Holder and Holder in Due course Dr Manish

The definition given in section 8 implies that any person (a) who is entitled

Definition of Holder • As per Negotiable Instrument Act, 1881, a holder is a

�Holder refers to a person; we mean the payee of the negotiable instrument, who

Difference between Holder and HDC BASIS FOR COMPARISON HOLDER IN DUE COURSE (HDC) Meaning

�A principal whose name appears on an instrument as the holder though it is

�A thief or a finder of an instrument is not a holder though he

�Possessor- if negotiable instrument is payable to bearer. �Indorsee- if negotiable instrument is payable

�Liability of prior parties �Installment purged or clensed of all defects �Privilege in case

Conclusion • After reviewing the above points, it is quite clear that a holder

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Holder and Holder in Due course Dr. Manish dadhich

The definition given in section 8 implies that any person (a) who is entitled in his own name to the possession of the negotiable instrument and (b) has right to receive the amount from the parties thereto. �(a) Possession of instrument �(b) Entitled to receive the amount

Definition of Holder • 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.

�Holder refers to a person; we mean the payee of the negotiable instrument, who is in possession of it. He/She is someone who is entitled to receive or recover the amount due on the instrument from the parties thereto. �On the other hand, the holder in due course i. e. HDC implies a person who obtains the instrument bonafide for consideration before maturity, without any knowledge of defect in the title of the person transferring the instrument.

Difference between Holder and HDC BASIS FOR COMPARISON HOLDER IN DUE COURSE (HDC) Meaning A holder is a person who legally obtains the negotiable instrument, with his name entitled on it, to receive the payment from the parties liable. A holder in due course (HDC) is a person who acquires the negotiable instrument bonafide for some consideration, whose payment is still due. Consideration Not necessary Necessary Right to sue A holder cannot sue all prior parties. A holder in due course can sue all prior parties. Good faith The instrument may or may not be obtained in good faith. The instrument must be obtained in good faith. Privileges Comparatively less More Maturity A person can become holder, before or A person can become holder in after the maturity of the negotiable due course, only before the instrument. maturity of negotiable

�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 in the name of the partner of a firm, it naturally becomes a holder, as it is not a separate entity from the partner. �Where a negotiable is a bearer one , any person who is in the possession of such instrument is the holder. �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 appear on the instrument.

�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 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. �When the endorsement of a bill is ‘ for collection only’ the endorsee cannot be a holder. �The above mentioned lists are not complete.

�Possessor- if negotiable instrument is payable to bearer. �Indorsee- if negotiable instrument is payable to order. �Payee can be HDC in India, even though the instrument has not been negotiated by him, its been issued to him. i) due consideration paid; ii)receive before maturity date(post maturityholder(not HDC)has rights of the transferer) iii)Good faith; due care and caution-about good title of transferer – no HDC

�Liability of prior parties �Installment purged or clensed of all defects �Privilege in case of inchoate stamped instrument not affected �No effect of conditional delivery or of special delivery. �No effect of absence of consideration or presence of an unlawful consideration: �Privilege in case of a fictitious bill �Estoppels against denying original validity of instrument �Estoppels against denying capacity of payee to endorsee �Estoppels against endorser to deny capacity of prior parties.

Conclusion • After reviewing the above points, it is quite clear that a holder and holder in due course are two different persons. Further, a person needs to be a holder first, to become a holder in due course, whereas, in the case of a holder, he need not be an HDC first.