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negotiable instrument query

priyanka narale (PCC student) (407 Points)

20 January 2009

Can anybody explain me the meaning

The holder in due course can sue upon a negotiable instrument in his own name for the recovery of the amount. further no need to give notice to the party liable on the instrument to pay.

M totally confused about the party to be sued.

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20 Replies

Ashish M (Chartered Accountant) (2731 Points)
Replied 21 January 2009

Pls read every word written below vry carefully........i hope u will got ur answer.......

""a holder in due course is a person who, through a valid consideration, become the holder of instrument.....

e.g. 'A' signed an instrument to pay a certain sum of money to somebody.

Now 'B', by theft, got the negotiable instrument.............................. After that, he purchases something from a seller 'C' and in consideration gives him the instrument.

Now in this case, the seller 'C' has become holder in due course bcoz he got the instrument in good faith and through bonafide consideration (i.e. by selling something to 'B' in return of instruement, whereas B was not Holder in due course coz he got the instrument by theft).

Now here as per your query, the party referred to is the party who is liable to pay the money under the obligation of the instrument. i.e. in my example...'A' is the party in your query........

Now as per definition, the seller C not required to give notice to A (the party) and he can sue upon A if he doesn't pay to C the amt. he undertook by signing the instrument........""

hope i m able to wisp smoke from the issue.............

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Prakash Popat (3134 Points)
Replied 21 January 2009

But A got right of recovery from B who was not holder in due course,Nice Reply Ashish.

Ashish M (Chartered Accountant) (2731 Points)
Replied 21 January 2009

ya.....ya........A got that right of recovery...........dats right...!

priyanka narale (PCC student) (407 Points)
Replied 21 January 2009

Thanks I got it. I was affraid that will anyone answer, but thanks to you Ashish