| An ARC can become a holder in due course under the NI Act. |
| Avarsekar & Sons Private Limited & Ors. Vs. Assets Care and Reconstruction Enterprises Limited & Anr. [Criminal Writ Petition No. 2776 of 2023] (Bombay High Court, 03.08.2026) |
| An ARC, though admittedly not the payee, answers the description of holder in due course under Section 9 of the NI Act read with Section 5 of the SARFAESI Act, once the assignment is for consideration and the cheque forms part of the assigned security. Thus by virtue of Section 9 of the NI Act read with Section 5(2) and (3) of the SARFAESI Act, respondent No.1 can be treated as a 'holder in due course' of the cheques for the purpose of maintaining and prosecuting the complaint under Section 138 read with Section 142 of the NI Act. |
| It was held that ARC, which acquires a bank's financial assets, including cheques taken as security under a Deed of Assignment executed pursuant to Section 5 of the SARFAESI Act, can be substituted as the complainant in a pending prosecution under Section 138 read with Sections 141 and 142 of the NI Act, in place of the bank that originally instituted the complaint as payee of the dishonoured cheque. |
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