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.