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What is Holder in Due Course?

Important banking qna for banking aspirants, which is helpful in banking exam.

Apr 8, 2015 16:01 IST
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A holder in due course is any person, who for consideration became the possessor of a promissory note, bill of exchange or before the amount mentioned in it become, payable and without having sufficient cause to believe that any defect existed in the title of the person from who he derived his title.

This definition implies the fulfillment of the following condition:

  1. Person who claims to be holder in due course must have the negotiable instrument in his possession. He must be payee or endorsee and a bearer.
  2. He must obtain possession of it for real, valuable and lawful consideration before its maturity
  3. He must obtain it in good faith without any sufficient to believe that any defect existed in the title of the person from whom he obtained it.

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