Home  /  Negotiable Instruments Act  /  Section 50

Section 50: Effect of endorsement

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1881
Section 49 All 148 Sections of Negotiable Instruments Act Section 51

Legal Commentary & Landmark Judgments: Section 50

Section 50 governs the legal effect of an indorsement, enacting that an indorsement followed by delivery transfers the property in the instrument to the endorsee with the right of further negotiation, unless restricted by express words.

  • Transfer of Property in Instrument: Vests complete legal ownership, right of recovery, and title to sue in the endorsee.
  • Right of Further Negotiation: The endorsee acquires the full right to negotiate the paper further, unless the indorsement contains restrictive words like 'pay A only'.
  • Restrictive Indorsement / Agency: An indorsement expressing that it is for collection ('pay to A for my use' or 'for collection') constitutes the endorsee an agent, barring further negotiation.
Key Landmark Precedents:
  • Seth Loon Karan Sethiya v. Ivan E. John (1977) 1 SCC 379: The Supreme Court examined restrictive indorsements under Section 50, holding that an indorsement for collection merely constitutes an agency and does not transfer beneficial title.
  • Canara Bank v. Canara Sales Corporation (1987) 2 SCC 666: Reiterated that a collecting bank holding an instrument for collection holds it as an agent under Section 50, subject to strict duties of care.
Courtroom Practice & Strategic Litigation Guidance:

In factoring transactions and trade discounts, check the wording of the indorsement. If an indorsement states 'for account of drawer' or 'for collection', the financer does not become an owner under Section 50 and cannot sue the drawer free of underlying contractual disputes.

Section 49 All 148 Sections of Negotiable Instruments Act Section 51