Rights of hdc of a cheque

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CA Gyati Gupta (Querist)
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06 February 2013 Sir
In case of a bill held by an HDC ,all the prior parties can b made liable,but in case of a cheque marked "not negotiable" the bearer shall not b able to give a better title to the cheque than the title the person from whom he had took,what is the reason behind it?

Hari Beldona

Hari Beldona (Expert)
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06 February 2013 The cheque marked or crossed as not negotiable means it can not be endorsed to other person the bank will credit the proceeds of the instrument to the payees account only.

In case of a bearer cheque can be negotiated to other person provided he got the instrument in return of lawful consideration. For example Mr.X finds a signed blank bearer cheque on the road assuming that the cheque validity period is not expired then he writes the name of Mr.X and endorses or simply hands over it to Mr.Y to whom he owes Rs 1,000/- in this case Mr.X can not give better title to Mr.Y since Mr X has not got the cheque for lawful consideration
If Mr.Y believing that Mr.X has obtained the cheque from the drawer genuinely then Mr.Y is holder in due course (HDC)

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