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.”
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. Section 9 of the Negotiable Instruments Act, 1881 establishes that a holder in due course is the holder itself, who accepts a negotiable instrument in a value-for-value exchange without doubting its title, so ultimately the holder is in good faith. The person who took it for value in good faith becomes the real owner of the instrument and is called the “holder in due consideration.” It can be summarized that every holder in the due course is a holder, but every holder in due course is not considered as a holder.
Holder and Holder in Due Course: Meaning, Conditions and Privileges
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. The act establishes a regulatory framework for promissory notes, bills of exchange, and cheques. The act was enacted to provide uniform legal regulations to cover all aspects of negotiable instruments in India. Several times, the act has been amended to make sure that it is in line with changing business practices and new judgments.
The Negotiable Instruments Act, 1881 does not define the term negotiable instruments. But while referring Section 13 of the act, provides only three kinds of negotiable instruments; Bills of Exchange, Promissory Notes, and Cheques, these instruments can be payable either to the order or the bearer.
Geeky Takeaways:
- A negotiated instrument is a signed document that promises a particular payment to a specified person or holder of the instrument.
- The Negotiable Instruments Act, 1881, is the governing act to provide a regulatory framework for all types of negotiable instruments.
- Section 13 of the act provides for three kinds of instruments, namely bills of exchange, promissory notes, and cheques.
- A holder is a person who has legally obtained the negotiable instrument, with his name entitled to it, in order to receive payment from the parties liable for payment.
Table of Content
- Who is a Holder under Negotiable Instruments Act?
- Who is Holder in Due Course?
- Conditions to be called Holder in Due Course
- Privileges of a Holder in Due Course
- Conclusion
- Holder and Holder in Due Course- FAQs