Who is a Holder under Negotiable Instruments Act?

Who is a Holder under Negotiable Instruments Act?

As per Section 8 of the Negotiable Instruments Act, 1881, “The holder of a negotiable instrument means any person entitled to the possession of the instrument in his own name and to receive or recover the amount due thereon from the parties liable thereto.” The holder is either the original payee or the endorsee. In cases where the bill is payable to the bearer, the person who is in possession of such a negotiable instrument is called the ‘Holder’....

Who is Holder in Due Course?

As per Section 9 of the Negotiable Instruments Act, 1881, “The holder in due course means any person who for consideration became the possessor of a negotiable instrument if payable to bearer, or the payee or indorsee thereof if payable to order before the amount mentioned in it became payable, and without sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.”...

Conditions to be called Holder in Due Course

1. He must be a Holder: The holder of a negotiable instrument must have the right to possess the instrument in his own name and also the holder must have the right to recover or receive payment from the parties liable to pay for the negotiable instrument....

Privileges of a Holder in Due Course

1. He gets a Better Title than that of the Transferor: The Holder only gets the same title as his transferor, but a holder in due course gets a better title than that of his transferor, and he is in a privileged position. The liable parties can’t make any defense by making a plea that the instrument was lost, obtained through fraud, or that the instrument is for an unlawful consideration against a holder in due course....

Conclusion

A negotiable instrument is a signed document that promises a particular payment to a specified person or holder of the instrument. In India, negotiable instruments are governed under the umbrella of the Negotiable Instruments Act, 1881. This is a significant law that governs all means of negotiable instruments in India. Section 13 of the Act provides only three kinds of negotiable instruments, which are bills of exchange, promissory notes, and cheques. These instruments can be payable either to the order or the bearer. A person who is legally qualified to possess the negotiable instrument in his own name and to receive the amount mentioned is called a holder. The holder is either the original payee or the endorsee. In cases where the bill is payable to the bearer, the person who is in possession of such a negotiable instrument is called the ‘holder’. A holder in due course is a person who acquires the negotiable instrument in good faith for a valid consideration before the instrument becomes due for payment and without having any defective title. A person who acquires the negotiable instrument bona fide for some consideration for an instrument whose payment is still due is called a holder in due course. It is to be noted that every holder in due course is a holder, but every holder in due course is not a holder....

Holder and Holder in Due Course- FAQs

What is a Negotiable Instrument?...