Section 16 of Negotiable Instruments Act 1881: Indorsement in Blank and in Full
Section 16 of the Negotiable Instruments Act, 1881 explains the distinction between an indorsement in blank and an indorsement in full. It also identifies the person specified in an indorsement in full as the "indorsee" and applies the Act's provisions relating to a payee to an indorsee with the necessary modifications.
Section 16: Indorsement in Blank and in Full
Section 16(1): If the indorser signs his name only, the indorsement is said to be "in blank". If the indorser adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the indorsement is said to be "in full", and the person so specified is called the "indorsee" of the instrument.
Section 16(2): The provisions of the Act relating to a payee apply, with the necessary modifications, to an indorsee.
Meaning of Indorser and Indorsee
An indorser is the person who indorses a negotiable instrument. Section 15 of the Negotiable Instruments Act defines indorsement and provides that the person who signs the instrument for the purpose of negotiation in the manner specified by that section is called the indorser.
An indorsee under Section 16 is the specified person to whom, or to whose order, the amount is directed to be paid by an indorsement in full. Section 16(2) makes the statutory provisions relating to a payee applicable to an indorsee with necessary modifications.
How Section 16 Relates to Negotiation
Section 14 provides that a promissory note, bill of exchange or cheque is negotiated when it is transferred to a person so as to constitute that person the holder. Section 15 defines indorsement. Section 16 then classifies an indorsement according to whether the indorser merely signs the name or additionally directs payment to a specified person.
The character of an indorsement can also affect whether an instrument is treated as payable to bearer. Under Section 13, a promissory note, bill of exchange or cheque is payable to bearer where it is expressed to be so payable or where its only or last indorsement is an indorsement in blank.
Related Definitions under the NI Act
A "negotiable instrument" is defined by Section 13. The Act separately defines a promissory note under Section 4, a bill of exchange under Section 5, a cheque under Section 6, and a holder and holder in due course under Sections 8 and 9.
Practical Difference between Blank and Full Indorsement
The statutory distinction is based on what the indorser writes. A signature alone constitutes an indorsement in blank. When the signature is accompanied by a direction to pay a specified person or that person's order, it constitutes an indorsement in full. The named person then becomes the indorsee for the purposes of Section 16.
Official legal text: The current text of the Negotiable Instruments Act, 1881 can be checked on the official India Code portal maintained by the Government of India.