Write short note on Payment in due Course.

The payment of the amount due under a negotiable instrument must amount to ‘payment in due-course’ in order to operate as a valid discharge of the instrument against the holder. According to Section 10 in order to constitute a payment of a negotiable instrument as a ‘payment in due course’ the following conditions must be fulfilled :

  1. The payment _must be in accordance with the apparent tenor. It should be made at or after maturity. A payment before maturity is not a payment in due course so as to discharge the instrument.
  2. The payment must be made by or on behalf of the drawee or acceptor. It must be made in money (or by cheque if accepted to the holder).
  3. The payment should be made in good faith, without negligence. It must be honestly made 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.
  4. The person to whom payment is made should be in possession of the instrument and should also be entitled to receive payment on it. He should be in possession of the instrument in such-manner the he is entitled to give a valid discharge.

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