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Doubt - Negotiable Instrument Act 1881

Krish (CA Final ) (3331 Points)

30 June 2010

Can any one explain me the procedure for Conversion of Indorsement in Blank to Indorsement in Full with EXAMPLE and also the responsibilities and duties of Indorsee and Indorser. Actually i am not being able to cope with study material language.

Thanks in Advance

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7 Replies

Somnath Masgi (JOB) (39 Points)
Replied 30 June 2010

If the endorser signs his name only, the endorsement is said to be "in blank", and if he adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the endorsement is said to be "in full", and the person so specified is called the "endorsee" of the instrument.

The holder "A" of a negotiable instrument indorsed in blanks may, without signing his own name, by writing above the endorser's signature a direction to pay to any other person"B" as endorsee, convert the endorsement in full; and the holder "A"does not thereby incur the responsibility of an endorser.

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Krish (CA Final ) (3331 Points)
Replied 30 June 2010

As per your last sentence of 2nd Para, "the holder "A"does not thereby incur the responsibility of an endorser."

Means you want to say that B cannot claim the amount from the holder "A"

jinita (Learner) (113 Points)
Replied 01 July 2010

the above situation is that A is already the holder of the bill which is a blank endorsement ie no ones name is written on the instrument as the endorsee. to discharge his liability against B, A transfers it to B by writing B's name as the endorsee and thereby the blank endorsement gets converted into endorsement in full.

Now in the above situation, B can recover the amount from the party who has signed the instrument ie the party whose liability is primary and unconditional. If that party fails to pay then B can recover the amount of bill from A.

Krish (CA Final ) (3331 Points)
Replied 01 July 2010

Hi Jinita, Thanks for Replying

Can you tell me what is the liability of "endorsee in full" after indorsed by "Indorsee in blank".

Let's take an example.

"A" is a Payee Holder of a B/E. He endorses it in blank and delivers it to "B". "B" endorses it in full to "C" or order. "C" without endorsement transfer the bill to "D". Whether "D" as bearer of the B/E is entitled to recover the payment from A or B or C.

According to my opinion as per Section 55 " if an instrument having been endorsed in blank, is endorsed in full, the endorsee in full does not incur the liability of an endorser. The amount cannot be claimed from the endorsee in full. " ------------------> means "C" is not liable for any recovery.

What about A & B ? Are they liable for recovery ?

jinita (Learner) (113 Points)
Replied 02 July 2010

I have 2 things to say.

1) you are telling that A is the payee holder. If so, then the name of A is mentioned as the payee and so it is no longer a blank endorsement. Hence no conversion takes place.

2)Assuming that No one's name is written as payee ie it is payable to bearer and D is holder in due course.

here first of all D will present the bill to the acceptor of the bill. If the acceptor fails, then D can recover amount from any person viz A, B, C provided they have not done sans recourse enodorsement

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If D is holder in due course, he can recover from presentment and if the acceptor fails he can recover from any party in either case

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Krish (CA Final ) (3331 Points)
Replied 02 July 2010

Well Jinita,

According to Sec. 16 & 54, section says that the instrument is payable to bearer even though originally payable to order. No further indorsement is needed for its negotiation.

For eg. A Negotiable Instrument is payable to X on order, means, X is a payee holder and X merely signs on the back of it, it will constitute indorsement in blank. It can now be transferred many number of times by mere delivery.