Section 55 and Section 56 of Negotiable Instruments Act 1881: Full Indorsement and Part Payment
Sections 55 and 56 of the Negotiable Instruments Act, 1881 regulate two specific aspects of negotiation. Section 55 deals with an instrument that has first been indorsed in blank and is later indorsed in full. Section 56 prevents negotiation of only part of the amount due, while permitting negotiation of the unpaid balance after part payment is properly noted on the instrument.
Section 55 - Conversion of indorsement in blank into indorsement in full
If a negotiable instrument, after having been indorsed in blank, is indorsed in full, the amount of it cannot be claimed from the indorser in full, except by the person to whom it has been indorsed in full, or by one who derives title through such person.
Meaning of indorsement in blank and indorsement in full
Section 16 of the Act explains these expressions. Where an indorser signs his name only, the indorsement is described as an indorsement in blank. Where 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 described as an indorsement in full, and the person so specified is called the indorsee.
Effect of Section 55
Section 55 applies where a negotiable instrument has already been indorsed in blank and is subsequently indorsed in full. In relation to the indorser in full, the amount cannot be claimed except by the person in whose favour that full indorsement was made or by a person who derives title through that person.
Section 56 - Indorsement for part of sum due
No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid, a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance.
Meaning and effect of Section 56
A negotiable instrument cannot ordinarily be split by an indorsement that purports to negotiate only a portion of the amount appearing to be due. Such a writing is not valid for the purpose of negotiation under Section 56.
The section, however, expressly recognizes a different situation where part of the amount has already been paid. In that case, the part payment may be noted on the instrument and the instrument may then be negotiated for the remaining balance.
Partial transfer and part payment are different
| Situation | Effect under Section 56 |
|---|---|
| An indorsement purports to transfer only part of the amount appearing to be due. | The writing is not valid for the purpose of negotiation. |
| Part of the amount has actually been paid and a note of that payment is indorsed on the instrument. | The instrument may be negotiated for the unpaid balance. |
Sections 55 and 56 at a glance
| Provision | Subject | Main rule |
|---|---|---|
| Section 55 | Blank indorsement followed by full indorsement | The amount cannot be claimed from the indorser in full except by the named indorsee or a person deriving title through that indorsee. |
| Section 56 | Indorsement for part of sum due | Negotiation of only part of the amount due is invalid, but after actual part payment the instrument may be negotiated for the balance if the payment is noted on it. |
Related provisions on negotiation
Sections 55 and 56 form part of Chapter IV of the Act. They are connected with provisions dealing with delivery, negotiation by delivery and indorsement, conversion of an indorsement in blank into an indorsement in full, effect of indorsement, persons entitled to negotiate, qualified indorsements, rights derived through a holder in due course, and instruments indorsed in blank.
This article explains the statutory provisions for general legal information. For authoritative wording, amendments and legislative status, refer to the official Government of India legislation source.