Report No. 11

101. Section 52.-

The contents of section 52 have been split into two sections as they deal with two separate matters, viz., conditional1 and qualified2 indorsements.

As regards a conditional indorsement, we have no provision in our Act corresponding to section 33 of the Bills of Exchange Act and section 39 of the Negotiable Instruments Law which make the conditional indorsement operative only as between indorser and indorsee and give the payer (acceptor or maker) the liberty to pay the indorsee regardless of the condition. There is no such liberty to the payer in India. As has been pointed out by Bhashyam and Adiga,3the Indian law is still based upon the old common law rule4 which has been discarded both in England and the USA. The old rule operates harshly upon the acceptor of a conditional indorsement who is not in a position to discover whether the condition has been fulfilled and yet cannot dare dishonour the instrument.

There is no reason why we should not adopt the modern principle as embodied in the English and American law. We have, accordingly, adopted that principle in two new sub-sections.

1. Section 40, ibid.

2. Section 41, ibid.

3. Negotiable Instruments Act, 1956, 10th Edn., p. 303.

4. Robertson v. Kensignton, (1811) 4 Taunt 30; Byles on Bills of Exchanges, 21st Edn., p. 169.

102. Following section 38 of the English Act, we have introduced two new sections,1 which together state the rights of 'holder' and 'holder in due course' which have now to be gathered from different provisions of the Act.

1. Section 47 and 52, App I.

103. There is no provision in our Act, corresponding to section 37 of the Bills of Exchange Act, giving the effects of 'negotiation back before maturity'. Under the English provision, if there is negotiation back of the instrument before maturity to the maker, drawer or to a prior indorsee or to the acceptor, such persons are entitled to further negotiate the instrument. But it would be inequitable to allow a right to enforce payment under the instrument against any of the parties who were liable before the instrument was indorsed back. This is avoided by the latter part of the English section. We have incorporated the two parts of the English provision in two sections, one explaining what is negotiation back1 and the other, the rights of a person who acquires an instrument through the process of negotiation back.2

1. Section 44. ibid.

2. Section 48, ibid.