A bill is dishonoured by non-acceptance. The bill is endorsed to 'A'. 'A' endorses it to 'B'. As between 'A' and 'B', the bill is subject to an agreement as to the discharge of 'A'. The bill is afterwards endorsed to 'C', who takes it with notice of dishonour. Decide, with reasons, whether 'C' is entitled to accept the bill in the capacity of a holder in due course.
To constitute a holder in due course. Section 9 of the Negotiable Instruments Act requires the holder to have obtained the instrument in good faith. However, Section 53 provides that a holder of a negotiable instrument who derives title from a holder in due course, has the rights thereon of that of a holder in due course.
Accordingly, a title that has been cleansed of defects by passing through the hands of a holder in due course, remains immune from those defects not with standing that a subsequent holder may have notice that defects once existed provided that he was not a party to them. Thus, 'C' shall get a good title to the bill.
To constitute a holder in due course. Section 9 of the Negotiable Instruments Act requires the holder to have obtained the instrument in good faith. However, Section 53 provides that a holder of a negotiable instrument who derives title from a holder in due course, has the rights thereon of that of a holder in due course.
Accordingly, a title that has been cleansed of defects by passing through the hands of a holder in due course, remains immune from those defects not with standing that a subsequent holder may have notice that defects once existed provided that he was not a party to them. Thus, 'C' shall get a good title to the bill.
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