1. Indorsement is in blank, the instrument can be indorsed by delivery only:
Thus, A finds a cheque payable to bearer. He indorses it by delivery to B, B takes it bona fide and for value, i.e. B is a holder in due course. B will get a good title.
2. If the instrument is indorsed in blank originally and subsequently, any person forges further indorsement, in such a case, holder in due course will acquire a good title. The reason is that instrument is transferable by mere delivery and the holder claims his title, not because of forged indorsement but because of blank indorsement.
Example:
ADVERTISEMENTS:
A holds a bill indorsed in blank by Ram.
Sd/Ram
A delivers it to B. B delivers it to C, C forges B’s signature and indorses it to D.
D, in the above case does not claim his title because of forged indorsement made by C but because of the blank indorsement by Ram. As such he can claim payment from any of the prior parties, in spite of the forged indorsement.
ADVERTISEMENTS:
3. If the indorsement is in full, it can be negotiated by indorsement and delivery:
In case of forged indrosement, the signature of the payee is forged, even the holder in due course will not acquire a good title in that case because forgery does not convey any title.
Example:
A finds a bill payable to B or order. A forged B’s signatures and indorsed it to C. C takes it bonafide and for value. C will not acquire a good title. It should be noted that the term “forged indorsement strictly” speaking, means forging payee’s signature and it has no effect on an instrument which is indorsed in blanks and is transferable by mere delivery.