According to section 8, a holder of a negotiable instrument is “a person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.” Thus, a person who has obtained the possession of an instrument by theft or under a forged endorsement is not a holder as is not entitled to recover the amount of the instrument.
Holder
And Holder-In-Due-Course:
According to section 8, a holder of a negotiable instrument is “a
person entitled in his own name to the possession thereof and to receive or
recover the amount due thereon from the parties thereto.” Thus, a person who
has obtained the possession of an instrument by theft or under a forged
endorsement is not a holder as is not entitled to recover the amount of the
instrument.
A ‘holder in-due-course’: Is “a
person who for consideration became
the possessor of a promissory note, bill of exchange or cheque, if payable to
bearer, or the payee or endorsee thereof, if payable to order, before the
amount mentioned in it becomes payable and without having sufficient cause to
believe that any defect existed in the title of the person from whom he derived
his title (Section 9).” Ambiguous Instrument (Sec.17):
An ambiguous instrument is one which
may be construed either as a promissory note or as a bill exchange. The holder
may at his option treat it as either and the instrument shall be treated
accordingly. Where Amount is stated differently in Figures and Words (Sec. 18): If the amount
undertaken or ordered to be paid is stated differently in figures and in words,
the amount stated in words shall be the amount undertaken or ordered to be
paid. Inchoate Instruments (Sec.20):
An inchoate instrument means an instrument
that is incomplete in certain respects. The person so signing shall be liable
upon the instrument, in the capacity in which he signed the same, to any
holder-in-due-course for such amount. But, a person other than a holder-in-due-course
cannot recover from the person delivering the instrument anything in excess of
the amount intended by him to be paid there under. Minor (Sec. 26): A minor may draw,
indorse, deliver and negotiate negotiable
instruments so as to bind all parties except himself.Agency (Sec. 27): Every person capable of binding
himself or of being bound may so bind himself or be bound by a duly authorized
agent acting in his name.
Liability of Agent Signing (Sec.
28): An agent who signs his name to
a P/N, B/E or Cheque without indicating thereon that he does not intend thereby
to incur personal responsibility, is liable personally on the instrument,
except to those who induced him to sign upon the belief that the principal only
would be held liable. Liability of Legal Representative (Sec.29):
A legal representative of a deceased
person who signs his name to a promissory note, bill of exchange or cheque is
liable thereon, unless he expressly limits his liability to the extent of the
assets received by him as such. Negotiable
Instruments Made, etc.:
Without Consideration (Sec.43): A negotiable instrument made, drawn,
accepted, indorsed or transferred without consideration, or for a consideration
which fails, creates no obligation of payment between the parties to the
transaction. Partial Absence or Failure of Money Consideration (Sec.44): When the
consideration for which a person signed a promissory note, bill of exchange or
cheque consisted of money, and was originally absent in part or has subsequently
failed in part, the sum which a holder standing in immediate relation with such
signer is entitled to receive from him is proportionately reduced. Partial
Failure of Consideration
not Consisting of
Money (Sec. 45): When a part of the consideration for
which a person signed a promissory note, bill of exchange or cheque, though not
consisting of money, is ascertainable in money without collateral enquiry, and
there has been a failure of that part, the sum which a holder standing in
immediate relation with such signer is entitled to receive from him is
proportionally reduced. Lost or Stolen Instruments [Sec.
58]: When a negotiable instrument has
been lost, or has been obtained from any maker, acceptor or holder thereof by
means of an offence or fraud, or for an unlawful consideration, no possessor or
indorsee who claims through the person who found or so obtained the instrument
is entitled to receive the amount due thereon from such maker, acceptor or
holder, or from any party prior to such holder. However, if such possessor or
indorsee is a holder, in due course, he shall be entitled to receive the
payment thereof.
Lost Instruments: When a bill or note is lost, the
finder acquires no title to it as
against the rightful owner. He is also not entitled to sue the acceptor or
maker in order to enforce payment on it. If the finder obtains payment, the
person who pays it in due course may be able to get a valid discharge for it.
But the true owner can recover the money due on the instrument from the finder. Stolen Instruments: (1) A person cannot enforce
payment of it against any party
thereto nor can he retain it against the party from whom he had stolen it. (2)
If the thief negotiates the instrument to a purchaser for value who has notice
of the theft, the transferee cannot acquire a better title than the thief and
thus cannot enforce payment. (3) If a person who has stolen a bill or note
payable to bearer transfers it to a holder in due course, he confers a good
title on him or any person deriving title from such holder.
Tags : Business Environment and Law-The Negotiable Instruments Act, 1881
Last 30 days 528 views