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CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Pooja holds a bill of Rs 90,000 payable to her order. She endorses it 'Pay to Qadir or order, Rs 40,000 only' and delivers it. What is the effect of this endorsement under the Act?

The endorsement is invalid as a negotiation. The Act does not allow a bill to be endorsed for only a part of the amount payable, so the Rs 40,000 partial endorsement transfers nothing to Qadir and Pooja remains holder.

  1. AIt is valid as a partial endorsement for Rs 40,000 and the balance remains with Pooja
  2. BIt is valid, but Qadir must pay Pooja the balance of Rs 50,000
  3. CIt is valid only if the drawee consents to part payment
  4. DIt is invalid, as an endorsement for part of the amount does not operate as a negotiationCorrect

Explanation

An endorsement that purports to transfer only part of the amount payable does not operate as a negotiation of the instrument. The bill cannot be split among different holders. Hence the endorsement is invalid, and no title for Rs 40,000 passes.

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