Facts of the Case
- A cheque is drawn as payable to “X or bearer.”
- The cheque is lost, and ‘Y’ finds it and negotiates it to ‘M’.
- The cheque originally belongs to Z, not to X.
- The issue arises whether X can claim the cheque from Z.
Issues in the Case
- Can a cheque that is payable to “X or bearer” be transferred by mere delivery?
- Does the finder (Y) have the legal right to negotiate a lost bearer cheque?
- Can X claim the cheque if he was only the named payee, but not the actual owner?
- What are the rights of Z, the true owner, and M, the bona fide transferee?
Principles Associated With It
- Under Section 13 and 46 of the Negotiable Instruments Act, a bearer cheque is negotiable by delivery alone, and endorsement is not necessary.
- A bearer cheque passes title to anyone who receives it in good faith and for value, even if it was originally lost or stolen.
- If the cheque originally belonged to Z, then Z is the true owner, and X has no right to claim it unless it was meant for X.
- The payee named as “X or bearer” merely allows it to be encashed by anyone in possession — i.e., it is a bearer instrument.
- A finder of a lost bearer cheque (Y) can legally negotiate it, unless there is evidence of theft or bad faith.
Judgement
- Since the cheque was payable to “X or bearer”, it is negotiable by delivery and does not require endorsement.
- If Z is the true owner and the cheque was not meant for X, then X has no valid claim to recover the cheque from Z.
- As the cheque was a bearer instrument, and M took it in good faith, M can claim the amount.
- Therefore, X cannot recover the cheque or its amount from Z, unless he proves he was the intended recipient or legal owner.