Business Law

Negotiable Instrument Act

Holder & Holder In Due Course

Presented By:

1. Abhishek

2. Neeraj Kumar

3. Rohit Dhaula

4. Sunny

5. Sumit

Holder (Sec.8) Definition

The definition given in Section 8 implies that any person:

Who is entitled in his own name to the possession of the negotiable instrument.

Has right to receive or recover the amount from the parties thereto.

Holder’s Of Negotiable Instrument

A principal whose name appears on an instrument as the holder though it is executed in the name of his agent for him.

Where a negotiable instrument is a bearer one, any person who is in the possession of such instrument is the holder.

Where a negotiable instrument is in the name of a partner of a firm, it naturally becomes a holder, as it is not a separate entity from the partner.

Cont…The endorsee of a cheque is called a

holder.If a holder of a negotiable instrument

is dead, the heirs of the deceased holder become the holders.

A principal on whose behalf a pronote is endorsed in blank and is delivered to his agent, he is a holder of the instrument though his name does not appear on the instrument.

The Following Are Not The Holders

A thief or a finder of an instrument is not a holder though he is in possession of an instrument.

The word “entitled” used in the definition of a holder shows that the title of the person who claims to be the holder must be acquired in a lawful manner. A person obtaining the instrument under forgery is not a holder.

Holder In Due Course (Sec.9)

Definition

The definition of holder in due course in Section 9 means that any person who for the consideration paid becomes the possessor of a negotiable instruments, before its maturity, in good faith and without any sufficient reason to believe that any defect existed in the title of the person from whom he obtained it.

Right & Privileges of Holder In Due Course

Liability of prior parties.

Fictitious drawer or payee.

No effect of conditional delivery.

Instrument cured of all defects.

Cont…Instrument obtained by unlawful

means or unlawful consideration.

Estoppel against denying original validity of instrument.

Estoppel against denying capacity of the payee to endorse.

Cont…Estoppel against denying signature or

capacity of prior party.

Inchoate stamped instruments.

Difference Between Holder & Holder In Due Course

Points Holder Holder In Due Course

1.Meaning A person entitled on its own name to possession of negotiable instrument & has right to receive or recover the amount due thereon from the parties there to.

A holder who takes the instrument in good faith for consideration before its over due & without its notice of defect in title of the person who has transferred it to him.

2.Consideration A holder can obtain instrument without consideration.

A person has to obtain instrument with consideration & for value.

Difference Between Holder & Holder In Due Course

3.Title If an instrument is inchoate, a holder of such instrument cannot get good title in the instrument.

Holder in due course acquires a good title even if the instrument is inchoate.

4.Liability A holder of the instrument can sue against the person who has signed it & also against the transferor from whom he has obtained it.

A holder in due course can sue all prior parties to a negotiable instrument until the instrument is duly satisfied.

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