Difference between Holder and Holder in Due Course

The term Holder and Holder in Due Course are related to Negotiable Instruments.

Holder

Holder is the person who is entitled in his own name to the possession of a negotiable instrument.

  • Normally a payee or endorsee is a holder.
  • Please note that holder may be or may not be with possession of the Instrument.
  • If the payee or endorsee dies, then the legal heir is the holder .
  • If there is a forged endorsement then , last endorsee is the holder.
  • If it is a bearer cheque, the person in whose name it is made is a holder.
  • If it is damaged the payee or last endorsee is the holder.
  • If it is stolen, then also payee or last endorsee is holder because a thief cannot become holder.
  • The holder has the right to obtain a duplicate of instrument is lost.
  • A holder can cross a cheque if it is not already crossed.

Holder in Due Course

Holder in due course means a person who must have the possession of the instrument. This is the basic difference between the Holder and Holder in Due course.

  • Holder in Due course must obtain the instrument in Good Faith.
  • If the instrument bears not-negotiable crossing , then the NO person can be a holder in due course.
  • If the instrument bears A/C payee crossing and restricted endorsement then NO person can be a holder in due course.
  • Forgery / theft / deceit do not convey any title.

15 Comments

  1. Santosh

    November 24, 2013 at 5:06 pm

    sir what is ‘ instrument ‘ term please tell .

    Reply
  2. Santosh

    November 24, 2013 at 5:07 pm

    what is negotiable instrument.? please explain in simple words

    Reply
    • pooja

      September 17, 2014 at 9:42 pm

      Negotiable instruments are basically transferable instruments from one person to another for the purpose of payment.they r basically of three types bills of exchange,cheques,promissory note.for example u can pay some amount to other person by bills of exchange u just have to mention the amount in it..mostly parties make this kind of payments for future date ..suppose u dont have right now to pay me..u can assign me a bills of exchange and it is a kind of surety from ur side that u will pay me becoz it is always signed.

      Reply
    • Amit

      December 1, 2014 at 11:37 am

      Any piece of paper that –
      a. entitles a person to a sum of money, and
      b. is freely transferrable
      is a negotiable instrument.

      Eg. is cheque. Suppose A makes a cheque in your name. Then you are entitled to a sum of money when you present it in the bank. Also suppose “or bearer” statement on cheque is not crossed out then you can give cheque to anyone and he will be entitled to receive money when he presents it to the bank, so it is transferrable also.

      Samjha?

      Reply
  3. vivek gujjar

    December 16, 2014 at 4:37 pm

    a written document which guranteeing the payment of specific amount either on order or on specific time

    Reply
  4. prathap

    March 5, 2015 at 7:24 am

    If you purchase any vegtables in market youwill give money. correct similary negoitable instrument is a mode of payment fromone person usally a creditor makes to another person debtor. cheques, promissorynote, certificate deposit, treasury bills all these are negoitable instruments

    Reply
  5. saeed ullah

    April 10, 2015 at 10:43 pm

    holder may are may not have the possession but it is must for the later

    Reply
  6. Hriata

    April 12, 2015 at 7:17 pm

    What is the meanig of amount due?

    Reply
    • Sazzad Hossain, ITP, CSCA

      December 18, 2017 at 4:03 pm

      means you have to pay that amount.

      Reply
  7. sandeep

    April 21, 2015 at 3:35 pm

    rules regarding payment of interest ????

    Reply
  8. dedan

    May 1, 2015 at 2:50 pm

    please explain ‘better title’ as one of the characteristics of negotiable instrument.

    Reply
  9. Solly

    June 20, 2015 at 5:50 pm

    Answer to Mrs. Dedan’s question……, Better title: In short explanation, It’s the transferee of a negotiable instrument is known as holder in due course. A bonafide transferee for value is not affected by any defect of title on the part of the transferor or of any of the previous holders of the instrument. This is the main distinction between a negotiable instrument and other subjects of ordinary transfer. 08185989153 for more conversation

    Reply
  10. sir u said in case of lost instrument last endorsee is holder but even if cheque lost and that is barer instrument if found person transfer it he becomes holder

    July 26, 2015 at 10:23 am

    pls refer once

    Reply
  11. Tosin

    July 27, 2017 at 1:53 pm

    can someone please explain how a bank can become an holder for value

    Reply
  12. SK Sharma,

    January 28, 2020 at 12:55 pm

    Can husband be a holder of cheque in due course which is in the name of his wife?Though both have a joint account.
    Two cheques issued by the accused one in favour of complainant another in favour of his wife. Legal Notice regarding both cheques and the complaint for the same filed by husband. That is rejected, though issuance of cheques and Notice admitted even then complaint is rejected on ground that the name of wife is not mentioned in the notice, hence notice is defective and illegal.
    Whole merit of the case is in favour of the complainant.
    Advise please .

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *