Chapter IV - Of Negotiation
Section 50
Section 50: Effect and restrictions of indorsement
Section 50 explains the effect of indorsement followed by delivery and how express wording may restrict further negotiation or create an agency role.
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This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
The indorsement of a negotiable instrument followed by delivery transfers to the indorsee the property therein with the right of further negotiation; but the indorsement may, by express words, restrict or exclude such right, or may merely constitute the indorsee an agent to indorse the instrument, or to receive its contents for the indorser, or for some other specified person.
Illustrations: B signs the following indorsements on different negotiable instruments payable to bearer.— (a) “Pay the contents to C only”. (b) “Pay C for my use.” (c) “Pay C or order for the account of B.” (d) “The within must be credited to C.” These indorsements exclude the right of further negotiation by C.
(e) “Pay C.” (f) “Pay C value in account with the Oriental Bank.” (g) “Pay the contents to C, being part of the consideration in a certain deed of assignment executed by C to the indorser and others.” These indorsements do not exclude the right of further negotiation by C.
Key rule and applicability
The usual stated effect is transfer of the instrument’s property with a further-negotiation right. Express indorsement words may restrict or exclude that right, or constitute the indorsee an agent for indorsement or receipt for the identified person.
Limits and related provisions
Do not assume that every named indorsee has an unrestricted right to transfer onward or that every indorsement is merely an agency mandate. The statutory examples distinguish wording with different effects, so the actual words matter.
Hypothetical business example
Hypothetical: a business receives an instrument indorsed pay the contents to C only. It compares that restrictive instruction with the Act’s illustrations instead of treating it as equivalent to an unrestricted pay C direction.
Practical decision flow
Read the complete indorsement and confirm delivery.
Identify any express restriction, exclusion or collection-agency wording.
Record the permitted rights before onward transfer or receipt of payment.
Practical checklist
Do
- Read the complete indorsement and confirm delivery.
- Identify any express restriction, exclusion or collection-agency wording.
- Record the permitted rights before onward transfer or receipt of payment.
Avoid
- Do not assume that every named indorsee has an unrestricted right to transfer onward or that every indorsement is merely an agency mandate. The statutory examples distinguish wording with different effects, so the actual words matter.
Glossary
- Restrictive indorsement
- Express wording restricting or excluding further negotiation.
- Agency indorsement
- Wording constituting the indorsee an agent for the stated purpose.
Frequently asked questions
Does indorsement without considering delivery capture the full rule?
The section states indorsement followed by delivery.
Can express words exclude further negotiation?
Yes. The provision and its illustrations expressly address that effect.
Can the indorsee be only an agent?
Yes, where the indorsement merely constitutes the indorsee an agent for the specified indorsement or receipt purpose.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026