DEPARTMENT OF TECHNICAL EDUCATION

Andhra Pradesh
Name : P. Samba Murthy,
Designation : Head of Department

Branch : D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic, Sircilla,
Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Negotiable Instrument Act
Duration : 50 Minutes
Sub-Topic : Instrument Holder and holder-in-
due course and their rights.
Teaching Aids : PPT and Animations
CCP504(B).57 1
Objectives
On completion of this period, you would be able to

 Explain
 The concept of holder of negotiable instrument
 Explain the rights of a holder

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RECAP
So far you have learnt:

 Meaning and features of bill promissory note and

cheque.
 Difference between cheque, bill and promissory note.

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Known to un Known

 Can you say any difference between cheque and bill ?

 On whom a cheque is drawn ?
 On who, a bill can be drawn :

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Holder of negotiable instrument
Introduction
 A negotiable instrument is transferable from person
to person.
 A person who is possessing instruments legally in
his own name and acquired the same in a proper
manner.
 Then he can be said that the holder of negotiable
instrument.

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PARTIES TO NEGOTIABLE INSTRUMENT

 The parties to a negotiable instrument are

 (1) Holder and
 (2) Holder in due course.

CCP504(B).57 6
HOLDER:

 According sec. 8 of negotiable instrument Act, the

holder of a promissory note, bill of exchange or
cheque means ‘any person entitled in his own
name to the possession thereof and to receive or
recover the amount due thereon from the parties
thereto.’

CCP504(B).57 7
 HOLDER:

 In other words, a holder is a person who is legally

entitled to recover the amount from the parties of the
instrument and who is in possession of the instrument.

 A person who has obtained possession of an

instrument by theft or any other unlawful methods is
not a holder.

CCP504(B).57 8
 HOLDER:

 Thus, to be a holder, a person must satisfy the

following two conditions:
 The holder is the person who is entitled to the
possession of the instrument in his own name.
 Actual possession of the instrument is not
essential.
 He shall have the right to possession under some
legal or valid title.

CCP504(B).57 9
 HOLDER:

Simply we can say that

A person is said to be holder in the following cases:

The name of the holder appears on the Documents as its

page or endorsee.

CCP504(B).57 10
 HOLDER:

2) In case of a bearer instrument , the bearer may claim

the money without having his name mentioned on the
instrument.
3) The holder is conception to receive payment or
recovery the amount by filing a suit in his name against
other parties to negotiable imbruement and to give a
valid discharges.

CCP504(B).57 11
HOLDER:

 For example, the heir of the deceased holder or

any other person entitled to the instrument by
operation of law is the holder of the instrument
even though he is not the payee.

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 HOLDER:

 Legal possession is essential

 For example, a finder of the lost instrument on the
road.
 A thief who steals it from the holder or an endorsee
under a forged instrument may have real
possession of negotiable instrument.

CCP504(B).57 13
 HOLDER:

 But they are not holders of the instruments as

they do not have the right to possession legally
speaking.
 He must be entitled to receive or recover the
amount on the instrument due from the parties
liable thereto.

CCP504(B).57 14
HOLDER:

 Holder is the person who is not only entitled to

the possession of the instrument in his own name,
but also has the right to receive or recover the
amount of the instrument and give a valid
discharge to the person paying the amount.

CCP504(B).57 15
RIGHTS OF A HOLDER

 The holder of a negotiable instrument enjoys the

following rights:
 An endorsement in blank may be converted by
him into an endorsement in full.
 A holder is entitled to cross a cheque either
generally or specially and also with words “Not
Negotiable”.

CCP504(B).57 16
RIGHTS OF A HOLDER Cont:

 A Holder can negotiate a cheque to a third person, if

such negotiation is not prohibited by the direction
given in the cheque.
 He can claim payment of the instrument and can sue
in his own name on the instrument.
 A holder may obtain a duplicate copy of a lost
cheque.

CCP504(B).57 17
SUMMARY

 The holder of negotiable instrument means any

person entitled in his own name to the possession
thereof and to receive or recover the amount due
therein from the parties thereto.
 To be holder, he is entitled in his own name to the
possession of the instrument and also the right to
receive or recover the amount due thereon from the
parties thereto.

CCP504(B).57 18
QUIZ
1. A holder may be obtain a duplicate copy of a

(c) Paper
(d) Lost negotiable instrument
(e) Both a & b
(f) None

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Self-examination questions

 Define Holder of a negotiable instrument.

 What are the right of a holder of negotiable
instrument.

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Assignment
 Prepare answers for the above questions

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