Page 117 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes
Example: A cheque is endorsed in blank by ‘X’. Y, the holder of the cheque, may convert
this ‘blank endorsement’ into ‘endorsement in full’ by say, adding the words ‘Pay Z or order’,
above ‘X’s signature. Y, in this case cannot be held liable on the cheque, if it is dishonored.
Forged Endorsement (Sec.85)

In case an instrument is endorsed in full, it cannot be endorsed or negotiated except by an
endorsement signed by the person to whom or to whose order the instrument is payable. Thus,
if such an instrument is negotiated by way of a forged endorsement, the endorsee will acquire
no title even though he be a purchaser for value and in good faith, because the endorsement
is nullity. But where the instrument has been endorsed in blank, it can be negotiated by mere
delivery and the holder derives his title independent of the forged endorsement and can claim
the amount from any of the parties to the instrument.

Example: A bill is endorsed, “pay to X or order”. X endorses it in blank and it comes
into the hands of Y, who simply delivers it to A. A forges Y’s endorsement and transfers it to B.
B, as the holder, does not derive his title through the forged endorsement to Y, but through the
genuine endorsement of X and can claim payment from any of the parties to the instrument in
spite of the intervening forged endorsement.

6.7 Presentment

Presentment of a negotiable instrument is made for two purposes: (i) for acceptance and (ii) for
payment.
Before discussing the presentment for payment, it is necessary to refer to the maturity of the
instrument.

Maturity (Secs.21-25)

Cheques are always payable on demand but other instruments like bills, notes, etc., may be made

payable on a specified date or after the specified period of time. The date on which payment of

an instrument falls due is called maturity (Sec.22). Therefore most of the provisions relating to
presentment for payment are linked with the maturity of the instrument. Sec.21 provides that a
note or bill ‘at sight’ or ‘on presentment’ is payable on demand. It is due for payment as soon
as it is issued. Therefore the question of maturity arises only in the case of a note or bill payable
‘After sight’ or ‘After date’ or at a certain period after the happening of an event which is certain
to happen.

Presentment for Payment

A negotiable instrument must be presented for payment to the maker, acceptor or drawee thereof,
as the case may be, by the holder or his agent. In case of default, the parties to the instrument
other than the maker, acceptor or drawee are not liable to such holder (Sec.64). The presentment
for payment must be made during the usual hours of business, and at a banker’s premises, during
banking hours (Sec.65).

Task Discuss the various effects of endorsement.

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