Payment in due course ( Section 10 of Negotiable Instruments Act, 1881 ):- It means pay in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances that do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.
1. Payment must be in accordance with apparent tenor Payment must be in accordance with the apparent tenor ( period ) of the instrument. This means that payment must be made according to the period as it appears on the face of the instrument. Thus, it is necessary that payment should be made at or after maturity. For example: if a bank makes payment of a post-dated cheque it will not be a payment in due course.
2. Payment must be made in good faith • Payment must be made in good faith. This made on the means that payment faith that the person made is the on whom payment is payment, gets real person entitled to get Prof. Example: If a bill payable to bearer ( i.e. A ) has been lost or stolen and a finder of the bill ( i.e. B ) presents if, for payment, a payment to the finder ( B ) would not be a payment in due course if the person paying ( i.e. C ) knows that the bill is a stolen bill and the person demanding payment ( i.e. B ) is not entitled to be paid. But if C has no knowledge and makes the payment to B in good faith, it would be a PIDC.
3. Payment must be made without negligence Payment must be made without any negligence on the part of the payer. If there are suspicious circumstances and the payer fails to make a necessary inquiry that may reveal the defects, in due course, the payment is not a payment precaution in respect of the payment. must exercise all Example: Payment of a cheque bearing forged signature of the customer as drawer, without the banker exercising due care, is not a payment in due course.
4. Payment must be made to a person in possession of the instrument Payment must be made to the lawful holder of the instrument. It is necessary because the payment made without production of the instrument cannot be a payment in due course(PIDC). So the payer must insist on seeing the instrument before making the payment and must obtain the instrument on payment.
5. Payment must be made in money only • The payment must be made in mone SES only unless the holder agrees to accept payment in any other Prof. Eedium or by cheque or draft.
Payment In Due Course, Section 10 Of NIA Act
MEANING OF PAYMENT IN DUE COURSE
I. MEANS PAYMENT MADE IN ACCORDANCE WITH THE APPARENT TENOR OF THE INSTRUMENT WHICH MEANS ACCORDING TO WHAT APPEARS ON THE FACE OF THE INSTRUMENT TO BE THE INTENTIONS OF THE PARTIES.
II. A PAYMENT WOULD NOT BE A PIDC IF IT IS MADE TO A PERSON NOT ENTITLED TO RECEIVE OR IT IS MADE BEFORE THE DATE OF MATURITY
III. THE PAYMENT IN DUE COURSE DISCHARGES ALL THE PARTIES LIABLE TO PAY ( SECTION 10 ).
” IF A BILL PAYABLE TO THE BEARER HAS BEEN LOST OR STOLEN AND A FINDER OF THE BILL PRESENTS IF, FOR A PAYMENT, A PAYMENT TO THE FINDER WOULD NOT BE PAYMENT IN DUE COURSE, IF THE PERSON PAYING KNOWS THE BILL IS STOLEN AND PERSON DEMANDING IS NOT ENTITLED TO BE PAID “
BUT IF HE HAS NO KNOWLEDGE AND MAKES THE PAYMENT IN GOOD FAITHIT WOULD BE PAYMENT IN DUE COURSE.
CONDITIONS SECTION 10
I. PAYMENT MUST BE IN ACCORDANCE WITH THE APPARENT TENOR OF THE INSTURMENT I. SHOULD BE MADE AT OR AFTER MATURITY
II . A PAYMENT BEFORE MATURITY IS NOT A PAYMENT IN DUE COURSE SO AS TO DISCHARGE THE INSTRUMENT
III . IF THE BILL OF EXCHANGE IS PAID BEFORE THE LAST DAY OF GRACE AND IS SUBSEQUENTLY ENDORSED OVER, IT IS VALID IN THE HANDS OF THE HOLDER IN DUE COURSE AND THE ACCEPTOR WOULD BE LIABLE TO PAY AGAIN ON THE INSTRUMENT
IV . EVEN IF THE BANK MAKES PAYMENT OF THE POST-DATED CHEQUE BEFORE THE DATE MENTIONED: NO PIDC.
PAYMENT MUST BE MADE IN GOOD FAITH AND WITHOUT NEGLIGENCE
MUST BE MADE HONESTLY IN THE BONAFIDE BELIEF THAT THE PERSON DEMANDING PAYMENT IS LEGALLY ENTITLED TO IT.
THE PAYER MUST NOT BE GUILTY OF ANY NEGLIGENCE IN MAKING THE PAYMENT
IF SUSPICIOUS CIRCUMSTANCES AND THE PAYER DOES NOT MAKE THE NECESSARY INQUIRY THEN IT IS NOT PAYMENT IN DUE COURSE.
FOR EXAMPLE : IF A SPECIALLY ENDORSED BILL OF EXCHANGE IS PAID WITHOUT INQUIRY: NEGLIGENCE ON THE PART OF THE PAYER AND PAYMENT WILL NOT BE TREATED AS PAYMENT IN DUE COURSE .
PAYMENT MUST BE MADE TO A PERSON OF THE INSTRUMENT IN POSSESSION OF THE INSTRUMENT
THE PAYMENT MUST BE MADE TO APERSON IN POSSESSION OF THE INSTRUMENTS UNDER CIRCUMSTANCES THAT DO NOT AROUSE SUSPICION ABOUT HIS TITLE TO POSSESS THE INSTRUMENT AND TO RECEIVE THE PAYMENT OF THE AMOUNT MENTIONED THEREIN.
A PAYMENT CAN NOT BE PAYMENT IN DUE COURSE IF IT IS MADE WITHOUT REQUIRING PRODUCTION OF THE INSTRUMENT
THE PAYER MUST INSIST ON SEEING THE INSTRUMENT BEFORE MAKING THE PAYMENT AND MUST OBTAIN THE INSTRUMENT ON PAYMENT.
THE PAYMENT MUST BE MADE IN MONEY ALSO
MUST BE MADE IN MONEY ONLY UNLESS THE HOLDER AGREES TO ACCEPT PAYMENT IN ANY OTHER MEDIUM OR BY CHEQUE OR DRAFT
CONCLUSION:
PAYMENT IN DUE COURSE MEANS
I. ACCORDING TO THE APPARENT TENOR OF THE INSTRUMENT AT OR AFTER MATURITY
II. IN GOOD FAITH AND WITHOUT NEGLIGENCE
III . IN MONEY ( OR BY CHEQUE IF ACCEPTABLE TO THE HOLDER )
IV . A PERSON WHO IS LEGALLY ENTITLED TO RECEIVE.
Payment is said to have been made in the due course u / s 10 when
1. Payment is according to the apparent tenor of the instrument
2. Payment is made in good faith
3. Payment must have been made without any negligence
4. Payment should be to a person who has possession and title of the instrument.
Protection when it is a payment in due course
According to Section 82 ( c )
According to Section 85 ( 1 )
According to section 85 ( 2 )
According to section 89 C