What is mean by Holder and Holder in due course.

HOLDER AND HOLDER IN DUE COURSE

WHAT DO YOU MEANT BY HOLDER?

A person who is legally entitled to the possession of the negotiable instrument in his own name to receive the amount there of is called a “Holder”. He is the original payee. In case the bill is payable to the bearer, the person in possession of the negotiable instrument is called the holder.

DEFINE HOLDER.

According to section 8 the “holder of a promissory note, bill of exchange, or cheque means any person entitle in his own name to the possession there of and to receive or recover the amount due there on from the parties there to”.

EXPLAIN THE RIGHTS OF A HOLDER.

The holder of the negotiable instrument point out certain right viz

v  To cross open cheques either generally or specially

v  To convert a blank endorsement into a full endorsement

v  To negotiable the instrument to a third party

v  To present it to the market or drawee

v  To use in his own name and

v  To obtain a duplicate of a lost instrument

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DEFINE HOLDER FOR VALUE.

It is defined in section 27 of the bill of exchange act, whenever the value of the instrument is guaranteed to any holder, he is called for value. No consideration is needed i.e. a person who claimed to be a holder, need not be given value it may be given by a prior party.

WHAT DO YOU MEAN BY HOLDER IN DUE COURSE?

Holder in due course in the person

v  Who receive an instrument innocently?

v  Who has paid value for the same?

v  Who has received the instrument before its maturity?

v  Who is in passion of the instrument as a bearer payee or endorse

It is said that every holder in due course in s holder, but every holder is not a holder in due course.

DEFINE HOLDER IN DUE COURSE.

According to section 9 of the negotiable instrument act defined the holder in due course as “any person who for consideration become the possessor of a promissory note, bill of exchange or cheque if payable to bearer or the payee or endorse thereof it 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 demand his title”.

PAYMENT IN DUE COURSE

 

The cheque should have been paid in due course. Sec.10 of the Negotiable Instruments Act defines the payment in due course. This concept of payment in due course has three essential features:

(i)    Apparent tenor of the instrument:

To avail of the statutory protection, the payment should have been made according to the apparent tenor of the instrument. The apparent tenor refers to the intention of the parties as it is evident from the face of the instrument. Example: if a drawer draws a cheque with a post-date, his intention is to make payment only after a certain date. If it is paid before the due date, this payment does not amount to payment in due course. So, the payment of a countermanded cheque does not amount to payment in due course.

 

(ii)  Payment in good faith and without negligence:

Good faith forms the basis for all banking transactions, and so, it is taken for granted. As regards negligence, the banker may sometimes be careless in his duties which constitutes an act of negligence. If negligence is proved, the banker will lose the statutory protection given under Sec.85.

Example:

(a)   Payment of a crossed cheque over the counter

(b)   Payment of a post-dated cheque before maturity

(c)   Failure to verify the regularity of an endorsement

 

(iii)Payment to a person who is entitled to receive the payment:

The banker should have made the payment to the ‘holder’ of the instrument. In other words, the banker must see that the person, who presents the cheque, is in possession of the instrument and he is entitled to receive the amount of cheque.

The mere possession of a document does not make one a holder. He must have a genuine title to it. For instance, if a person brings in a cheque which has been countermanded, or forged, though, he is in possession of the instrument, he has no title to it. Therefore, if a banker suspects the title of the person, he should not make payment. If a banker makes payment in such cases, he cannot get statutory protection under Sec.85.