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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Rohan, a holder, sues Sunil on a promissory note. Sunil denies that Rohan is a holder in due course but gives no proof that the note was obtained by fraud or an offence. Under the Act, what is the position on the question whether Rohan is a holder in due course?

The court presumes that Rohan is a holder in due course until the contrary is proved. Section 118(g) creates this presumption in favour of every holder. The burden shifts to the holder only if the instrument was obtained by an offence, fraud or for unlawful consideration.

  1. ARohan must first prove he is a holder in due course
  2. BThe court presumes, until the contrary is proved, that Rohan is a holder in due courseCorrect
  3. CNo presumption arises in favour of any holder
  4. DThe presumption arises only if the note has been indorsed at least twice

Explanation

Section 118(g) presumes, until the contrary is proved, that the holder of a negotiable instrument is a holder in due course. The burden shifts to the holder only where the instrument was obtained by an offence, fraud or for unlawful consideration. No such proof exists here, so the presumption stands.

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