Section 56 NI Act: Indorsement for part of sum due

Negotiable Instruments Act, 1881

Section 56 NI Act at a Glance

Section 56 NI Act bars negotiating a negotiable instrument through a writing that transfers only part of the amount appearing due. However, if the amount has been partly paid, that partial payment may be noted on the instrument and the balance negotiated.

Section 56 NI Act Bare Act Text

56. Indorsement for part of sum due.
No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid, a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance.

Section 56 NI Act in Simple Words

Section 56 NI Act prohibits partial negotiation of the sum appearing due on a negotiable instrument. Under the first part of Section 56 NI Act, no writing on a negotiable instrument is valid for the purpose of negotiation if the writing purports to transfer only a part of the amount appearing to be due on the instrument.

The second part of Section 56 NI Act provides an exception where part of the amount appearing to be due on the instrument has already been paid. In that situation, a note recording the partial payment may be indorsed on the negotiable instrument, and the instrument may then be negotiated for the remaining balance.

When Section 56 NI Act Applies

A writing on a negotiable instrument that purports to transfer only a part of the amount appearing to be due is not valid for the purpose of negotiation.
Where the amount appearing to be due on the instrument has been partly paid, a note to that effect may be indorsed on the instrument.
Once the note of partial payment is indorsed on the instrument, the instrument may be negotiated for the remaining balance.

Example of Section 56 NI Act

Shabnam in Amritsar holds a promissory note for ₹80,000 made by Mohan. Shabnam writes an indorsement on the promissory note purporting to transfer ₹30,000 of the ₹80,000 due to Nisha in Ludhiana. Under Section 56 NI Act, that writing is not valid for the purpose of negotiating the promissory note because the writing purports to transfer only a part of the amount appearing to be due. However, if Mohan first pays Shabnam ₹30,000 and Shabnam indorses a note of that partial payment on the promissory note, Shabnam may negotiate the promissory note to Nisha for the ₹50,000 balance.

When Section 56 NI Act Does Not Apply

Where the amount appearing to be due on the negotiable instrument has been partly paid, a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance.

FAQs on Section 56 NI Act

What is Section 56 NI Act?▼

Section 56 NI Act states that no writing on a negotiable instrument is valid for the purpose of negotiation if the writing purports to transfer only a part of the amount appearing to be due on the instrument. However, if the amount has been partly paid, a note of that payment may be indorsed on the instrument, which may then be negotiated for the balance.

Can a negotiable instrument be negotiated for only a part of the amount appearing due under Section 56 NI Act?▼

No. Under Section 56 NI Act, no writing on a negotiable instrument is valid for the purpose of negotiation if the writing purports to transfer only a part of the amount appearing to be due on the instrument.

Can a negotiable instrument be negotiated for the balance after part of the amount has been paid under Section 56 NI Act?▼

Yes. Where the amount appearing to be due has been partly paid, Section 56 NI Act allows a note to that effect to be indorsed on the instrument, and the instrument may then be negotiated for the balance.

What must be indorsed on the instrument before negotiating it for a partly paid balance under Section 56 NI Act?▼

A note stating that the amount appearing to be due has been partly paid may be indorsed on the instrument, after which the instrument may be negotiated for the balance.

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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) ·