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DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy,
Designation : Head of Department

Branch : D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic, Sircilla,
Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Negotiable Instrument Act
Duration : 50 Minutes
Sub-Topic : Definition of Endorsement
Teaching Aids : PPT

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Objectives

On completion of this period, you would


be able to
 Understand the definition and essentials of a
valid endorsement

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1. What is Bill & give example?
2. Define Cheque?
3. What do you understand by ‘Endorsement’?

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Introduction

 The term “Endorsement” of a negotiable


instrument means writing of a person’s
name on the back of instrument for the
purpose of negotiation.

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Endorsement-Definition

 According to Section 15, when the maker or


holder of a negotiable instrument signs his
name, otherwise than such maker, for the
purpose of negotiation, on the back or face
thereof or on a slip of paper annexed thereto
he is said to have endorsed the instrument.

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ENDORSEMENT (OR ‘INDORSEMENT’)

 If the payee of a cheque wants to make the


payment of cheque to a third party, he can
endorse the cheque to another person say X, by
signing at the back of the cheque or by writing
‘pay to X’ or ‘pay to X or order’ by signing at the
back of the cheque or by writing ‘pay to X’ or ‘pay
to X order’ and signing it.

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Endorsement

 Sec.15 of negotiable instruments Act,


1881 explains endorsement as ‘writing of a
person’s name by the maker or holder of a
negotiable instrument, on the face or back
of it, or on a slip of a paper annexed to it,
for the purpose of negotiation.

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Endorsement
 The person who so signs the instrument or
endorses the
instrument is called endorser.
 The person to whom the instrument is endorsed
or transferred is called the endorsee.
 But according to the common usage,
endorsement is usually made on the back of the
instrument

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ESSENTIALS OF A VALID ENDORSEMENT

The essential points of a valid endorsement are as


under
On the Instrument:
 The endorsement must be written on the face or
back of the instrument or a slip annexed to it called
‘allonge’ and must be signed by the endorser.
 An endorsement on the face of the instrument is
valid

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Essential a endorsement

 If a cheque is payable to two persons, both


of them should sign their names in their own
handwriting. If the endorser signs in block
letters, it will not be considered a regular
endorsement.

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Maker or/Holder:

 The Endorsement must be made by the


maker or holder of the instrument.
 A stranger cannot indorse it.

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Endorsement

Signature of Endorser:
 It must be signed by the endorser for the purpose
of negotiation.
 Signature of the endorser on the instrument
without any additional words is sufficient.
 The endorser must sign his name in the same
spellings as appearing on the instrument if it is
payable to order.

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Endorsement

 If the name of the endorser is mis-spelt on the


instrument, the endorser should first write the
name so mis-spelt and then again sign with
correct spellings.

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Endorsement

Mode:
 Endorsement may be made the endorser
either by merely signing his name on the
instrument or by any words showing an
intention to indorse the instrument to a
specified person.
 In the latter case, endorsement need not
contain the complimentary prefix or suffix.

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Endorsement
Delivery:
 Endorsement is completed only by delivery, actual
or constructive (Sec.15). The delivery must be
made by the Endorser himself.
 If the delivery is conditional, the endorsement is
not complete until the condition is fulfilled.

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Summary

 Endorsement means signing at the back of the


instrument for the purpose of negotiation.
 Mere signatures without any additional words are
sufficient. Endorsement must be on the instrument.
 The endorsement must be made by the holder of the
instrument but a stranger cannot endorse it.

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Review Question

1. Define endorsement?
2. Briefly explain the essential or endorsement?

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Quiz

1. What is ‘allonge’?
 Cheque
 Promissory note
 Demand draft
 Endorsement on a slip annexed to bill

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