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

Under the Negotiable Instruments Act, 1881, the 'holder' of a promissory note, bill of exchange or cheque means a person who is:

A holder is a person entitled in his own name to possess the instrument and to receive or recover the amount due on it from the parties. Mere possession is not enough, and the extra conditions of consideration and good faith relate only to a holder in due course.

  1. AAny person who is merely in physical possession of the instrument
  2. BAny person entitled in his own name to possession of it and to receive or recover the amount due from the partiesCorrect
  3. COnly a person who has paid consideration and acquired it before maturity without notice of defect
  4. DOnly the person named as drawee on the instrument

Explanation

Section 8 defines a holder as a person entitled in his own name to possession and to receive or recover the amount due from the parties. Mere physical possession, such as that of a finder or thief, does not make one a holder. The option describing consideration, before maturity and no notice of defect is the definition of a holder in due course, which is narrower.

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