Chapter IV - Of Negotiation
Section 58
Section 58: Lost, fraudulently obtained or unlawful instruments
Section 58 restricts recovery through a person who found a lost instrument or obtained it through an offence, fraud or unlawful consideration, subject to the stated holder-in-due-course exception.
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Need advice on Section 58?
This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
When a negotiable instrument has been lost, or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, no possessor or indorsee who claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such maker, acceptor or holder, or from any party prior to such holder, unless such possessor or indorsee is, or some person through whom he claims was, a holder thereof in due course.
Key rule and applicability
The restriction follows the title route through the finder or unlawful acquirer. The exception applies where the claimant is a holder in due course or someone through whom the claimant derives title was such a holder.
Limits and related provisions
Mere possession or an ordinary onward transfer does not automatically cleanse the defect. Establish the original circumstances, the precise claim chain and the qualifying holder-in-due-course status rather than assuming a transfer for money answers every issue.
Hypothetical business example
Hypothetical: a business receives a cheque whose earlier acquisition is alleged to involve fraud. It traces the chain and the conditions of any claimed holder-in-due-course acquisition before relying on a right to payment.
Practical decision flow
Identify the alleged loss, offence, fraud or unlawful consideration.
Trace the claimant’s title through the relevant persons.
Assess and document the statutory holder-in-due-course exception if relied upon.
Practical checklist
Do
- Identify the alleged loss, offence, fraud or unlawful consideration.
- Trace the claimant’s title through the relevant persons.
- Assess and document the statutory holder-in-due-course exception if relied upon.
Avoid
- Mere possession or an ordinary onward transfer does not automatically cleanse the defect. Establish the original circumstances, the precise claim chain and the qualifying holder-in-due-course status rather than assuming a transfer for money answers every issue.
Glossary
- Defective acquisition
- The loss or unlawful-acquisition circumstances listed in the provision.
- Protected title chain
- The chain involving a holder in due course as described in the exception.
Frequently asked questions
Does possession alone establish entitlement despite the listed defect?
No. The restriction and its exception must be applied.
Can an earlier holder in due course be relevant?
Yes. The exception includes a person through whom the claimant claims having been a holder in due course.
Does the provision cover unlawful consideration?
Yes. It is expressly included alongside the listed offence and fraud circumstances.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026