Sections 14-16 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 14, 15 and 16 explain how a note, bill or cheque moves from one person to another. Section 14 defines negotiation, section 15 defines indorsement and the indorser, and section 16 divides indorsement into "in blank" and "in full" and names the indorsee. This article reads them as per the consolidated text consulted. The Act spells the word "indorse"; "endorse" is the common spelling and means the same thing. If you want a second opinion on a chain of indorsements before you accept an instrument, a legal consultation is the place to start.
An instrument is negotiated when it is transferred so as to make the transferee the holder. A maker or holder who signs it, otherwise than as maker, for the purpose of negotiation indorses it and is the indorser. If the indorser signs his name only, the indorsement is in blank; if he adds a direction to pay a specified person or order, it is in full, and that person is the indorsee. The provisions on a payee apply to an indorsee with necessary modifications.
Section 14: negotiation
The text says that when a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute the person the holder thereof, the instrument is said to be negotiated.
Two elements appear. First, there is a transfer to a person. Second, the transfer is "so as to constitute the person the holder". The word "holder" is defined in section 8 as a person entitled in his own name to possession and to receive or recover the amount (see our article on sections 8 to 10). So a transfer that does not make the transferee a holder is not negotiation within this definition. A bank clerk who carries a cheque for a customer does not become a holder in his own name; the cheque has not been negotiated to him.
Section 15: indorsement
The text says that when the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the "indorser".
The definition has several parts, shown below.
| Part | What the text says |
|---|---|
| Who signs | The maker or holder of a negotiable instrument |
| Capacity | Otherwise than as such maker |
| Purpose | For the purpose of negotiation |
| Where | On the back or face, or on a slip of paper annexed |
| Also covered | A stamped paper intended to be completed as a negotiable instrument, signed for the same purpose |
| Result | He is said to indorse; he is the indorser |
"Otherwise than as such maker"
The maker of a note signs it as maker when making it. That signature is not an indorsement. If the same maker later signs the instrument in another capacity for negotiation, such as after it has come back into his hands, that signature can be an indorsement. The words "otherwise than as such maker" separate the two roles.
"On the back or face thereof or on a slip of paper annexed"
Indorsement is usually on the back, but the text allows the face, and allows a slip of paper annexed to the instrument. This is useful when the back has no room left.
Stamped paper to be completed
The section also covers a signature, for the same purpose, on a stamped paper intended to be completed as a negotiable instrument. This links with section 20 on inchoate stamped instruments (see our article on section 20).
Section 16(1): "in blank" and "in full"
The text says that if the indorser signs his name only, the indorsement is said to be "in blank", and if he adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the indorsement is said to be "in full", and the person so specified is called the "indorsee" of the instrument.
| Type | What the indorser writes | Effect on the label |
|---|---|---|
| In blank | His signature only | The indorsement is "in blank" |
| In full | His signature plus a direction to pay to, or to the order of, a specified person | The indorsement is "in full"; the specified person is the indorsee |
Example with invented names
Shalini Foods receives a cheque payable to its order. On the back it writes only "Shalini Foods" with a signature. That is an indorsement in blank. Under section 13, Explanation (ii), if that is the only or last indorsement the cheque becomes payable to bearer (our article on section 13 explains this).
Shalini Foods could instead write on the back: "Pay Dev Logistics or order", and sign. That is an indorsement in full. Dev Logistics is the indorsee. Shalini Foods is the indorser.
Why the choice matters
The text of section 16 does not itself state the consequences of the choice. Other provisions deal with them, including the provision on converting a blank indorsement into one in full, which a later article of this series explains. The practical point is that a blank indorsement leaves the instrument open to whoever holds it, while an indorsement in full names the next person. This sentence is a plain-language reading of section 13 and the definition in section 16; it is not a quotation from section 16.
Section 16(2): indorsee treated like a payee
The text says the provisions of the Act relating to a payee shall apply with the necessary modifications to an indorsee.
So where the Act says something about the payee, such as the definition of payee in section 7 (see our article on section 7), the same is to be read for the indorsee with the changes the context demands. The words "necessary modifications" are the Act's own; it does not list them.
Putting the three sections together
- A payee holds an instrument. It is handed to that person, who becomes the holder.
- If the holder wishes to pass it on, he signs it for that purpose. That signature is an indorsement (section 15).
- If he signs only his name, the indorsement is in blank. If he adds a direction to pay a specified person or order, it is in full, and that person is the indorsee (section 16).
- When the instrument is transferred so that the transferee becomes the holder, the instrument has been negotiated (section 14).
The chain can repeat: an indorsee can indorse again, in blank or in full.
Points the text leaves open
The text consulted does not say how many indorsements an instrument may bear, what must be written for a direction in full beyond "to, or to the order of, a specified person", or what happens if a signature is placed for a purpose other than negotiation. Where such a question arises, read the other provisions of the Act and, if needed, take advice.
Need help with a chain of indorsements?
If you are accepting an instrument that has passed through several hands, or you need to recover on one, the indorsements should be checked carefully. We can review them with you in a legal consultation.
Key takeaways
- An instrument is negotiated when it is transferred so as to make the transferee the holder.
- Indorsement is a signature by a maker or holder, otherwise than as maker, for the purpose of negotiation, on the back, the face or an annexed slip.
- A signature only is an indorsement in blank; a signature with a direction to pay a specified person or order is an indorsement in full.
- The specified person in an indorsement in full is the indorsee.
- The provisions about a payee apply to an indorsee with necessary modifications.
Read next
- Section 13: negotiable instrument payable to order or bearer
- Sections 17-19: ambiguous instruments, amount in words and payable on demand
- Section 20: inchoate stamped instruments
- Types of negotiable instruments
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.