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Holder of a Negotiable Instrument

Section 8: 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.

Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.1)


The term “holder” as defined in this section appreciably ditfers from that of the English law. Under the provisions of the English Bills of Exchange Act the holder of a bill is a person who is actually in possession of it. The English law recognises only the de-facto holder. But under the present section the legislature, by inserting the words “entitled in his own name to the possession thereof” goes much further and lays down that one who is entitled to, but may not actually be in, possession of a note is the holder thereof. In other words, this section recognises dejure holders while the English law does not.

But the term, as defined in this section, is not limited to a dejure holder, as an endorsee of a note, to whom the endorsement has been legally made and delivery of the note has been given, has been held to be the holder thereof.

Entitled in his own name

The words “in his own name” do not and cannot mean the personal name of the person and there is no reason that any alias or assumed trade name would not fall within the meaning of these words. The coparcenary can be described as the holder of a note if it is made in its collective or business name and therefore in its own name within the meaning of his section. But a mere surviving coparcener of the holder is not a holder if there is no endorsement in his favour. Where a note is executed in the name of the managing agents of a bank it is the bank that is the holder of the note and not the managing agents. In case of a note executed in favour of a joint family firm the members comprising the firm at the time of execution are the holders.

A receiver appointed, in a partition suit, by Court and authorised to sue is a holder, within the meaning of the section, of a pronote executed in favour of the firm under partition.


In view of the prevalence of benami transactions in the country it is well to consider the position of the benamdar in the light of the wording of the present definition. A benamdar is a person who has no real interest in the property. But the use of the words “entitled in his own name to the possession thereof” goes to show that the benamdar in whose name the document stands as the payee is the holder thereof and not the real beneficiary whose name does not appear therein.

This section has been so worded to prevent the possibility of the real beneficial owner preferring a claim on the ground that the ostensible holder is a mere benamdar. It, therefore, follows as a necessary corollary that no person whose name does not appear on the negotiable instrument itself as the payee, or who is neither the endorsee nor the bearer can sue on the same, that is to say, in the case of a benami pronote it is only the benamdar who can sue on the note and not the beneficial owner. Therefore, a son lending his father's money and obtaining a pronote in his name is alone entitled to sue on the instrument.

No one can maintain a suit on a pronote except the holder thereof. The fact that the holder has been made a party and he has admitted that he is benamdar makes no difference and no decree can be passed in his favour. It is, however, possible that the suit can be proceeded with if it is based on the original consideration and not on the note. But it has been held by the Patna High Court and a division Bench of the Calcutta High Court that there is no reason why the real owner should not successfully institute a suit on a pronote executed in the name of his benamdar if the latter admits that he is the benamdar. In a suit upon a pronote, court should not allow evidence to show that the pronote was not really executed in plaintiff’s favour or that the note has been discharged by payment to the real owner. But it can be shown that the name of a wrong payee was inserted by mistake or that the payee is another man of identical name.

When, however , a negotiable instrument has been executed in the name of an ,insolvent tor a undisclosed principal the latter can sue on the instrument without any indorsement in his favour. When a pronote is executed in the name of one member of a joint family and the other members are interested in it, the person in whose name the note stands is entitled to sue.

A Karnavan of a tarwad is not entitled to sue for money on a pronote executed in favor of a deceased female member on the ground that the money advanced was his unless he brings the suit as the representative of the deceased.

A maker cannot successfully allege that the person in whose name the instrument stands or is endorsed is a benamdar and not entitled to the amount. A pronote stands in the name of a member of a joint family who died having a widow. The note was taken for the joint interest of all the members of the family. Even there it was the widow alone who was competent to sue. No plea of benami will be entertained. But a real owner is not debarred from suing for a declaration that he is the real payee and claiming delivery of the note from the payee named in the note.

An endorsement of a bill for collection does not as between the endorser and the endorsee, pass the property in the bill to the endorsee, though it puts him in possession to make title for a subsequent holder in due course. An endorsee for collection, after returning the bill to the endorse: without re-endorsement, does not come within the definition of a holder to entitle him to sue.

A transferee of a promissory note by way of assignment by a deed is a holder to entitle him to sue. But such a holder is subject to all equitees while a holder by endorsement and delivery is not. Therefore, a person to whom a promissory note is handed over without a deed or endorsement is not entitled to sue on it. But it has been held in an Allahabad case that a holder under this section is a person to whom there has been negotiation by endorsement and delivery where the note is payable to order and not a person who has merely acquired rights under a sale deed.

Joint Holders

Where in a bill there are several payees or endorsees, all of them are joint holders and none of them can alone negotiate or sue on it. All of them must join together to negotiate the instrument or sue on it under section 45 of the Indian Contract Act. If one of them be dead all the legal representatives of the deceased must join with the surviving payee or endorsee to negotiate the instrument or sue on it. All the members of a joint family are holders of a note in the name of the joint family firm.

Blank Endorsement

It is difficult to state who is the holder where a note payable to order is endorsed in blank or where a note is payable to bearer and the name of the endorsee or payee does not appear on the face of the instrument. In such cases the person to whom the instrument has been delivered for negotiation must be deemed to be the holder, he being the person in actual possession. The person to whom an instrument is transferred by operation of law is the holder and is entitled to recover the amount by suit.

Lost Note

Under the last paragraph of this section when a note is lost or stolen the last holder continues to remain the holder in spite of the loss or theft. The passing of the custody to other hands does not affect the position. Thus, a note belonging to X is lost and Y finds it, Y forges X’s signature and passes it to Z who passes good value for it. Y having no title himselt can pass no title to the endorsee Z. Besides, negotiation by forgery stands in the way of passing any title to Z in spite of his payment of consideration and even if without knowledge of the loss or foigery. Section 9 that follows only cures a defect of title but cannot create title where none exists.

Section 8 of Negotiable Instruments Act, 1881