The holder of a negotiable instrument, who has acquired it after dishonour, whether by non-acceptance or non-payment, with notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor:
Accommodation note or bill.
Provided that any person who, in good faith and for consideration, becomes the holder, after maturity, of a promissory note or bill of exchange made, drawn or accepted without consideration, for the purpose of enabling some party thereto to raise money thereon, may recover the amount of the note or bill from any prior party.
Legal Commentary & Landmark Judgments: Section 59
Section 59 governs instruments acquired after dishonour or when overdue, enacting that the holder acquires only the rights of their transferor and takes the paper subject to all underlying equities and defects.
Distressed debt buyers and asset reconstruction companies purchasing overdue loan notes must conduct thorough due diligence. Under Section 59, the borrower can raise every contractual breach and failure of consideration that existed against the original lending bank.