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Section 47: Negotiation by delivery

Negotiable Instruments Act • Official Statutory Text & Practice Guide

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Act 1881
Section 46 All 148 Sections of Negotiable Instruments Act Section 48

Legal Commentary & Landmark Judgments: Section 47

Section 47 regulates negotiation by delivery, enacting that a promissory note, bill of exchange, or cheque payable to bearer is negotiable by mere delivery without any written indorsement.

  • Bearer Instrument Negotiation: Passes from hand to hand by mere manual transfer of physical possession without written transfer or assignment.
  • Protection to Innocent Transferees: Any person receiving a bearer instrument in good faith and for value becomes an unassailable holder entitled to enforce payment against all prior parties.
  • Exceptions for Restrictive Conditions: A bearer instrument ceases to be negotiable by mere delivery if it has been specially indorsed under Section 49 or crossed restrictively.
Key Landmark Precedents:
  • Seth Loon Karan Sethiya v. Ivan E. John (1977) 1 SCC 379: The Supreme Court recognized that bearer instruments embody the purest form of commercial negotiability, where title passes instantaneously upon physical transfer.
  • Braja Kishore Dikshit v. Purna Chandra Panda (AIR 1957 Ori 153): Affirmed that the possessor of a bearer instrument is presumed to be the lawful holder under Section 47 and Section 118.
Courtroom Practice & Strategic Litigation Guidance:

Cheques drawn payable to 'Self' or 'Bearer' fall squarely under Section 47. If an employer signs a cash cheque and an employee misappropriates it, any third party who encashes it in good faith for value is protected under Section 47.

Section 46 All 148 Sections of Negotiable Instruments Act Section 48