Difference between Holder and Holder in Due Course

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


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.
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  • Santosh

    sir what is ‘ instrument ‘ term please tell .

  • Santosh

    what is negotiable instrument.? please explain in simple words

    • pooja

      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.

    • Amit

      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.


  • vivek gujjar

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

  • prathap

    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

  • saeed ullah

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

  • Hriata

    What is the meanig of amount due?

    • Sazzad Hossain, ITP, CSCA

      means you have to pay that amount.

  • sandeep

    rules regarding payment of interest ????

  • dedan

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

  • Solly

    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

  • 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

    pls refer once

  • Tosin

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