‘Nakul’ made promissory note in favour of ‘Sahdev’ of 10,000 and delivered to him. ‘Sahdev’ indorsed the promissory note in favour of ‘Arjun’ but…

According to Section 48 of the Negotiable Instruments Act, 1881, a promissory note, bill of exchange or cheque payable to order, is negotiable by the holder by indorsement and delivery thereof. Further, delivery of an instrument is essential whether the instrument is payable to bearer or order for effecting the negotiation. The delivery must be voluntary, and the object of delivery should be to pass the property in the instrument to the person to whom it is delivered. The delivery can be, actual or constructive. (i) Actual delivery takes place when the instrument changes hand physically. (ii) Constructive delivery takes place when the instrument is delivered to the agent, clerk or servant of the indorsee on his behalf or when the indorser, after indorsement, holds the instrument as an agent of the indorsee. In the present case, Nakul made a promissory note in favour of Sahdev and delivered it to him. Sahdev, in turn, indorsed the note in favour of Arjun and delivered it to Arjun’s agent. This constitutes valid constructive delivery to Arjun. The subsequent death of Arjun’s agent and the fact that Arjun later found the instrument in his agent’s drawer does not affect the validity of the negotiation. Therefore, since there was valid indorsement and delivery, Arjun has become the holder of the promissory note and is entitled to recover the amount from Nakul.