Difference between Holder and Holder in due course

Difference between holder and holder in due course

Meaning of Holder

  • Section 8 of Negotiable Instruments Act 1881 defines the term Holder. A Holder is a person who is entitled in his own name to the possession of a negotiable instrument to receive and recover the amount due on the instrument.
  • A holder is a person who lawfully obtains the negotiable instrument. The negotiable instrument has his name entitled on it so he can receive the payment from the parties liable.
  • A holder may or may not be in possession of the instrument.
  • If the title of the prior party is defective and does not have a legal right to deliver the instrument to the holder, the holder also has no such right.
  • Holder is entitled to the possession of the instrument in his own name.
  • Consideration is not necessary
  • A holder does not have a right to sue prior parties related to the transaction
  • The holder may or may not obtain the instrument in good faith(with Bonafide intentions).
  • A person can become a holder either before or after the maturity of the negotiable instrument.

Kinds of Holder

  • De Jure – It means that the holder of a negotiable instrument as a matter of legal right.
  • De facto – It means the holder of a negotiable instrument by the virtue of possession but not entitled in his/her own name.

Meaning of Holder in Due Course

  • Holder in due course means a person who has the possession of the instrument.
  • A holder in due course is a person who acquires the negotiable instrument (in good faith) for some consideration, whose payment is still due.
  • Always in the possession of the instrument.
  • Holder in due course is free from the defective title of prior party.
  • Holder has to obtain it in good faith for some consideration.
  • Consideration is necessary.
  • A holder in due course has a complete right to sue the prior parties.
  • The holder in due course always obtains the instrument in good faith (with bonafide intentions).
  • A person can become holder in due course only before the maturity of negotiable instrument.
See also  M.C. Mehta vs Union of India: Ganga Pollution Case

Differences between Holder and Holder in Due Course

Basis Holder Holder in due course
Meaning A holder is a person who lawfully obtained the negotiable instrument. The negotiable instrument has his name entitled on it so he can receive the payment from the parties liable.
A holder in due course is a person who acquires the negotiable instrument (in good faith) for some consideration, whose payment is still due.
Possession May or May not be in possession of the instrument. Always in the possession of the instrument.
Title If the title of the prior party is defective and does not have a legal right to deliver the instrument to the holder, the holder also has no such right. Holder in due course is free from the defective title of prior party.
Entitlement Holder is entitled to the possession of the instrument in his own name. Holder has to obtain it in good faith for some consideration.
Consideration Consideration is not necessary Consideration is necessary
Right to sue A holder does not have a right to sue prior parties related to the transaction. A holder in due course has a complete right to sue the prior parties.
Good Faith The holder may or may not obtain the instrument in good faith(with bonafide intentions). The holder in due course always obtains the instrument in good faith(with bonafide intentions)
Maturity of the instrument A person can become a holder either before or after the maturity of the negotiable instrument. A person can become holder in due course only before the maturity of negotiable instrument.

 

Author: Shreya Rathor,
Bharati Vidyapeeth Deemed University, Pune, Final Year

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