Holder in Due Course and Payment in Due Course

Holder in Due Course and Payment in Due Course

Holder in Due Course :

According to Section 9 “holder in due course means any 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 there of if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that defect existed in the title of the person from whom he derived the title.

Conditions for holder in due course :

• Negotiable Instrument must be in  possession.
• The name must appear as payee or  endorsee on the instrument in case of    order cheque.
• Instrument must be regular & complete  in all respects.
• Valuable consideration.
• Must obtain the instrument without having sufficient cause to believe that any defect existed in the title of the transferor.
• Consideration
• Possession
• Defect in transfer’s title

Payment in Due Course:

Section 10 to states “payment in due course means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.”

Essential features of Payment in Due Course :

1. Payment as per Apparent tenor
2. Payment in good faith & without negligence
3. Payment to the person in possession of instrument in circumstances which do  not arouse suspicion about his title to possess the instrument and to receive payment thereof.