Facts of the Case
- A cheque is drawn payable to “X or bearer”, making it transferable by mere delivery.
- Y, a thief, steals the cheque without X’s consent.
- Y negotiates the cheque to Z, who receives it in good faith and for value.
- X, the rightful owner, wants to recover the cheque or its value.
Issues in the Case
- Whether a bearer cheque stolen and transferred can give good title to the transferee.
- Whether Z, as a bona fide transferee, becomes a valid holder.
- Can X recover the cheque from Z or any other party?
Principles Associated with It
- Under Section 9 of the Negotiable Instruments Act, a holder in due course takes the instrument free from prior defects.
- A bearer instrument passes by mere delivery under Section 13.
- However, theft does not confer legal title—“nemo dat quod non habet” (one cannot give what one does not have).
- If Z took it in good faith and for value, Z may be treated as a holder in due course, even if the title was defective.
Judgement
- Since the cheque is payable to bearer, Z acquires good title even though it was stolen, provided he took it in good faith and without knowledge of the theft.
- X cannot recover the cheque from Z because Z is a holder in due course under the law.
- The bank or A is not liable unless negligence is proven in the payment process.