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A person who has obtained possession of an instrument by theft or under a forged endorsement, is not a holder, as he is not entitled to recover the instrument. Here, holder implies de jure holder (holder in law) and not de facto holder (holder in fact) an agent holding an instrument for his principal is not a holder, although he may receive its payment.
ii) He became the holder of the instrument before its maturity;and iii) He became the holder of the instrument in good faith i.e. without sufficient cause to believe that any infirmity in the instrument or defect existed in the title of the person from whom he derived it.
Crossing of cheques
Crossing of cheques :
There are two type of cheques, open cheques and crossed cheques. A cheque which is payable in cash across the counter of a bank is called an open cheque. When such a cheque is in circulation, a great risk attends it. If its holder loses it, its finder may go to the bank and get payment , unless it payment has already been stopped. It was to prevent losses incurred by open cheques getting in to the hands of wrong persons, that the custom of crossing was introduced. A crossed cheque is one on which two parallel transverse line with or without words & Co. are drawn . The payment of such a cheque can be obtained only through a banker. Basically, there are two types of crossing of cheques, i.e., general crossing and special crossing.In general crossing, there are two tranverse line with or without the words & Co. and with or without the words Not negotiable.In special crossing, there is an addition of the name of a banker.
In addition to the above two, there is one more type of crossing i.e. restrictive crossing. In this type of crossing, the words A/c Payee are added to the general and special crossing. The effect of the words Not negotiable on a crossed cheque is that the title of the transferee cannot be better than that of the transferor. The addition of the words Not Negotiable does not restrict the further transferability of the cheque; it only take away the main feature of negotiability, which is, that a holder with a defective title can give title to a subsequent holder in due course. Anyone who takes a cheque marked not negotiable takes it at his own risk.
Endorsement
Conditional
An endorsement is conditional or qualified which limits or negatives the liability of the endorser. An endorser may limit his liability in any of the following ways: (i) By sans recourse endorsement : i.e. By making it clear that he does not incur the liability of an endorser to the endorsee or subsequent holders and they should not look to him in case of dishonor of instrument. The endorser excludes his liability by adding the words sans recourse or without recourse, e.g pay A or order sans recourse.
or
Qualified:
(ii) By making his liability depending upon an happening of an specified event which may never happen, e.g, the holder of a bill may endorse it thus pay A or order on his marrying B. In such a case, the endorser will not be liable until A marries B.
For instance, A is in need of money of Rs. 1000. He approaches his friend B for borrowing the amount. B is not in a position to lend, but he suggests that A might draw a bill on him, which he would accept. If the credit of A is good, he would get the bill discounted with his banker. On the due date, A would pay Rs. 1000 to B, who would meet the bill. This bill is an accommodation bill.
Dishonour of Cheque
3. The Cheque should have been presented by the payee or the holder in due course with a period of six months from the date on which it is drawn or within the period of its validity, which is earlier.
4. The payee or the holder in due course of the cheque should have given notice demanding payment within 15days to the drawer, on receipt of information of dishonour of cheque from bank. 5. The drawee is liable only, if he fails to make the payment within 15 days of such notice period. 6. The payee or holder in due course of the cheque dishonoured should have made a complaint within one month of the arising of cause of action