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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.
The party transferring the negotiable instrument should be legally capable. It does not include the someone who finds the lost
instrument payable to bearer and the one who is in wrongful possession of the negotiable instrument.
Definition of Holder in Due Course (HDC)
Holder in Due Course is defined as a holder who acquires the negotiable instrument in good faith for consideration before it
becomes due for payment and without any idea of a defective title of the party who transfers the instrument to him. Therefore, a
holder in due course.
When the instrument is payable to bearer, HDC refers to any person who becomes its possessor for value, before the amount
becomes overdue. On the other hand, when the instrument is payable to order, HDC may mean any person who became
endorsee or payee of the negotiable instrument, before it matures. Further, in both the cases, the holder in both the cases he
must acquire the instrument, without any notice to believe that there is a defect in the title of the person who negotiated it
NEGOTIABLE INSTRUMENTS
6. A person can become a holder, before or after the maturity of the negotiable instrument. On the contrary, a person can
become a holder in due course, only before the maturity of the negotiable instrument.
Comparison Chart
BASIS FOR
COMPARIS
ON
HOLDER
Meaning
Considerati
on
Not necessary
Necessary
Right to sue
Good faith
Privileges
Comparatively less
More
Maturity
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NEGOTIABLE INSTRUMENTS
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