Section 52 NI Act: Indorser who excludes his own liability or makes it conditional
Negotiable Instruments Act, 1881
Section 52 NI Act at a Glance
Section 52 NI Act allows an indorser, by express words in the indorsement, to exclude liability or make liability or the indorsee's right to payment depend on a specified event. If that indorser later becomes the holder, all intermediate indorsers are liable.
Section 52 NI Act Bare Act Text
52. Indorser who excludes his own liability or makes it conditional.
The indorser of a negotiable instrument may, by express words in the indorsement, exclude his own liability thereon, or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event, although such event may never happen.
Where an indorser so excludes his liability and afterwards becomes the holder of the instrument, all intermediate indorsers are liable to him.
Illustrations
(a) The indorser of a negotiable instrument sign; his name adding the words—“Without recourse”.
Upon this indorsement he incurs no liability.
(b) A is the payee and holder of a negotiable instrument. Excluding personal liability by an indorsement “without recourse” he transfers the instrument to B, and B indorses it to C, who indorses it to A. A is not only reinstated in his former rights, but has the rights of an indorsee against B and C.
Section 52 NI Act in Simple Words
Section 52 NI Act lets an indorser limit or attach conditions to the indorser's obligation on a negotiable instrument. By using express words in the indorsement, the indorser may exclude the indorser's own liability on the instrument. By express words in the indorsement, the indorser may also make that liability, or the right of the indorsee to receive the amount due on the instrument, depend upon the happening of a specified event, although that event may never happen.
The second paragraph of Section 52 NI Act covers what happens if the instrument circulates back to an indorser who excluded liability. Where an indorser excludes liability by express words and afterwards becomes the holder of the instrument, all intermediate indorsers are liable to that holder.
Section 52 NI Act gives two illustrations of these rules. In Illustration (a), the indorser of a negotiable instrument signs the indorser's name adding the words "Without recourse", and the result is that upon this indorsement the indorser incurs no liability. In Illustration (b), A is the payee and holder of a negotiable instrument, transfers it to B excluding personal liability by an indorsement "without recourse", B indorses it to C, and C indorses it to A; the result is that A is not only reinstated in A's former rights, but also has the rights of an indorsee against B and C. The official text prints "sign; his name" in Illustration (a); the sense is "signs his name".
When Section 52 NI Act Applies
- An indorser uses express words in the indorsement of a negotiable instrument.
- Those express words exclude the indorser's own liability on the instrument, or make that liability or the indorsee's right to receive the amount due depend upon the happening of a specified event, although that event may never happen.
- Where an indorser so excludes liability and afterwards becomes the holder of the instrument, all intermediate indorsers are liable to that indorser.
Example of Section 52 NI Act
FAQs on Section 52 NI Act
What is Section 52 NI Act?▼
Section 52 NI Act permits the indorser of a negotiable instrument to use express words in the indorsement to exclude the indorser's own liability, or to make that liability or the indorsee's right to receive the amount due depend on a specified event. It also states that if an indorser who excluded liability later becomes the holder, all intermediate indorsers are liable to that holder.
What is the effect of adding the words 'Without recourse' to an indorsement under Section 52 NI Act?▼
The indorser incurs no liability on that indorsement. As shown in Illustration (a) to Section 52 NI Act, when the indorser of a negotiable instrument signs the indorser's name adding the words "Without recourse", the indorser incurs no liability upon that indorsement.
Can an indorser make the indorsee's right to payment depend on an event that may never happen under Section 52 NI Act?▼
Yes. Section 52 NI Act allows the indorser, by express words in the indorsement, to make the indorser's liability or the indorsee's right to receive the amount due depend upon the happening of a specified event, although that event may never happen.
What happens under Section 52 NI Act if an indorser who excluded liability later becomes the holder of the instrument again?▼
All intermediate indorsers are liable to that holder. Under Illustration (b) to Section 52 NI Act, if A, the payee and holder, transfers the instrument to B "without recourse", B indorses it to C, and C indorses it to A, A is reinstated in A's former rights and has the rights of an indorsee against B and C.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·