Facts of the Case
- A negotiable instrument (e.g., a promissory note or cheque) is made for Rs. 10,000.
- The owner of the instrument endorses it for Rs. 5,000, which is only a part of the total amount mentioned on the instrument.
Issues in the Case
- Can a negotiable instrument be endorsed partially for a lesser amount than its face value?
- Is a partial endorsement valid and enforceable under the law?
- What effect does partial endorsement have on the rights of the endorsee?
Principles Associated with It
- Under the Negotiable Instruments Act, 1881, a negotiable instrument cannot be partially endorsed for less than the full amount payable.
- Section 38 of the Act requires the endorsement to be unconditional and for the entire amount payable on the instrument.
- Partial endorsements create ambiguity and uncertainty, which undermines the negotiability and integrity of the instrument.
- Therefore, a partial endorsement is generally invalid and will not transfer negotiable rights for the lesser amount.
- The endorsee in a partial endorsement does not acquire the rights to enforce the instrument for the partial sum.
Judgement
- The endorsement of the Rs. 10,000 instrument for only Rs. 5,000 is not valid under the Negotiable Instruments Act.
- Partial endorsement is not recognized legally, so the endorsee of the Rs. 5,000 cannot claim the amount endorsed.
- The instrument remains payable for the full amount of Rs. 10,000 unless fully endorsed or negotiated properly.
- Thus, partial endorsement cannot be done, and any such endorsement will be treated as invalid or ineffective.