UNI

T–I
II

PAYI
NGBANKERANDCOLLECTI
NGBANKER

1.PAYI
NGBANKER

Abankeronwhom chequei
sdrawnshouldpaythechequewhenitispr
esent
ed
forpayment.Thepayi
ngbankershouldusereasonabl
ecareanddili
genceinpayi
ng
cheque.

2.PRECAUTI
ONSBEFOREHONOURI
NGACHEQUE

Thepay
ingbankershoul
dobser
vet
hef
oll
owi
ngpr
ecaut
ionsbef
orehonour
inga
cheque.

I. PRESENTATI ONOFTHECHEQUE
TypeofCheque
Apay ingbankershoul dfindoutt het ypeofchequet owhi chitbelongs.
Chequemaybeof2t ypes.Theyar eopenedChequeandCr ossedCheque.The
paymentofopenchequei spaidatcount erandcr ossedchequemustbemade
onlytot hef ellowbanker .
Branch
Thepay i
ngbankershouldseewhet herthechequei sdrawnont hebr anch
wher etheaccounti skept.
Account
Acust omermi ghthaveopenedt woormor eaccount sinsamebr anch.For
eachaccount ,asepar atechequebookmaybei ssued.Hencet hepay i
ngbanker
shoul dseet hatchequeofoneaccounti snotusedf orwi thdrawingmoneyf r
om
anotheraccount .
Banki ngHour s
Thepay i
ngbankeral sonot esthatchequei spr esenteddur i
ngbanki ng
hoursonabusi nessday .Paymentout sidebanki nghour sdoesnotamountt o
paymenti nduecour se.
Mut i
lation
I
ft hechequei stornint
opi ecesorcancel ledormut il
ated,thent hepaying
bankershoul dnothonouri t
.Heshoul dretur
nt hechequef ordr awerconf i
rmation.
I
I. FORM OFTHECHEQUE
Pri
nt edFor m
Thechequemustbei nproperform andsat i
sfyalltherequirement soflaw.
Thecust omershoul ddr awthechequedr awnpr intedf orm suppliedbybanker s,
fai
li
ngwhi ch; thebankermayr efuset ohonouri t
.
Uncondi tionalOr der
Thechequeshoul dnotcont ai
nanycondi tion.Ifitisacondi tionalone,the
payingbanker ’
spositi
onwi l
lbecomecr it
icalandhemaynothonouri t.
Date

1
 Bef ore honour i
ng,a bankermustsee whet hert her ei s dat e on t he
i
nstrument .Ifi tisundat ed,itcannotber egardedasav alidinst rument .I fitis
ante–dat ed,i tmaybepai dbef orei thasnotbecomest alebyt hatt ime.Post
datedchequesmustbehonour edonl ytoduedat e.
Amount
Thepay i
ngbankermustseewhet herthatt heamounti sst atedbot hi n
wordsandf i
gur esagr eewi t
heachot her .Ifamounti sst at edonl yi nf i
gur et he
bankermustr etur nwi t
hr emar k“ Amountr equir
edt obest at edinwor ds”.
Mat er
ialAl teration
Apay i
ngbankershoul dbecaut iousi nfi
ndi ngoutt heal t
erat ionst hatmay
appearonacheque.I ft herei sanyal terati
on,t hebankermustr eturni twi th
remark“ Alter ationr equiresdr awer ’
sconf irmation”.Ifalterat i
oni sconf i
rmedby
drawerwi thf ul lsi
gnat ure,thent hebankercanhonouri t
.
I
II
. SUFFICI ENTBALANCE
Ther emustbesuf fi
cientbal ancet omeett hecheque,i ff undsav ai
lable
arenotsuf ficientt omeetachequet hent hepay ingbankercanr eturni t.
I
V. SIGNATUREOFTHEDRAWER
Thepay i
ngbankermustcompar ethesi gnat ureoft hecust omerf oundi n
thechequewi t
ht hatofhi sspeci mensi gnatur e,ifhepay sachequewhi ch
containsaf or getsi gnatureoft hedr awer ,andt hent hepay mentwi llnotamount
topaymenti nduecour se.
V. ENDORSEMENT
Thebankermustf i
ndoutr egularityofendor sement ,ifanyt hatappear son
theinstrument .Inpr epr oendor sementt hebankermustf indoutt heexi st enceof
authorit
y .
VI
. LEGALBAR
Theexi st enceofl egal barl i
kegar nisheeor derl i
mitst hedut yoft hebanker
topayt hecheque.

VI
I. MI NORPRECAUTI ONS
Apay i
ngbanker ,l
ookintof oll
owingmi nordetail
salso:
 Hemustseewhet herthereisor derofthecust omernott opaya
cheque.
 Hemustseewhet hert hereisanyev i
denceofmi sappropriat
ionof
money .
 Hemustseewhet herhehasgotanyi nformationaboutthedeat hor
i
nsolvencyorinsani t
yofhi scustomer.
3.CIRCUMSTANCESFORDI SHONOUROFACHEQUE
APayingbankeri sunderal egal obli
gati
ont ohonourhiscustomer ’
smandat e.
Awr ongf
uldi shonorwi l
lhav ethewor steffectont hebanker .Howev er,underthe
foll
owi
ngcircumst ances,thepaymentofachequemustber efused:
A.Countermandi ng

2
 Itisthei nst r
ucti
ongi venbyt hecust omerofabankr equest i
ngt hebank
nottohonourapar t
icul
archequei ssuedbyhi m.Whensuchor deri srecei v
edt he
bankermustr efuset opayt hecheque.Count ermandi ngmustbei nwr i
ti
ng.The
writ
tenmandat eshoul dcont ainallt hedet ail
soft hecheque, vizdat e,numberof
thecheque, nameoft hepay eeandt heamount .
B.Upont herecei ptofnot i
ceofdeat hofacust omer
Deathput sanaut omat i
cendt othecont r actualrelati
onshi pbet ween
bankerandcust omer .Whenabankerr ecei
veswr i
tteninformat ionf rom an
author i
tati
vesour cer egar di
ngdeat hofpar t
icularcust omer ,heshoul dnot
honouranychequedr awnbyt hatdeceasedcust omer .I
fbankeri sunawar eof
deat hhecanhonourcheque.
C.Upont herecei ptofnot i
ceofi nsol vency
Thebankermustr efuset opaychequesdr awnoni nsolvent.Thebanker
mustbeser v
edwi ththepet i
ti
onuponwhi chhecant akenecessar yact i
on.
D.Upont herecei ptofnot i
ceofi nsani ty
Wher eabankerr eceivesnot iceofcust omeri nsanity,hei sj usti
fiedin
refusingpay mentoft hechequedr awnbyhi m.Thebankershoul dactupona
definit
epr oofoft hecust omer ’
si nsani t
yl i
kedoct or’scer t
if
icateandcour t
order.
E.Upont herecei ptofnoticeofGar nisheeOr der
Garni
sheeor derr eferst ot heor derissuedbyt hecour tattachingt he
fundsoft hej udgementdebt orint hehandsoft het hirdparty.

F.Upont her eceiptofnot iceofassi gnment

The bank bal ance ofcust omerconst i
tutes assetand i tcan be
assignedt oanyper sonbygi vingnot icet obanker.Oncet heassi gnmentis
made, theassi gnorhasnol egalri
ghtov erthebankbalance.
G.Whenbr eachoft rustisi nt
ended
Int r
ustaccount ,mer eknowl edgeofcust omerintent
iont ouset r
ust
fundsforhi sper sonal use, i
tissufficientr easontodishonorcheque.
H.Def ectiveTitle
Ifaper sonbr i
ngschequef orpay menthasdef ecti
vetitl
e,thebanker
shouldr ef
uset ohonourt hechequepr esent edbyhim.
I. OtherGr ounds
Abankercandi shonorchequei nf ollowingcircumstances.Ifchequeis
 Acondi tionalone
 Dr awnonor dinarypieceofpaper
 Ast al eone
 Apost–dat edone
 Mut ilated
 Dr awnonot herbranchwher eaccounti snotkept
 Pr esent eddur ingnon–banki nghours
 I fwor dsandf i
guresdi f
fer

3
  Ther ei snosuf fi
cientf unds
 Si gnat ur eoft hecust omeri ff orged
 Endor sementi si rregul ar
 Cr ossedchequei spr esent edatcount er
4.STATUTORYPROTECTI ONTOAPAYI NGBANKER
Supposi ng, apay ingbankerpay sachequewhi chbear saf orgedsi gnat ureof
thepay eeorendor see,hei sl iabl et ot het rueowneroft hecheque.Buti tisqui te
unjust i
fiabl etomaket hebankerr esponsi blef orsucher rors.
StatutoryPr ot ecti
onunderI ndi anLaw
Sec.85oft heNIAct,1881of fer spr otectiont ot hepay i
ngbankeri nIndi a.It
readsasf ollows:
“Wher eachequepay abl et oor derpur portst obeendor sedbyoronbehal foft he
payee,t hedr aweei sdi schar gedbypay menti nduecour se”.Tocl aim prot ecti
on,t he
bankershoul dhav efulfill
edt hef ol l
owi ngcondi ti
ons:
 Heshoul dhav epai donor dercheque
 I tshoul dhav ebeenpai di nduecour se
 Suchachequeshoul dhav ebeenendor sedbyt hepay eeorhi sor der.
 Or dercheque:st at
ut or ypr ot ect i
onhasbeenext endedt oanor derchequei fitis
endor sed.
 Endor sedbyPay eeorhi sor der :pr otect ioncanbecl ai medi fchequei spr oper l
y
endor sedbypay ee.
5.PAYMENTI NDUECOURSE
“Pay menti nduecour semeanspay menti naccor dancewi tht heappar ent
tenoroft hei nstrument ,i ngoodf ai thandwi t houtnegl igence,t oanyper soni n
possessi ont hereofunderci r
cumst anceswhi chdonotaf fordar easonabl egr ound
forbel i
ev ing,t hathei snotent itledt or eceivepay mentoft heamountt herein
ment ioned”
FeaturesofPay menti nDueCour se
 Appar entt enoroft hei nst rument
I
tr eferst ot hei ntent ionofpar tiesasi tisev identf rom thef aceoft he
inst r
ument .
 Pay menti nGoodFai th&wi thoutNegl i
gence
Goodf aithf or msbasi sf oral lbanki ngt r
ansact ions.Thebankerwi lll
ose
st atutor ypr otect i
oni fhei snegl i
gent .
 Pay mentt oaper sonwhoi sent itledt or eceiv epay ment
Thebankershoul dhav emadet hepay mentt ot hehol deroft hei nstrument .
Inot herwor ds, thebankermustseet hatt heper son, whopr esent sthecheque, i
s
inpossessi onoft hei nstrumentandhei sent it
ledt or eceivet heamountof
cheque.
6.HOLDERI NDUECOURSE
Sec.9ofNegot iableI nst rumentActsay s‘ anyper son,whoi nconsi der ation
becomet hepossessorofapr omi ssor ynot e, bil
lofexchangeorchequei fpay ablet o

4
 thebearerort hepay eeorendor seet her eof ,ifpay abl etoor derbef or et heamount
ment i
onedi ni tbecomepay ableandwi thouthav i
ngsuf ficientcauset obel i
evet hat
anydefectexi st edi nt i
tleofaper sonf rom whom heder i
vedhi st i
tle’
 Whor ecei vesi nst r
umenti nnocent ly
 Whohaspai dt hev aluef ort hesame
 Whohasr eceiv edt hei nst rumentbef oremat ur ity
 Whoi sinpossessi onofi nst rumentasbear erorpay eeorendor see.
Ri
ghtsandPr ivilegesofaHol deri nDueCour se
 Heobt ainsbet tert i
tlet ot hei nst rumentt hant hatofowner
 Thedef ect ivet itl
eofpr ev i
ousendor ser swi llnotadv ersel yaf fecthi sr i
ght s
 Hecanpassbet tert it
let oot her s
 Unt i
lthei nst r umenti sf inallydi schar ged,ev erypar tyt ot hati nstrumenti sliable
tohim.
 Ev enthedr awerofaNIcannotcl aimi nv alidityoft hei nstr ument
7.RECOVERYOFMONEYPAI DBYMI STAKE
A.MoneyCanbeRecov ered
 Moneyr ecei v edmal af i
dei sr ecov er able–whenaper sonr ecei vesmoney
inbadf ai th,knowi ngt hathei snotent i
tledt or ecei ve,t henbankeri s
ent itledt or ecov ermoney .
 Moneypai dunderami stakeoff acti sr ecov erabl e–i fthemi stakei sa
mi st akeoff actt henmoneywr ongl ypai disr ecov er abl e.
 Mi st akebet weenpar typay ingandt hepar tyrecei v ing–i ft hemi stakei s
bet ween t hepar t
ypay ing and t hepar t
yr eceiv ing t hen t hemoneyi s
recov er abl e.
B.Moneycannotber ecov erabl e
 Moneypai dunderami stakeofl aw i snotr ecov er abl e–whenabanker
pay smoneymi stakingl aw, hecannotr ecov erit.
 Moneypai donaNIt oani nnocenthol deri snotr ecov erabl e– when
moneypai dbymi stakeonaNIt oahol deri nduecour se,i tcannotbe
claimedaf teral apseoft ime.
 Whenaper son,whor ecei vesmoneyi ngoodf aithbymi stake,al tershi s
posi t i
onr elyinguponi t,neednotr et urnt hesame.
 Moneypai dt oagentbymi stake–wher eabankerpay smoneybymi st ake
toanagent , whoi nt ur nhaspai dt hesamet othepr inci palorusedbef ore
themi stakei sf oundout ,themoneycannotber ecov ered.
8.COLLECTI NGBANKER–MEANI NG
Acol lect ingbankeri sonewhounder takest ocol l
ectt heamountofacheque
forhiscust omerf rom pay ingbanker .Ev er ybankt odaydi schar gesonei mpor tant
functi
on.Thati scol lectingchequesandbi l
lsonbehal foft hecust omer .Maj or
porti
onoft hewor kofcol lect i
oni sdonebyt hecl earinghouse.
Hol
derforVal ue
Acollectingbankerbecomesahol derf orv aluei fhehaspai dt hev al ueoft he
5
chequetothecustomerbefor
ethechequeisal
readycol
l
ected.
AsanAgent
Acoll
ect
ingbankeractsasanagentoft
hecustomeroncredi
ti
ngt
heaccountof
thecustomeronlyaf
terr
eali
zi
ngthepaymentfr
om thepayi
ngbanker

9.DUTI ESOFCOLLECTI NGBANKER

a)Exer ciser easonabl ecar eanddi ligencei nhi scol lectionwor k:
Whenabankercol l
ect sachequef orhi scust omerheact sasanagentand
heshoul dexer ci ser easonabl ecar e,di li
gencesev enski l
lsincollectionwor k.He
mustobser v eut mostcar ewhenpr esent i
ngchequef orpay ment .
b)Pr esentt hechequef orcol lect i
onwi t
houtanydel ay:
Thebankermustpr esentt hechequef orpay mentwi thoutanydel ay .I
f
therei sanydel ay,t hecust omermaysuf fert hel ossandt hebankermustbear
theloss.
c)Not icet ocust omeri ncaseofdi shonorofcheque:
I
ft he cheque becomes di shonour ed,he shoul di nform hi s customer
withoutanydel aywi thinar easonabl et i
me, i
fhef ailstodosot hebankerhast o
beart heloss.
d)Pr esentt hebi llf oraccept anceatanear lydat e:
AsperSec.61ofNIAct ,abi llofexchangemustbeaccept ed.Ift he
bankerunder t
akest ocol lectbi ll
s, i
ti sthedut yt opr esentt hem foraccept anceat
anear lydat e.
Present mentf oraccept ancei sexcusedi nthef ollowingcases:
 Wher eabi l
lispay abl eondemand
A dr aweei sf i
ct i
tiousper son,dead,i nsaneorbankr uptora
per sonhav ingnocapaci tyt oent ercont ract.Al t
hought hepr esentment
isnotqui ter egular ,thedr aweehasr ef usedt oaccepti nsomeot her
ground.
 Pr esentt hebi l
lforpay ment
Thebankershoul dpr esentt hebi ll
sf orpay menti npr opert i
me
andatpr operpl ace.Accor dingt oSec.66ofNIActabi llmustbe
present edf orpay mentonmat urit
y .Sec.22l aysdownt hatmat urityof
thebi l
li st hedat eonwhi chi tisduef orpay ment ,t
owhi ch,3day sof
gracear eadded.
 Pr otestandnot eaf or eignbi llfornon–accept ance:
Incaseofdi shonorofabi llf ornon– accept anceornon–
pay ment ,iti sthedut yoft hecol l
ect ingbankert oinformt hecust omer
immedi ately .Ift hebi llinquest ionhappenst obeaf oreignbill,the
bankershoul dhav ei tpr otestedandnot edbyaNot aryPubl i
c,t hen
forwar dedt ocust omer .

6
10.STATUTORYPROTECTI ONTOTHECOLLECTI NGBANKER
The st atutorypr otection i s av ail
abl et ot he col l
ect i
ng banker ,ifhe f ulfi
ll
s
foll
owi ngcondi t
ions:
 Cr ossedChequeonl y
Protect i
on can be cl ai med onl yf ort hose cheques whi ch are
crossedbef oret heyr eacht hehandsofabanker .
 Col lectionsonbehal fofcust omer sasanagent
Thepr otection can becl aimed onl ybyt hebankeronl yf ort hose
chequescol lectedbyhi m asagentofhi scust omer s.
 I ngoodf aithandwi t houtnegl igence
Acol lectingbankermustacti ngoodf ai
thandwi t
houtnegl i
gence.
Thisappl iest owhol et ransact i
onf rom t her eceiptoft hechequet ot he
receiptoft hepr oceedsf rom t hepay i
ngbanker .Pr otecti
onextendedt o
divi
dendwar rants, dr aft
set c.
11.BASI SOFNEGLI GENCE
Thewor dnegl igencehasnodef initemeani ngi nbanki ngl aw.Thel i
abi l
i
tyfor
negligencei mposesont hebankerast atutorydut ytothet rueowner .
Thet erm negl i
gencedef inedas“ Negl i
gencei st hedoi ngoft hatwhi cha
reasonabl emanunderal lt heci rcumst ancesoft hepar ticul
arcasei nwhi chhei s
acti
ngwoul dnotdo,ort hef ail
uret odosomet hing,whi char easonableman
undert hoseci rcumst anceswoul ddo” .
Negligencecanbest udiedunder4heads:
 Gr ossNegl igence
 Negl i
genceconnect edwi ththei mmedi atecol l
ectionofcheque.
 Negl i
genceunderr emot egr ounds
 Cont ri
butor ynegl igence.
GrossNegl i
gence
Ifabankeri scompl etelycar elessi ncol lecti
ngachequet hen,hewi l
lbehel d
l
iableundert hegr oundofgr ossnegl igence.
Eg.
 Col lectingachequecr ossed‘ A/ Cpay ee’forothert hant hepay ee’saccount .
 Fai l
ur etov erifythecor rectnessofendor sement .
 Fai l
ur etov erifytheexi st enceofaut hor i
tyinthecaseofpr epr osignatur
es.

Negl
igenceconnectedwiththeimmedi
atecoll
ecti
on:
I
font hefaceofacheque,ther
eisawar ningthatt
herei
smisappropr
iat
ionof
money;thecoll
ecti
ngbankershoul
dnotdi
sregardsuchwarni
ng.Heshoul
dmakesome

7
reasonabl eenquiryonl yaf tergettingsomesat i
sfactoryexplainations;hecanpr oceed
tocollectcheques.
Eg.
 Col l
ecti
ngachequedr awnagai nsttheprincipal’sA/c,tot hepr i
vateaccountof
theagentwi thoutenqui r
y.
Negligenceunderr emot egrounds:
Thebanker shav ebeenhel dnegligentundert hosesi t
uationsi nwhi chabanker
cannotbeexpect edl i
able,ar ebrandedas‘ remotegrounds’ .
Eg.
 Fai l
uretoascer taint henameoft heempl oyerofanew cust omerconst it
utes
negli
gence.Incaseofmar ri
edwoman, fai
luretov er
if
ythenameoft heempl oy er
ofherhusbandconst itut
esnegl i
gence.
Contributorynegligence
Acol l
ect
ingbankerev enaf teraccepti
ngnegl igenceonhi spar t,canpleadf or
contri
but orynegli
gence,( i
.e.)customernegl i
gencei st heproximat ecausef ort
hel oss,
thencust omerwi llbeliable.