Question

Explain five rules necessary for the endorsement of cheques.

Answer 1

1. The endorsement should be made on the back of the instrument. If there is no space on the back, a slip or separate piece of paper called an allonge should be attached to the instrument.
2. The endorsement must be in writing and must be signed by the endorser.
3. The endorser must sign his name exactly as given on the cheque. The spellings in his name must be same as already appear on the cheque.
4. The endorsement must be for the full value of the instrument. But where part payment of the instrument has already been made, it can be endorsed for the balance.
5. If the payees are more than one person, the names of all of them must be given in the endorsement.
6. The endorsement should be made in ink.
7. When the endorser is illiterate, he should put his thumb impression along with the signature of a witness.
8. When a cheque is endorsed in favour of a company, the endorsement must indicate that a competent office has endorsed it on behalf of the company.
9. While making endorsements, words like Mr., Shri, Dr. etc., should not be used.
10. Endorsements are presumed to have been made in the order in which they appear on the instrument or on the back thereof.