Facts of the Case
- A negotiable instrument is drawn for an amount of Rs. 10,000.
- The owner endorses it to another person, but only for Rs. 5,000.
- The endorsement is partial, not for the full value of the instrument.
Issues in the Case
- Can a negotiable instrument be endorsed partially for a lesser amount than what it is drawn for?
- Is partial endorsement valid under the Negotiable Instruments Act?
- What is the effect of such an endorsement on the negotiability of the instrument?
Principles Associated With It
- Section 56 of the Negotiable Instruments Act, 1881 clearly states that no writing on a negotiable instrument is valid for the purpose of negotiation if it purports to transfer only a part of the amount due on the instrument.
- A negotiable instrument must be endorsed for the entire amount, or it cannot be negotiated at all.
- Partial endorsements destroy the negotiability of the instrument, making it unacceptable under the law.
Judgement
- The endorsement of Rs. 5,000 out of Rs. 10,000 is a partial endorsement, which is invalid under Section 56.
- The instrument cannot be negotiated for only part of the sum due.
- Therefore, the endorsement is not legally effective, and the transferee cannot claim the Rs. 5,000 under the Negotiable Instruments Act.
- A valid endorsement must be for the entire amount mentioned on the face of the instrument.