Meaning of a Holder (Company)

As per Sec. 8 of the Indian Negotiable Instruments Act, by the term ‘holder’ is meant such a person who is authorised and rightful to hold any promissory note, bill of exchange or cheque in his own name and entitled to receive money from the concerned party. If such negotiable instrument is lost, or is destroyed, its holder shall be that person who was the owner of it at the time of its loss or destruction.

Accordingly, there are two essentials to exist in a ‘holder’: (i) Possessing the right to have the instrument in one’s own name; and (ii) Right to receive the amount payable, from other parties. Despite one’s having the instrument in his possession, if he has no right to receive money,such person shall not be treated as the ‘holder”.

Meaning of a Holder In Due Course

According to Sec. 9 of the Indian Negotiable Instruments Act, by the term ‘holder in due course’ is meant any such person who, prior to the accruing of the payment of he amount mentioned in the instrument, in lieu for the consideration, and having sufficient reason for such belief that there was no defect in the title of the giver, takes, any bill of exchange which is payable to the bearer or order, such payee or endorsee shall be the ‘holder in due course’. According to the definition given here, the following elements must be there in the ‘holder: in due course’:

(1) In Return for Some Consideration- If the holder receives the instrument without consideration (value), as a matter of donation, or in any other way, it shall be an instrument without consideration. The holder of such instrument shall not be a holder in due course since the consideration is essential for it.

(2) Before the Date of Maturity- For being a holder in due course, it is essential that he must get the instrument before the date of maturity. If he receives it later on, he shall not be treated as a holder in due course.

(3) Right of the Transferer- If he receives the document, with this faith that there was no defect in the title of the transferer, then he shall be a holder in due course.

(4) Right on the Instrument- In case of the bearer instrument, the holder of the instrument, and in case of the order instrument, the receiver or endorsee, shall be the holder in due course found in holder. Hence, it is said that a holder in due course is always a holder, but a holder is not always a holder in due course.

Special Rights of Holder in Due Course

(1) Stamped Incomplete Instruments- If any person, after putting his signatures on a stamped but incomplete instrument, delivers it to some other person, the holder in due course can not say against the holder that the instrument has not been completed as per his orders.

(2) Liability of Earlier Parties- Till the payment of the instrument, each previous party concerned with it shall be liable to the holder in due course.

(3) False Instrument- When as per the orders of the drawer, any bill of exchange is payable in some fictitious name and has been endorsed by the same person after signing as a drawer, the acceptor may not say to the holder in due course that it was a fictitious name.

(4) Conditional Delivery- If the instrument is transferred to the holder is due course, the other parties, with a view to remaining free from their liability, may not say that the transfer for the instrument was done for some specific purpose or meeting a condition.

(5) Acquiring Rights From Holder in Due Course by Holder- Any holder who acquires right form holder in due course, gets the same rights as were available to the holder in due course.

(6) Obtaining Instruments in Illegal Way- The person liable for the instrument may not say against the holder in due course that the instrument had been lost or he had got it in a deceitful or illegal manner and for illegal consideration.

(7) Each Holder in Due Course is a Holder- Unless there is some thing against it, every valid holder in due course is a holder.

(8) Restriction on Denying the Real Validity of Instrument- On a claim being filed by the holder in due course, the promiser of the promissory note, the ordered of the cheque, or acceptor for honour of the instrument, can not dis-own or deny the validity of the instrument.

(9) Restriction on Denying on the Capability of Endorsing to the Receiver-On being claimed likewise, the promiser can not refuse or reject the capacity to endorse, of the acceptor of the promise or of the drawer or payee.

(10) Doubtful Instruments- If any instrument looks to be a promissory note or a bill of exchange alike, the holder may treat it as either of the two forms and later on too, shall it be considered likewise.

(11) Instrument Without Consideration- If any instrument is written, accepted or transferred without consideration, it shall be void but if such instrument reaches the hands of the holder in due course, he shall be able to receive the amount from any of the previous parties.