Holder and Holder in due course By Deep

Holder and Holder in due course By Deep Narayan Guest Faculty Patna Law College

Holder • According to section 2. of the English bills of exchange • Holder means the payee or indorsee of a bill or note , who is in possession of it or the bearer thereto. • i. e holder word include • Payee • Bearer(transferee ) • indorsee (transferee)

Section 8 -Holder “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.

Entitled to possession • A person may be entitled to the possession of the instrument but he may not have actual possession. Illustration • Where a bill payable to order is , without indorsement, entrusted by the payee to his agent the agent does not become the holder and the payee is entitled in his own name to the possession of the bill. • Exception Operation of law

Right to receive or recover amount due • Holder has right of suit on the instrument • Thus a thief, or a finder having no claim to the instrument, or a person who takes an instrument under a forged indorsement or the payee or indorsee if he is prohibited by court from receiving the amount due on the instrument, is not a holder.

Case laws • Sarjoo Prasad v. Rampayari Debi, AIR 1950 Pat. 494 It was held that the payee mentioned in the instrument or indorsee thereof is the only person to sue, and the real owner or defendant will not be allowed to prove that he is only a name lender. • Batcha prasad v. Janki, AIR 1957 Pat 380

• When the holder of a negotiable instrument dies, his right passes to his heirs by devolution and all of them must join in a suit to enforce the deceases holder’s right. • Sigheshwar Mandal v. Gita Devi, AIR 1975 Pat. 81 It was held that the daughter of the deceased payee of a promissory note could not sue its maker on the note since she did not qualify as a holder thereof. If she was the sole heir of the payee, or if the property in the note had been bequeathed to her, she would had a valid claim against the maker.

Law commission Report(11 th Report) • Holder means the payee or indorsee of an instrument who is in possession of the instrument or the bearer thereof but does not include a beneficial owner claiming through a benamidar.

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 indorsee thereof, if [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.

Consideration • 2(d) of Indian contract Act • Lawful consideration • Daulat Ram v. Nagindas (1913) 15 Bom L. R. 333 • Anil kumar S. v. N. Ramakrishna Karba Gokulam and other AIR 2009 (NOC) 5541 (Ker)

Before Maturity • The person must become the holder before the amount becomes payable. • A person who takes a bill or note on the day on which it becomes payable is not a holder in due course because he takes it after it becomes payable as the instrument can be discharged at any time on that day. • A promissory note payable on demand is not overdue unless a demand for payment has been made and practice it is treated as a continuing security. • Nunna Gopalan v. Vuppuluri Lakshinarasamma AIR 1940 Mad 651

believe that any defect existed in the title of the person from whom he derived his title • In English law only requires “good faith”. • In Indian law due care and caution(ie if negligent or careless then no holder in due course) BASED ON GILL v. CUBITT • U. Ponnappa Mootha & Sons v. Catholic Syrian Bank Ltd. AIR 1991 SC 441 • Simmons v. London Joint Stock Bank , (1891) 1 ch. 270

Relevant Section Regarding Privileges • • • Section 20 Section 42 Section 46, 47 Section 36 Section 53 Section 58 Section 120 Section 121 Section 122