Section 51 NI Act: Who may negotiate

Negotiable Instruments Act, 1881

Section 51 NI Act at a Glance

Section 51 NI Act states that a sole maker, drawer, payee, or indorsee, or all joint makers, drawers, payees, or indorsees together, may indorse and negotiate a negotiable instrument unless negotiability is restricted or excluded under Section 50 NI Act.

Section 51 NI Act Bare Act Text

51. Who may negotiate.

Every sole maker, drawer, payee or indorsee, or all of several joint makers, drawers, payees or indorsees, of a negotiable instrument may, if the negotiability of such instrument has not been restricted or excluded as mentioned in section 50, indorse and negotiate the same.

Explanation.—Nothing in this section enables a maker or drawer to indorse or negotiate an instrument, unless he is in lawful possession or is holder thereof; or enables a payee or indorsee to indorse or negotiate an instrument, unless he is holder thereof.

Illustration

A bill is drawn payable to A or order. A indorses it to B, the indorsement not containing the words “or order” or any equivalent words. B may negotiate the instrument.

Section 51 NI Act in Simple Words

Section 51 NI Act specifies who has the authority to indorse and negotiate a negotiable instrument. Every sole maker, drawer, payee, or indorsee may indorse and negotiate the instrument, provided its negotiability has not been restricted or excluded as mentioned in Section 50 NI Act. Where there are several joint makers, drawers, payees, or indorsees, the section gives the power to all of them together.

The Explanation to Section 51 NI Act sets a limit on when these parties can exercise this power. Nothing in Section 51 NI Act enables a maker or drawer to indorse or negotiate an instrument unless that maker or drawer is in lawful possession of the instrument or is the holder of it. Similarly, nothing in Section 51 NI Act enables a payee or indorsee to indorse or negotiate an instrument unless that payee or indorsee is the holder of it.

In the Illustration to Section 51 NI Act, a bill is drawn payable to A or order, and A indorses it to B without the indorsement containing the words "or order" or any equivalent words. The result stated in Section 51 NI Act is that B may negotiate the instrument.

When Section 51 NI Act Applies

  • The person negotiating is the sole maker, drawer, payee, or indorsee, or all of several joint makers, drawers, payees, or indorsees.
  • The negotiability of the instrument has not been restricted or excluded as mentioned in Section 50 NI Act.
  • Under the Explanation, a maker or drawer must be in lawful possession of the instrument or be its holder.
  • Under the Explanation, a payee or indorsee must be the holder of the instrument.

Example of Section 51 NI Act

Iqbal and Nikhil in Guwahati are joint payees and holders of a negotiable instrument for ₹80,000 whose negotiability has not been restricted or excluded under Section 50 NI Act. Because they are joint payees, Section 51 NI Act requires both Iqbal and Nikhil to indorse the instrument to negotiate it to Lakshmi. Once the instrument is indorsed and delivered to Lakshmi as the sole indorsee and holder, without any words restricting further negotiation, Lakshmi may negotiate the instrument further under Section 51 NI Act even if the indorsement to Lakshmi did not contain the words "or order".

FAQs on Section 51 NI Act

What is Section 51 NI Act?▼

Section 51 NI Act identifies who may indorse and negotiate a negotiable instrument when its negotiability has not been restricted or excluded under Section 50 NI Act. It allows a sole maker, drawer, payee, or indorsee, or all of several joint makers, drawers, payees, or indorsees, to indorse and negotiate the instrument subject to the possession and holder conditions in its Explanation.

Can one of several joint payees or joint indorsees negotiate an instrument alone under Section 51 NI Act?▼

Section 51 NI Act does not give that power to one of them alone. It gives it to all of several joint makers, drawers, payees, or indorsees of a negotiable instrument together.

When can a maker or drawer indorse or negotiate an instrument under Section 51 NI Act?▼

Only when in lawful possession of the instrument or as its holder. Under the Explanation to Section 51 NI Act, nothing in Section 51 NI Act enables a maker or drawer to indorse or negotiate an instrument unless that maker or drawer is in lawful possession or is the holder of it.

When can a payee or indorsee indorse or negotiate an instrument under Section 51 NI Act?▼

Only when that payee or indorsee is the holder of the instrument. The Explanation to Section 51 NI Act states that nothing in Section 51 NI Act enables a payee or indorsee to indorse or negotiate an instrument unless that payee or indorsee is the holder of it.

Can an indorsee negotiate a bill of exchange under Section 51 NI Act if the indorsement to that indorsee omits the words 'or order'?▼

Yes, if the instrument's negotiability is not restricted or excluded under Section 50 NI Act. In the Illustration to Section 51 NI Act, where a bill drawn payable to A or order is indorsed by A to B without the words "or order" or any equivalent words, B may negotiate the instrument.

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Disclaimer: This is for informational purposes only. Always consult a qualified advocate for legal advice.

Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·