Indorsement on Cheques PDF

Information Hub INDORSEMENT ON CHEQUES Section 32, 33, 34 and 35 discuss about the Indorsements. The title of a cheque transfers freely on delivery, if it is a bearer instrument or, in case of an Order instrument, indorsement and delivery, subject to the fa...

Information Hub INDORSEMENT ON CHEQUES Section 32, 33, 34 and 35 discuss about the Indorsements. The title of a cheque transfers freely on delivery, if it is a bearer instrument or, in case of an Order instrument, indorsement and delivery, subject to the fact that the indorsement is regular. Payment or the title of a cheque, which supposed to be paid to the order of a payee, will made available to be paid to the bearer, upon regular indorsement. Before we getting into details, let us first clarify an important matter. Many tends to misread the Indorsement as Endorsement. If you carefully see, Endorsement means a public indication of approval or support, whereas Indorsement is a legal signature on some financial documents, like checks. However, in Banking terms, Indorsement has a separate definition too. The definition of Indorsement in Banking terms is, “What is appearing on the face of the cheque as Payee, exactly on to the reverse of it, in flowing hand and without gaps in-between” If name of the payee written in Sinhala or Tamil, we may observe indorsement without flowing letters and gaps in initials. As we are aware, flowing hand is not Block Capital letters. Also, there can’t be any spaces in between the letters, when indorse a cheque or a Bill of Exchange. The moment you find any gaps in-between the letters on an indorsement that totally distort the name of the payee. Just look at the below example, Accordingly, 1, 3 & 4 of the above indorsements are not regular, therefore if an order cheque is indorsed in such manner, the Paying Bank usually return them to the remark of “Payees indorsement irregular” On the 2nd above, although, R and S are in block capital, which considers as a regular indorsement, therefore, 2 & 5 considers as regular indorsements. You may also notice that how the payees name distorts when there are gaps in-between letters. If you see 3 above it is not R Samaranayake, it is R S amaranayake. Collecting Bank should be mindful, not to guarantee the indorsement of an order cheque that customers deposits to their accounts, unless otherwise, if you are not certain to the bona-fide of the title of same, since the collecting Bank, without their knowledge passes on the title to a fraudulent party. As explained in Sec 32 of BEO to be a valid indorsement It must be written on the bill and be signed by the person who indorses it (indorser) Partial indorsements are not valid. Part of the value of the bill can’t be transferred When a cheque / bill is payable to the order of two or more payees or indorsers, all must indorse the instrument, unless one has the authority to indorse for the others. (However, this situation happens only at the International Trade Transaction related operations.) If the name of the payee or indorsee is wrongfully stated or misspelt, that should be indorsed as described in the bill. If the payee or indorsee, wishes they can add their proper names, but not a must. Titles of the payee or endorsee is not a must on an indorsement. Example, if the payee or endorsee is Dr. R Samaranayake, in the indorsement “Dr” is not necessary, it’s optional. According to the BEO, there are four types’ endorsements, they are “Blank Indorsement”; “Special Indorsement”; “Restrictive Indorsement” and “Conditional Indorsement” Blank Indorsement. - Section 34 BEO As the word Blank explains, it specifies no further indorsee, hence a cheque so indorsed and if the indorsement is regular as explained above, becomes payable to bearer. (Title passes on Regular Indorsement and delivery) In braches, we mostly deals with such instruments. Special Indorsement – Section34 (2) BEO This explains the person to whom or to whose order the cheque / bill to be payable Example: Pay B or to the order of B Restrictive Indorsement – Section 35 BEO When further transactions of the title of a cheque / Bill is restricted to a nominated person that considers as a restrictive indorsement. Example: If a cheque / bill indorsed “Pay B only” or “Pay to the account of X only” such indorsements called Restrictive Indorsement. A restrictive indorsement gives the right to the indorsee to receive the payment. As you see, the special indorsement allows further negotiation of the instrument, as against restrictive indorsement Conditional Indorsement – Section 33 BEO Such an indorsement entitles possession to the indorsee, only after full filling of some condition named in the indorsement Example: Cheque / Bill can be indorsed as “Pay to the order of B, only after receiving goods at the ware house.” Accordingly, to receive the title of the value involved in the cheque / bill, B has to deliver goods at the ware house indorsement.txt · Last modified: 2021/02/12 09:03 by lk03515