Sections 47-48 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.
Section 47 says a note, bill or cheque payable to bearer is negotiable by delivery, with an Exception for an instrument delivered on condition, and gives two illustrations. Section 48 says an instrument payable to order is negotiable by the holder by indorsement and delivery. Both are made subject to section 58. This article reads them as per the consolidated text consulted. If you need to be sure how an instrument you received has to be passed on, a legal consultation before you accept or transfer it is sensible.
Subject to section 58, an instrument payable to bearer is negotiable by delivery (s.47), and an instrument payable to order is negotiable by the holder by indorsement and delivery (s.48). Exception: an instrument delivered on condition that it is not to take effect except in a certain event is not negotiable unless the event happens, except in the hands of a holder for value without notice of the condition. Illustrations (a) and (b) show delivery to an agent and a banker holding as agent as negotiation.
Section 47: negotiation by delivery
The text says: subject to the provisions of section 58, a promissory note, bill of exchange or cheque payable to bearer is negotiable by delivery thereof.
"Negotiable" here means capable of being negotiated, that is, transferred so that the transferee becomes the holder (see our article on sections 14 to 16). For a bearer instrument, delivery is enough.
Two things frame the rule.
- "Subject to the provisions of section 58." Section 58 deals with instruments obtained by unlawful means or for unlawful consideration; its text is covered in a later article of this series. This article does not describe it, and the rule here must be read together with it.
- "Payable to bearer." What makes an instrument payable to bearer is in section 13: it is expressed to be so payable, or the only or last indorsement is in blank (see our article on section 13).
The Exception: conditional delivery
The text says: a promissory note, bill of exchange or cheque delivered on condition that it is not to take effect except in a certain event is not negotiable (except in the hands of a holder for value without notice of the condition) unless such event happens.
| Element | Text |
|---|---|
| Instrument | A note, bill or cheque |
| How delivered | On condition that it is not to take effect except in a certain event |
| General result | It is not negotiable |
| Until | Such event happens |
| Carve-out | Except in the hands of a holder for value without notice of the condition |
Read it in three layers.
- The general rule. If the instrument was delivered subject to a condition that it will take effect only on a certain event, it is not negotiable until that event occurs.
- The event. Once the event happens, the bar goes.
- The protected holder. A person who holds it for value and without notice of the condition is not caught by the bar. Both parts are needed: value and no notice.
Compare section 46, which allows proof that an instrument was delivered conditionally or for a special purpose between immediate parties and holders other than holders in due course (see our article on section 46). The Exception here uses different words: "holder for value without notice of the condition". The two provisions are not worded identically, and the text consulted does not say how they interact. A reader should check both before relying on either.
Example with invented names: Manoj hands a bearer cheque to Nandini on condition that it is to take effect only if a contract between them is signed by month end. The cheque is not negotiable in Nandini's hands unless the contract is signed. If Nandini passes it for value to Omar, who has no notice of the condition, the Exception's carve-out protects Omar's position as a holder for value without notice. If Omar knew of the condition, the carve-out would not apply to him.
The illustrations
The text gives two illustrations.
(a) A, the holder of a negotiable instrument payable to bearer, delivers it to B's agent to keep for B. The text says the instrument has been negotiated.
(b) A, the holder of a negotiable instrument payable to bearer, which is in the hands of A's banker, who is at the time the banker of B, directs the banker to transfer the instrument to B's credit in the banker's account with B. The banker does so, and accordingly now possesses the instrument as B's agent. The text says the instrument has been negotiated, and B has become the holder of it.
| Illustration | Who now has the instrument | Result printed |
|---|---|---|
| (a) | B's agent, to keep for B | Negotiated |
| (b) | The banker, as B's agent | Negotiated; B has become the holder |
Both illustrations show that delivery to the transferee's agent is delivery for this purpose. The agent holds for B, so B is treated as having received the instrument. Illustration (b) shows the case where the instrument is already in the hands of a banker acting for both: a direction to transfer it to B's credit, and the banker's act of doing so, changes the capacity in which the banker holds it. The text does not go beyond these two cases.
These illustrations help explain "constructive delivery" in section 46, which the text does not define. They are examples of how delivery to an agent works; the text does not say that they are the only forms of constructive delivery.
Section 48: negotiation by indorsement
The text says: subject to the provisions of section 58, a promissory note, bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof. (The consolidated copy prints "chequepayable" as one word; it is a printing slip.)
| Instrument | How it is negotiated |
|---|---|
| Payable to bearer (s.47) | Delivery |
| Payable to order (s.48) | The holder's indorsement and delivery |
Two actions are needed for an order instrument, and by the holder: the indorsement (a signature for negotiation, see our article on sections 14 to 16) and delivery. The indorsement can be in blank or in full. If it is in blank and is the only or last indorsement, section 13 makes the instrument payable to bearer, after which delivery alone negotiates it. The Act spells it "indorsement"; "endorsement" is the common spelling.
Example: Pallavi Retail holds a cheque payable to its order. To pass it to a supplier it signs the back and hands it over. That is indorsement and delivery. If it only hands over the cheque without signing, the cheque, being payable to order, is not negotiated by the holder under section 48.
How sections 46, 47 and 48 fit
Section 46 states in general terms that bearer instruments are negotiable by delivery and order instruments by indorsement and delivery. Sections 47 and 48 repeat the rules and make each subject to section 58; section 47 adds the Exception and the illustrations. In practice:
- Check whether the instrument is payable to bearer or to order.
- If bearer, delivery negotiates it; if order, you need the holder's indorsement and delivery.
- Check whether it was delivered on a condition that it should not take effect until an event. If so, it is not negotiable until the event happens, unless the transferee is a holder for value without notice.
- Remember section 58 qualifies both rules.
Need help with a negotiated instrument?
If you have received an instrument on a condition, or you are unsure whether it has been properly negotiated to you, we can review the instrument and the chain of transfers with you. Start with a legal consultation.
Key takeaways
- Subject to section 58, a bearer instrument is negotiable by delivery.
- Subject to section 58, an order instrument is negotiable by the holder by indorsement and delivery.
- An instrument delivered on condition that it takes effect only on a certain event is not negotiable until the event happens, except in the hands of a holder for value without notice of the condition.
- Delivery to the transferee's agent, or a banker's holding as the transferee's agent, can amount to negotiation, as the two illustrations show.
Read next
- Section 46: delivery of a negotiable instrument
- Sections 14-16: negotiation, indorsement in blank and in full
- Section 13: negotiable instrument payable to order or bearer
- 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.