The Negotiable Instruments Act outlines the different situations in which a cheque should be returned. This article provides comprehensive information on the duties and rights of bankers regarding cheque returns. It covers topics such as when a banker must refuse payment, when a banker may refuse payment, and the protection of paying bankers. Scroll down below to find more details about “Banker’s Duty and Rights for Cheque Returns.” duties of paying banker banker’s duty of secrecy bankers duty collecting banker duties duties of banker pdf
Banker’s Duty and Rights for Cheque Returns
The duty and rights of a banker regarding cheque returns are significant. Under the Negotiable Instruments Act, there are specific provisions that determine when a cheque should be returned. In this article, we will explore the complete details regarding the banker’s duty and rights for cheque returns. This includes situations such as when the banker must refuse payment, when the banker may refuse payment, and the protection provided to the paying banker. Scroll down below to find more information on “Banker’s Duty and Rights for Cheque Returns.”
- Cases in which the Banker must Refuse Payment:
- Insufficient funds in the account of the drawer.
- Drawer’s signature mismatch or irregularity.
- Post-dated or stale cheque.
- Amount in words and figures differ.
- Drawer’s account is closed or frozen.
- Cheque is presented after the expiry of the validity period.
Cases in which the banker may refuse Payment:
- Suspicion of fraud or forgery.
- Irregular endorsement or alteration on the cheque.
- Court order or legal notice restricting payment.
- Account holder’s death or incapacity.
- Insufficient information or documentation.
Protection of the Paying Banker:
- The banker is protected from any legal liability if the cheque payment is made in good faith and without negligence.
- The banker can seek indemnity from the drawer in case of any losses incurred due to the payment of a fraudulent or unauthorized cheque.
- The banker may take legal action against the drawer for any false or misleading information provided in relation to the cheque.
When Banker must refuse Payment:
In the following cases, the banker has the authority to dishonor a customer’s cheque:
(a) When a customer countermands payment: If a customer issues a cheque and later instructs the banker not to honor it, the banker must immediately stop payment.
(b) When the banker receives notice of the customer’s death.
(c) When the customer has been adjudged as insolvent.
(d) When the banker receives notice of the customer’s insanity.
(e) When an order of the Court prohibits payment.
(f) When the customer has given notice of assignment of the credit balance of their account.
(g) When the holder’s title is defective and the banker becomes aware of it.
(h) When the customer has given notice for closing their account
When Banker may Refuse Payment:
In the following cases, the banker may refuse to pay a customer’s cheque:
- When the cheque is post-dated.
- When the banker does not have sufficient funds of the drawer and there is no communication between the bank and the customer to honor the cheque.
- When the cheque is of doubtful legality.
- When the cheque is not duly presented, e.g., it is presented after banking hours.
- When the cheque on the face of it is irregular, ambiguous, or otherwise materially altered.
- When the cheque is presented at a branch where the customer has no account.
- When some persons have a joint account and the cheque is not signed jointly by any or all the survivors of them.
- When the cheque has been allowed to become stale, i.e., it has not been presented within six months of the date mentioned on it.
Protection of Paying Banker:
According to the Act, if a cheque payable to order appears to be endorsed by or on behalf of the payee, the banker is relieved of liability by making payment in due course. The banker can debit the customer’s account with the amount, even if it is later discovered that the endorsement was forged or made by an agent of the payee without authority. It should be noted that the term “payee” includes the endorsee. This protection is provided because a banker cannot be expected to be familiar with the signatures of all individuals. The banker is only required to be familiar with the signatures of their own customers.
In the case of bearer cheques, the general rule is that once a cheque is designated as a bearer cheque, it remains a bearer cheque throughout its validity. This means that if a cheque is originally made payable to the bearer by the drawer, the banker can disregard any endorsements on the cheque. The banker will be released from liability by making payment in due course, irrespective of any endorsements present on the cheque. banker’s duty of secrecy banker’s duty of secrecy bankers duty bankers duty bankers duty duties of banker pdf duties of banker pdf
FAQ”S Banker’s Duty and Rights for Cheque Returns
Checks instruct a financial institution to transfer funds from the payor’s account to the payee or that person’s account. Check features include the date, the payee line, the amount of the check, the payor’s endorsement, and a memo line collecting banker duties.
As paying banker, the banker is obligated to accept the customer’s check if it is valid and if it is issued by the holder in its original form within a reasonable period of time and before the banker has provided orders to stop paying or receiving notice of the death of the customer, etc., and if sufficient funds are …
the capacity of “agent for collection”, the banker collects the cheque on behalf of his customer, that also when presented to him. If a customer gives an open cheque i.e a cheque uncrossed, the banker has to cross the cheque before it is sent for collection. Then only, he can claim protection under sec. 131.