Submiited By-Dhruv Gupta B.A.Llb 1 Year Section A 014 Submited To - Ms. Akanksha Takkar Assistant Professor Iimt and School of Law

SUBMIITED BY-
SUBMITED TO-
DHRUV GUPTA
MS. AKANKSHA TAKKAR
B.A.LLB 1 YEAR
ASSISTANT PROFESSOR
SECTION A
IIMT AND SCHOOL OF LAW
014
Section 8 of Negotiable Instruments Act 1881: "Holder"
The "holder" of a promissory note, bill of exchange or cheque means any person entitled in
his own name to the possession thereof and to receive or recover the amount due thereon
from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the
time of such loss or destruction.
As per Negotiable Instrument Act, 1881, a holder is a party who is entitled in his own name
and has legally obtained the possession of the negotiable instrument, i.e. bill, note or
cheque, from a party who transferred it, by delivery or endorsement, to recover the amount
from the parties liable to meet it.
The party transferring the negotiable instrument should be legally capable. It does not
include the someone who finds the lost instrument payable to bearer and the one who is in
wrongful possession of the negotiable instrument.
SECTION-9. "Holder in due course"
Holder in due course" means any person who for consideration became the possessor of a
promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if
9[payable to order], before the amount mentioned in it became payable, and without having
sufficient cause to believe that any defect existed in the title of the person from whom he derived his
title.
Holder in Due Course is defined as a holder who acquires the negotiable instrument in
good faith for consideration before it becomes due for payment and without any idea
of a defective title of the party who transfers the instrument to him. Therefore, a holder
in due course.
When the instrument is payable to bearer, HDC refers to any person who becomes its
possessor for value, before the amount becomes overdue. On the other hand, when the
instrument is payable to order, HDC may mean any person who became endorsee or
payee of the negotiable instrument, before it matures. Further, in both the cases, the
holder in both the cases he must acquire the instrument, without any notice to believe
that there is a defect in the title of the person who negotiated it.
BASIS FOR HOLDER IN DUE COURSE
HOLDER
COMPARISON (HDC)
Meaning A holder is a person who A holder in due course
legally obtains the (HDC) is a person who
negotiable instrument, acquires the negotiable
with his name entitled on instrument bonafide for
it, to receive the payment some consideration,
from the parties liable. whose payment is still
due.
Consideration Not necessary Necessary
Right to sue A holder cannot sue all A holder in due course
prior parties. can sue all prior parties.
Good faith The instrument may or The instrument must be

may not be obtained in obtained in good faith.
good faith.
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Maturity A person can become A person can become
holder, before or after holder in due course, only
the maturity of the before the maturity of
negotiable instrument. negotiable instrument.
Sec. 51. Right of holder to sue; payment. - The holder of a
negotiable instrument may to sue thereon in his own name; and payment to him in due
course discharges the instrument.
RIGHTS OF A HOLDER IN GENERAL

1. He may sue on the instrument in his own name
2. He may receive payment and if the payment is in due course, the instrument is discharged
RIGHT TO SUE
• Holder of a negotiable instrument may sue on his own name, even if
he be a holder only for collection or as a pledge of the instrument
RIGHT OF TRANSFEREE OF UNINDORSED INSTRUMENT

• Such possessor may sue in his own name if his transferor could have done so
• Under Section 49, a transfer for value, but without indorsement, of an instrument is payable to
order vests in the transferee such title as the transferor had therein.
EFFECT OF PAYMENT TO THE HOLDER

• The payment in due course to the holder of the instrument discharges the instrument
• It is in due course if it is made at or after the maturity of the
instrument; or to the holder thereof; in good faith and without notice
that his title is defective
1. Once a negotiable instrument passes through the hands of a holder in due course, it get
cleansed of all defects, unless he himself was a party to fraud or illegality committed
regarding the instrument (S. 53).
2. The maker of a note, or drawer of a bill or cheque, and no accepts of a bill for the honour
of the drawer, will be permitted to deny the validity of the instrument, as originally drawn, in
a suit thereon by a holder in due course.
3. In case of a suit by holder in due course, no maker of a note, or acceptor of a bill payable
to order, will be permitted to deny the validity of the payee’s capacity at the date of the
note of a bill to endorse the same (S.121).
4. Upon a suit by a holder in due course the acceptor cannot take the defence or
accommodation acceptance (S. 36).
5. The holder in due course gets a better title than that of the transferor of the instrument,
even if the title of the transferor was defective, the holder in due course will get a good title.
But in case of a forged instrument, even a holder in due course will get no title, as it is a case
of total absence of title and not a mere defect of title (S. 58).
6. If a note or a bill is negotiated to a holder in due course the liable parties cannot avoid
liability on the ground, that delivery of the instrument was conditional or for a special
purpose (S. 46, 47).
7. When a bill is drawn payable to the drawer’s order on a fictitious name, and is
endorsed by the same hand as drawer’s signature, the acceptor cannot take the plea that
the payee was a fictitious person (S. 42).
8. Where a duly stamped and signed instrument is either left wholly blank or in complete
in some material requirements such as date, amount, payee’s name, and is delivered by one
person to another for the purpose of filling it up. If such a person or any holder fills up
more amount, than what he was authorized to do. The holder in due course of such an
instrument can recover the whole amount, provided the stamp affixed upon it is sufficient to
cover the filled sum (S.20).
In the case of GEMINI VS CHANDAN 2007 it was held that there is no provision in the
act by which a holder in due course can be presumed to be a holder. There is a
presumption by virtue of section 118 of the act that a holder is a holder in due course
in some specific situation. Therefore holder and holder in due course are not the same
thing.
In the case of S.V PRASAD VSSURESH KUMAR AIR 2005 it was held that a holder in due
Course acquires a right to recover the amount from the holder of the instrument. The
endorsement can take place without having participation from the maker of the
instrument.The holder in due course acquires the same right which was with the holder.
In the case of MILIND SHRIPAD CHANDURKAR VS KALIM KHAN 2011 it was held that a
suit for recovery of amount which is liable through a negotiable instrument can only be
filed by a person who is holder in due course of a negotiable instrument.

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Good faith The instrument may or The instrument must be

Privileges Comparatively less More

RIGHTS OF A HOLDER IN GENERAL

RIGHT OF TRANSFEREE OF UNINDORSED INSTRUMENT

EFFECT OF PAYMENT TO THE HOLDER

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