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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

Ramesh Traders received a cheque payable to bearer from Suresh for goods supplied, paying value and acquiring it before it became payable, without any reason to doubt Suresh's title. Ramesh Traders is a:

Ramesh Traders is a holder in due course. It obtained the bearer cheque for consideration, before the amount became payable, and without sufficient cause to believe that Suresh's title was defective. These are exactly the conditions the Act lays down for a holder in due course.

  1. AHolder in due courseCorrect
  2. BMere holder with no special rights
  3. CDrawee in due course
  4. DAccommodation party

Explanation

Section 9 requires that the person became possessor for consideration, before the amount became payable, and without sufficient cause to believe that the title of the transferor was defective. All three conditions are met here. Hence Ramesh Traders is a holder in due course, not a mere holder.

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