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PAYMENT OF CHEQUE5

An inpoilanl slaluloiy olIigalion of a lankoi lovaids his cuslonois is lo honoui choquos
diavn ly lho lho cuslonoi on lho lank. Tho paying lankoi is iosponsilIo lo his cuslonoi and is
undoi duly lo nako paynonls lo lho iighl poisons in accoidanco vilh lho insliuclions of lho
diavoi. If ho honouis lho choquos caioIossIy and nogIigonlIy in a nannoi inconsislonl vilh lho
insliuclions of lho diavoi, ho suljocls hinsoIf lo hoavy IialiIily. Nol onIy vouId ho Ioso lho
nonoy so paid, lul ho viII lo IialIo lo pay danagos oi conponsalion lo lolh lho cuslonoi and
lo lho liuo ovnoi of lho choquo ( as piovidod foi in lho NogolialIo Insliunonls Acl). Tho lankoi
is undoi an olIigalion lo nako paynonl of his cuslonois choquos if lho cuslonoi has sufficionl
funds lo his ciodil. IaiIuio lo do so vilhoul sufficionl ioasons nakos hin IialIo undoi Soclion 31
lo conponsalo lho diavoi foi any Ioss oi danago causod ly such dofauIl. Tho duly of a paying
lankoi is of gioal iosponsiliIily and caIIs foi gioal caio, caulion, piudonco and piosonco of nind
on his pail.

PrccautInns tn bc takcn by thc PayIng Bankcr.

Tho paying lankoi shouId onsuio lhal lho choquo is ioguIai in aII iospocls and shouId lako lho
foIIoving piocaulions vhiIo naking paynonl of his cuslonois choquos.

Tho choquo shouId lo in lho piopoi foin

Tho NogolialIo Insliunonls Acl dofinos a choquo lul doos nol piosciilo ils foin. Noi doos il
ioquiio lhal a choquo lo diavn on lho piinlod foin issuod ly lho lank. Tho lankoi shouId,
lhoiofoio, nol dishonoui a choquo diavn on a pioco of papoi piovidod il caiiios an uncondilionaI
oidoi lo lho lankoi and fuIfiIs olhoi ioquisilos of a choquo. ul aInosl ovoiy lank in India
ioquiios lhal 'choquos nusl lo diavn on lho lanks piinlod foins and 'lho lank iosoivos ils
iighl lo iofuso paynonl of any choquos diavn olhoiviso. This nakos il ossonliaI lhal lho choquo
foins issuod ly lho lankoi nusl lo usod ly lho cuslonois.

Advantagc nf usIng PrIntcd Fnrms . Diaving of choquos on lho piinlod foins issuod ly a
lankoi is dosiialIo locauso of lho foIIoving advanlagos :

(i) Il is convonionl foi lho diavoi lo diav a choquo. Ho nood nol lako nocossaiy piocaulions
vhiIo diafling a choquo as poi lho ioquiiononl of lho Acl. Tho chancos of dishonoui of
lho choquo aio lhus nininizod.

(ii) Tho counloifoiIs of lho choquos soivo lho puiposo of iocoid foi fuluio iofoionco.

(iii) If lho diavoi vishos lo counloinand paynonl of any choquo, ho can issuo insliuclions lo
lho lankoi noio convonionlIy

(iv) If lho cuslonoi koops lho choquo look safoIy and caiofuIIy chancos of foigoiy can lo
nininiisod. Tho soiiaI nunlois of lho choquo foins issuod lo a cuslonoi aio iocoidod ly
lho lankoi, vho voiifios, al lho lino of piosonlalion, lhal lho choquo is diavn ly a poison
lo vhon lho ioIovanl choquo look is issuod.

Chcquc drawn nn a fnrm Issucd tn annthcr pcrsnn. In caso a choquo is diavn on a choquo foin
issuod ly lho lankoi lo sonolody olhoi lhan lho diavoi, lho lankoi vouId nol lo juslifiod in
iofusing ils paynonl. Tho diavois oidoi lo lho lankoi doos nol locono invaIid locauso lho foin
of lho choquo vas nol issuod lo lho diavoi. In caso of 8in|a Cc-cpcra|itc Dctc|cpncn| and Canc
Mar|c|ing Unicn ||d. and Anc|ncr ts. 8an| cf 8inar ||d. and O|ncrs, lho choquo in quoslion vas a

Iooso choquo-foin suiiondoiod ly sono olhoi cuslonoi of lho lank. Tho Supiono Couil
considoiod il invaIid nol locauso il vas diavn on a foin nol issuod lo lho cuslonoi lul locauso
il vas diavn on a foin nol issuod lo lho cuslonoi lul locauso lho signaluio of ono of lho
diavois vas foigod. Thus a lankoi nay juslifialIy honoui such choquos lul shouId lako gioal
caio in onsuiing lhal lho paynonl is nado in duo couiso.

Dalo of lho Choquo.

A choquo nusl loai a dalo. Tho nandalo of lho cuslonoi lo lho lankoi givon in lho choquo
loconos IogaIIy offoclivo on lho dalo nonlionod lhoioin. Tho diavoi of a choquo fiIIs in lho dalo
lofoio lho choquo is issuod, lul if ho has nol dono so, lho insliunonl doos nol locono invaIid.
Tho payoo of lho choquo oi any sulsoquonl hoIdoi lhoiolo nay fiII in lho dalo. ul if an undalod
choquo is piosonlod foi paynonl, lho lankoi nusl iofuso ils paynonl.

Tho dalo shouId nol lo inconpIolo i.o., il nusl incIudo losidos lho yoai, lho nano of lho nonlh
and lho nunloi of lho day. Ioi oxanpIo, a choquo loaiing Ioliuaiy 1997 oi Novonloi ,
19.. Is nol a conpIolo dalod choquo and lho lankoi nusl iofuso ils paynonl. If a choquo is
dalod ApiiI 31, 1997, il shouId lo paid if il is piosonlod on ApiiI 3O oi lhoioafloi.

5ta!c Chcqucs If lho diavoi nonlions a dalo oaiIioi lo lho dalo of viiling lho choquo. Il is caIIod
an anlo-dalod choquo. Ioi oxanpIo, a choquo issuod on 7
lh
of }uIy 1997 nay loai lho dalo of 1
sl
of
}uIy 1997. Tho lankoi shaII havo no oljoclion in naking paynonl of such choquos. ul if a choquo
is nol piosonlod foi paynonl vilhin a ioasonalIo poiiod afloi lho dalo of ils issuo, il is caIIod a
slaIo choquo. In India a choquo is lioalod as slaIo choquo afloi lho oxpiiy of six nonlhs fion lho
dalo of lho choquo and lho lankoi ioluins such choquo lo gol lho diavois confiinalion lhoioon.
This piaclico vhoioly a choquo is iogaidod as slaIo afloi six nonlhs has no slaluloiy sanclion in
India.

Pnst-datcd Chcqucs. If lho diavoi (oi any hoIdoi) nonlions a dalo on lho choquo, vhich is
sulsoquonl lo lho dalo on vhich il is diavn, il is caIIod a posl-dalod choquo. Ioi oxanpIo, if a
choquo diavn on 1
sl
Maich, 1997 loais lho dalo of 1
lh
Maich, 1997, il is a posl-dalod choquo.
Such a choquo, lhough nol invaIid, loconos offoclivo onIy on lho dalo nonlionod lhoioin. Tho
lankoi shouId, lhoiofoio, nol nako paynonl of lho posl-dalod choquo lofoio lho dalo nonlionod
lhoioin, olhoiviso ho viII lo IialIo as foIIovs :

(a) If lho diavoi insliucls lho lankoi, lofoio lho dalo nonlionod in lho choquo, nol lo nako
paynonl of lho posl-dalod choquo, lho lankoi cannol dolil his accounl vilh lho anounl
of lho choquo in caso lho lankoi had honouiod lho choquo lofoio lho iocoipl of lho
counloinand oidoi. Such paynonl is doonod as paynonl nado vilhoul lho aulhoiily of
lho diavoi.

(l) If, as a consoquonco of paynonl of a posl-dalod choquo ly lho lank, any olhoi choquo
issuod ly lho diavoi is dishonouiod on lho giound of insufficioncy of funds, lho diavoi
viII lo onlilIod lo cIain danagos foi ils dishonoui undoi Soclion 31.

(c) If lho cuslonoi dios, loconos insoIvonl oi insano afloi lho lankoi has nado lho paynonl
lul lofoio lho dalo nonlionod in lho choquo, lho anounl cannol lo dolilod lo lho
cuslonois accounl locauso lho Iallois nandalo loconos inoffoclivo on lho occuiionco of
any of lhoso ovonls.

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(d) !aynonl of a posl-dalod choquo lofoio lho dalo of lho choquo is nol considoiod as
paynonl in duo couiso. Tho lankoi, lhoiofoio, cannol avaiI of lho slaluloiy pioloclion
undoi Soclion 8. ul ils paynonl on oi afloi lho dalo of lho choquo shaII lo vaIid and lho
lankoi viII loai no IialiIily in lhis iogaid.

Chcqucs Drawn In HIndI wIth HIndI datc

#osoivo ank of India has advisod lho lanks lhal an insliunonl viillon in Hindi dalo is a
vaIid insliunonl. Such insliunonl oughl lo lo accoplod ly lho lankoi. Thoio is no
piohililion undoi any ConliaI Acl on using any dalo olhoi lhan lho iilish CaIondai
dalo. #osoivo ank has suggoslod lo lho lanks lo ascoilain lho iilish CaIondai dalo
coiiosponding lo lho NalionaI Saka CaIondai in oidoi lo avoid paynonl of slaIo choquos.

Anounl of lho Choquo

Tho anounl of lho choquo nusl lo coilain and oxpiossod lolh in voids and figuios. In caso of
any disciopancy lolvoon lho anounl oxpiossod in voids and figuios, Soclion 18 piovidos lhal
lho anounl in voids shaII lo lho anounl undoilakon oi oidoiod lo lo paid. Tho lankoi nay,
lhoiofoio, pay lho anounl viillon in voids vilhoul incuiiing any IialiIily foi lho sano.
Hovovoi, in piaclico lho lankois sond lack lho choquos lo lho diavoi vilh lho ionaik 'anounl
in voids and figuios diffoi and sook lho diavoi lo coiiocl lho choquo. Tho Indian anks
Associalion has advisod ils nonloi-lanks nol lo dishonoui choquos on lhis giound and shouId
pay lho anounl viillon in voids in confoinily vilh Soclion 18. This unifoin piaclico has cono
inlo foico fion May 1, 1979. If lho anounl is viillon in figuios onIy, il shouId lo sonl lack lo lho
diavoi foi nocossaiy onliy.
High vaIuo choquos of #s.1OIakhs and alovo shouId loai lvo signaluios.
(DCA.CAD.(MC)No.4-1O77/4.O1.OO1/OO3-O4 dalod ApiiI 16, OO4)

Iunds in lho accounl nusl lo sufficionl.

Tho lankoi is undoi an olIigalion lo pay his cuslonois choquos if lho cuslonoi has funds in his
accounl lo nool lho choquo. ul if lho funds in lho cuslonois accounl aio insufficionl lo pay lho
choquo, lho lankoi is nol lound lo honoui lho choquo oi ovon lo pay lho laIanco in lho accounl
lo lho piosonloi of lho choquo. Choquos aio lo lo paid in fuII and nol in pail. Ioi oxanpIo, if a
choquo foi #s.1,OOO is piosonlod foi paynonl lo a lankoi vhiIo lho diavois accounl has lho ciodil
laIanco of #s.9OO onIy, lho lankoi is nol lound lo honoui lho choquo oi lo nako pail paynonl lo
lho oxlonl of #s.9OO locauso lho choquo conlains lho oidoi of lho diavoi lo pay a spocifiod sun of
nonoy. WhiIo considoiing sufficionl funds in lho accounl of lho diavoi, lho foIIoving poinls
shouId lo loino in nind ly lho lankoi.

(i) If lho lankoi has aIioady agiood lo gianl a Ioan oi ovoidiafl lo lho cuslonoi up lo a
coilain anounl, choquos in oxcoss of lho ciodil laIanco in lho accounl lul vilhin lho Iinil
of lho Ioan oi lho ovoidiafl nusl lo honouiod ly lho lankoi in lho usuaI couiso. Ioi
oxanpIo, if lho lankoi agioos lo gianl Mi. X an ovoidiafl up lo #s.,OOO, ho shouId
honoui choquo issuod ly Mi. X liII lho dolil laIanco ioachos lho Iinil of #s.,OOO. If
sulsoquonlIy, lho lankoi docidos lo ioduco lho ovoidiafl Iinil lo, say, #s.,OOO onIy, ho
shouId nol slop honouiing lho cuslonois choquos innodialoIy. Ioi lhis puiposo ho
shouId givo duo nolico lo lho cuslonoi and choquos in oxcoss of dolil laIanco of #s.,OOO
lo dishonouiod afloi lho soivico of such nolico.

(ii) Tho nininun laIanco ioquiiod lo lo nainlainod in a cuiionl accounl oi savings accounl
is doonod as avaiIalIo foi honoiing choquos. Thal anounl shouId nol lo iogaidod as

4


fiozon ly lho lankoi. If lho acluaI laIanco is ioducod loIov lho piosciilod nininun
anounl, lho lankoi shouId honoui lho choquo and nay chaigo an incidonlaI chaigo fion
lho cuslonoi foi lhis dofauIl (soivico chaigos oi lank chaigos).

Paymcnt bc madc In chrnnn!ngIca! nrdcr nf rcccIpt. In caso of a cuiionl accounl, any nunloi of
choquos nay lo piosonlod foi paynonl on a singIo day. Tho lankoi gonoiaIIy foIIovs lho iuIo of
naking paynonl of lho choquos in lho chionoIogicaI oidoi of lhoii iocoipl. Il noans lhal lho
choquo fiisl iocoivod ly lho lankoi on an accounl viII lo paid fiisl, and so on. Tho soiiaI nunloi
of lho choquo oi lho dalo of ils issuo is nol significanl foi lhis puiposo.

Tho lankoi nay sonolinos faco a silualion vhon a nunloi of choquos aio piosonlod
sinuIlanoousIy foi paynonl, oi aio iocoivod ly ono naiI oi lhiough lho sano cIoaiing lul lho
funds avaiIalIo in lho accounl of lho diavoi aio insufficionl lo pay aII of lhon. Ioi oxanpIo lvo
choquos foi #s.OO and #s.3OO aio iocoivod ly a lankoi foi paynonl vhiIo lho diavois accounl
shovs ' a ciodil laIanco of #s.6OO onIy. Thoio nay lo lvo viovpoinls in such a silualion. Tho
lankoi nay lioal lolh lho choquos as consliluling ono donand and honco dishonoui lolh of
lhon foi shoilago of funds. ul lhis vouId nol lo faii lovaids lho diavois inloiosl locauso lho
dishonoui of lolh lho choquos viII affocl his iopulalion gioalIy vhiIo funds aio sufficionl lo
honoui al Ioasl ono of lhon. Tho lankoi viII do voII if ho honouis as nany choquos as possilIo
liII lho ciodil laIanco is nol oxhauslod. In piaclico, a choquo foi a liggoi anounl is paid fiisl in
lul if a choquo foi snaIIoi anounl is payalIo lo lho lax aulhoiilios, olc. il nay lo honouiod fiisl.
If lolh lho choquos aio of oquaI anounl, lho lankoi is fioo lo honoui any of lhon.

MaloiiaI AIloialions

A choquo conlains a nandalo of lho diavoi lo his lankoi lo pay a spocifiod sun of nonoy lo lho
loaioi oi lho poison nonlionod lhoioin oi lo his oidoi. Any aIloialion oi coiioclion nado, lo lo
vaIid, nusl lo nado ly, oi vilh lho consonl of lho diavoi and confiinod ly his fuII signaluio.
Tho paying lankoi shouId lo voiy caiofuI in lhis iogaid and shouId nol nako paynonl if lho
choquo loais an aIloialion, spociaIIy a naloiiaI aIloialion, vilhoul confiinalion ly lho diavoi.

An aIloialion is considoiod a naloiiaI aIloialion if il affocls lho opoialion of lho insliunonl
sulslanliaIIy and lho IialiIily of lho pailios concoinod is changod significanlIy

LxanpIos of naloiiaI aIloialions aio as foIIovs :

(i) AIloialion of lho dalo of lho choquo. y aIloiing lho dalo a fiauduIonl hoIdoi can socuio
paynonl of a posl-dalod choquo oi a slaIo choquo, vhich a lankoi is nol aulhoiizod lo
nako.

(ii) AIloialion of lho pIaco of paynonl.

(iii) AIloialion of anounl of lho choquo.

(iv) AIloialion in lho nanos of lho pailios oi lho ioIalionship lolvoon lhon oi affocling lhoii
IogaI slalus.

(v) Tho sulslilulion of lho void 'loaioi in pIaco of 'oidoi ' in lho choquo.

(vi) An aIloialion of lho ciossing on a choquo.

A naloiiaI aIloialion nakos a naloiiaI oi significanl chango in lho nandalo givon in lho choquo.
If an addilion oi aIloialion doos nol affocl lho nandalo of lho diavoi oi lho posilion of lho pailios
naloiiaIIy oi significanlIy, il viII nol lo caIIod a naloiiaI aIloialion. Ioi oxanpIo, lho foIIoving
changos viII nol lo lioalod as naloiiaI aIloialions :

(a) Convoision of an ondoisononl in lIank inlo an ondoisononl in fuII.
(l) Ciossing of an opon choquo ly lho hoIdoi.
(c) Convoision of a gonoiaI ciossing inlo a spociaI ciossing.
(d) Convoision of 'loaioi inlo 'oidoi.

In N. Naiayanasvany vs. Madan LaI (A.I.#. 198 Kainalaka 7), lho High Couil hoId lhal if lho
ialo of inloiosl is insoilod in lho lIank spaco in a piinlod foin of a pionissoiy nolo vilh a
diffoionl ink and in diffoionl handviiling, il vas a naloiiaI aIloialion spociaIIy vhon lho
aIloialion is offoclod vilhoul lho consonl of lho pionissoiy, vhon lho docunonl vas in lho
cuslody of lho pionisoo.

cga! cffcct nf matcrIa! a!tcratInns. Accoiding lo Soclion 87, any naloiiaI aIloialion of a
nogolialIo insliunonl iondois lho sano void as againsl any ono vho is a paily lo il al lho lino of
naking such aIloialion and doos nol consonl lo lho aIloialion, unIoss il vas nado lo caiiy oul lho
-connon inlonlion of lho oiiginaI pailios. Any such aIloialion, if nado ly an ondoisoo,
dischaigos his ondoisoi fion aII IialiIily lo hin in iospocl of lho considoialion lhoioof. Thus a
naloiiaI aIloialion on a nogolialIo insliunonl shaII havo lho foIIoving offocls :

(i) Tho insliunonl loconos a void ono as againsl aII poisons vho voio lho pailios lo lho
insliunonl al lho lino lho aIloialion vas nado and vho did nol givo lhoii consonl foi
such aIloialion. Tho poison naking such aIloialion ionains iosponsilIo on lho
insliunonl. ul lho IialiIily of a poison vho loconos a paily lo lho insliunonl afloi lho
aIloialion has loon nado is nol affoclod.

(ii) A naloiiaI aIloialion nado vilh lho consonl of lho pailios lo lho insliunonl shaII nol
locono a void ono.

(iii) An aIloialion, lhough naloiiaI, viII nol vilialo lho insliunonl if -

(a) il is nado lofoio lho oxoculion of lho insliunonl, i.o. lofoio il is issuod lo lho
olhoi paily.

(l) il is nado noioIy foi lho puiposo of coiiocling a nislako, o.g., lho yoai 19997 vas
viongIy viillon as 1989, and

(c) il is nado lo caiiy oul lho connon inlonlion of lho oiiginaI pailios lo lho
insliunonl. Ioi oxanpIo, if lolh lho pailios lo a choquo - lho diavoi and lho
payoo- agiood lhal lho choquo shouId lo payalIo lo loaioi, lul lho diavoi foigol
lo do so, il nay lo aIloiod lo caiiy oul lho connon inlonlion of lolh lho pailios.
ul il is ossonliaI lhal lho connon inlonlion of lho oiiginaI pailios nusl lo
suppoilod ly piopoi ovidonco. In 'crcc Prita|c ||d. and O|ncrs ts. Ncuandran
Naraindas and O|ncrs (A.I.#. 197, Madias 4A), lho Madias High Couil hoId lhal
lho saving cIauso unIoss il (aIloialion) is nado foi caiiying oul connon
inlonlion is nol alliaclod vilhoul pIoading and pioof. In lhis caso lho pIainliff
insoilod lho ialo of inloiosl and lho voids poi nonlh afloi lho pionissoiy nolo

6

vas oxoculod ly lho dofondanl and conlondod lhal lho aIloialion vas caiiiod oul
onIy foi lho puiposo of giving offocl lo lho connon inlonlion of lho pailios. ul
lho Couil olsoivod lhal lhoio vas no ovidonco lo shov lhal lho dofondanl had
agiood lo pay inloiosl and hoId lhal Soclion 87 vouId nol havo any appIicalion lo
lho ciicunslancos of lho caso.

Burdcn nf Prnnf. In caso of a dispulo iogaiding lho naloiiaI aIloialion, lho quoslion aiisos as lo
vhich paily shouId piovo lho piosonco of anyono of lho alovo-nonlionod ciicunslancos vhich
iondoi lho insliunonl offoclivo in spilo of lho naloiiaI aIloialion. In caso of $:-na Rcddq ts.
Ranana Rcddi, lho High Couil of Andia !iadosh hoId lhal as lho piosunplion in caso of
nogolialIo insliunonl vas lhal lho aIloialions, if any, voio nado sulsoquonl lo lho issuo of lho
insliunonl, il vas incunlonl on lho pIainliff lo disIodgo il and shov lhal lho aIloialion vas nol
inpiopoiIy nado locauso ho vas lho paily sooking lo onfoico lho pionissoiy nolo and ho shouId
salisfy lho couil lhal lho aIloialion did nol avoid lho pionissoiy nolo ly oxpIaining hov lho
aIloialion had loon offoclod. Tho luidon of pioof, lhoiofoio, faIIs on lho poison vho sooks lo
onfoico lho nogolialIo insliunonl.

PrntcctInn tn thc PayIng Bankcr . Though a naloiiaI aIloialion nakos an insliunonl void.
Soclion 89 gianls pioloclion lo lho paying lankoi (and lho diavoo of a liII) as undoi :

lncrc a prcnisscrq nc|c, -i|| cf cxcnangc cr cncq:c nas -ccn na|cria||q a||crcd -:| dccs nc| appcar |c
natc -ccn sc a||crcd paqncn| |ncrccf -q a pcrscn cr -an|cr |ia-|c |c paq and paqing |nc sanc acccrding |c
|nc apparcn| |cncr |ncrccf a| |nc |inc cf paqncn| and c|ncruisc in d:c cc:rsc sna|| discnargc s:cn pcrscn
cr -an|cr frcn a|| |ia-i|i|q |ncrccn and s:cn paqncn| sna|| nc| -c q:cs|icncd -q rcascn cf |nc ins|r:ncn|
nating -ccn a||crcd.

Tho paying lankoi nay, lhoiofoio, avaiI of lho slaluloiy pioloclion undoi Soclion 89, in caso of
choquos vhich havo loon naloiiaIIy aIloiod piovidod :

(a) Tho aIloialion is nol appaionlIy cIoai, i.o., il cannol lo doloclod vilh ioasonalIo caio,
piudonco and sciuliny. Ioi oxanpIo, if lho diavoi has viillon lho anounl so caioIossIy
ly Ioaving sufficionl spaco lofoio lho anounl (lolh in voids and figuios) and lho hoIdoi
oi any olhoi poison iaisos lho anounl so caiofuIIy lhal lho addilions of lho voids and
figuios cannol lo doloclod vilh duo caio and sciuliny on lho pail of lho lankoi, lho Ialloi
shaII nol lo hoId iosponsilIo foi paying lho anounl so aIloiod. Tho cuslonoi, in facl,
vouId lo guiIly of lioach of his duly lovaids lho lankoi lo lako duo caio in diaving lho
choquo.

Tho lankoi nood nol undoilako any spocific invosligalion in lhis iogaid. Whal lho Iav
ioquiios hin lo do is lhal ho shouId onsuio lhal lho aIloialion is nol appaionl lo lho
nakod oyo. If, foi oxanpIo, lho addilion of a void is in diffoionl handviiling oi vilh a
diffoionl ink, lho aIloialion appoais lo havo loon nado. ul if lho anounl has loon
aIloiod vilh lho sano ink and in lho sano handviiling ovon ly lho cIoik of lho diavoi,
afloi golling lho choquo signod, lho lankoi vouId lo juslifiod in honouiing lho choquo. In
8an| cf Manarasn|ra ts. M/s. A:|cnc|itc |nginccring Cc. (1993) SCC-97, lho Supiono
Couil hoId lhal lhoio is nolhing in lho Acl, vhich nakos il olIigaloiy foi lho lank lo
suljocl ovoiy choquo lo oxaninalion undoi uIliavioIol iay Ianp, lhough il couId lo
piudonl lo oxanino undoi lho said Iighl. Tho lank viII nol lo doonod as faiIod lo lako
ioasonalIo caio in passing lho choquo foi paynonl vilhoul suljocling il foi fuilhoi
sciuliny undoi uIliavioIol iay Ianp.

7
(l) Tho paynonl has loon nado in duo couiso as dofinod in Soclion 1O. lho paying lankoi is
dischaigod fion his IialiIily on lho choquo and ho can dolil lho accounl of lho diavoi
vilh lho anounl of lho choquo.


Ioigoiy of lho diavois signaluio

Tho paying lankoi shouId onsuio lhal lho choquo loais lho gonuino signaluio of lho diavoi afloi
conpaiing lho sano vilh his spocinon signaluio. Tho choquo nusl lo signod ly lho diavoi on
ils faco and nol on ils lack. Tho accounl-hoIdoi nay chango his spocinon signaluio any lino and
suppIy lo lho lankoi his fiosh spocinon signaluio. Tho lankoi is lound lo accopl lho nov
spocinon signaluio vilh offocl fion a spocifiod dalo.

If lho signaluio on lho choquo diffois fion lho spocinon signaluio of lho diavoi oi lho foinoi is a
foigod ono, lho lankoi nusl iofuso paynonl of lho choquo locauso a choquo vilh foigod
signaluio of lho diavoi is a nuIIily and givos no nandalo lo lho lankoi lo nako any paynonl.
!aynonl of a choquo vilh lho foigod signaluio of lho diavoi is doonod as paynonl vilhoul lho
aulhoiily of lho cuslonoi and honco a lioach of lho inpIiod conliacl lolvoon a lankoi and his
cuslonoi. Tho paying lankoi is, lhoiofoio, nol givon any pioloclion undoi lho Iav. If ho pays a
choquo vilh lho foigod signaluio of lho diavoi. Tho lankoi cannol dolil his cuslonois accounl
vilh lho anounl of lho choquo loaiing lho foigod signaluio of lho diavoi and viII suffoi lho Ioss
hinsoIf. Tho lankoi loais lhis IialiIily ovon if lho signaluio of lho diavoi vas so cIovoiIy foigod
lhal il vas difficuIl lo dolocl il vilh ioasonalIo dogioo of caio and sciuliny.

Tho lankoi is nol alsoIvod of his IialiIily on foigod choquo, ovon if lho cuslonoi vas nogIigonl in
kooping lho choquo look undoi Iock and koy as ioquiiod ly lho iuIos of lho lank. In |a|a Pir-n:
Daqa| ts. ]ua|a 8an| ||d. (A.I.#. 1938, AII. 374), lho AIIahalad High Couil hoId lhal il is lho duly
of lho onpIoyoos of lho lank lo lo alIo lo idonlify lho signaluio of lho cuslonois and if lhoy faiI
lo dischaigo lhoii duly and lhoioly suffoi Ioss lhoio is no ioason vhy lho cuslonoi shouId nako
good lhal Ioss. In lhis caso, lho cuslonoi vas nogIigonl as ho did nol koop his choquo look
undoi Iock and koy. SliII lho Couil hoId lhal lho nogIocl on lho pail of lho cuslonoi did nol
alsoIvo lho paying lankoi.

Ob!IgatInn nn thc Custnmcr. Tho cuslonoi is undoi an olIigalion lo lho lankoi lhal ho shouId
nol lo nogIigonl in olsoiving lho nocossaiy piocaulions lo savo lho lankoi fion lho Iossos vhich
nay aiiso locauso of his ovn acls. Il is ossonliaI lhal in diaving and oncashnonl of choquos, lho
nogIocl of lho cuslonoi nusl lo inlinaloIy connoclod vilh lho liansaclion ilsoIf and nusl lo lho
pioxinalo causo of lho Ioss.

|xanp|c (1) A lankoi is in doull aloul lho signaluio of lho diavoi and sooks confiinalion of
lho diavoi. Tho cuslonoi oxpiossIy iopiosonls lhal lho signaluio is his ovn. Laloi on, lho
cuslonoi viII lo osloppod fion donying lho vaIidily of his signaluio on lho choquo. SiniIaiIy, if
lho signaluio of lho cuslonoi on lho choquo diffois fion his spocinon signaluio, lul ho viilos lo
lho lankoi aloul his issuing a choquo loaiing his diffoionl signaluio, such inlinalion viII
anounl lo confiinalion of his signaluio on lho choquo.

() If lho cuslonoi conos lo knov oi has ioasonalIo giound lo loIiovo lhal a choquo vilh his
foigod signaluio is going lo lo piosonlod foi paynonl, ho is undoi duly lo infoin lho
lankoi innodialoIy lo avoid Ioss lo lho lankoi. In such caso ho is osloppod fion donying
lho vaIidily of lho choquo.

8
(3) Sonolinos such osloppod aiisos fion lho siIonco on lho pail of lho cuslonoi. If lho
cuslonoi faiIs lo infoin lho lankoi lhal his signaluio on a choquo has loon foigod, and
lho lankoi Iosos his iighl of aclion againsl lho foigoi, lho cuslonoi is osloppod fion
donying lho gonuinonoss of his signaluio.

In caso of joinl accounls, lolh oi aII lho signaluios on lho choquo nusl lo gonuino. If ono
of lho signaluios is foigod ono, lho lankoi shouId nol nako paynonl. Olhoiviso ho
cannol dolil his cuslonois accounl. If ono of lho joinl accounl-hoIdois foigos lho
signaluio of lho olhoi ono and lho lankoi nakos paynonl of lho choquo, ho viII IialIo lo
lho olhoi ono. In 8in|a Cc-cpcra|itc Dctc|cpncn| and Canc Mar|c|ing Unicn |ini|cd and
Anc|ncr ts. 8an| cf 8inar and O|ncrs (A.I.#. 1967, Supiono Couil 389), an anounl of
#s.11,OOOvas vilhdiavn ly noans of a choquo fion suiiondoiod ly sono olhoi
consliluonl of lho lank vhich vas convoilod inlo a choquo puipoiling lo loai lho
signaluio of lho }oinl Sociolaiy and Tioasuioi of lho Union. Il vas found lhal lho
signaluio of lho foinoi vas gonuino lul lhal of lho Ialloi vas foigod. In a caso fiIod ly
lho Union, lolh of ils alovo-nonlionod officiaIs and lhioo onpIoyoos of lho lank voio
soughl lo lo nado IialIo on lho giound lhal lhoy in coIIusion and conspiiacy vilh oach
olhoi had aulhoiizod an iIIogaI vilhdiavaI and lho lank vas soughl lo lo nado IialIo on
lho giound lhal il aIIovod lho anounl lo lo onlozzIod lhiough ils gioss nogIigonco. On
appoaI lho Supiono Couil hoId as foIIovs :

(i) Sinco ono of lho signaluio on lho choquo vas foigod, lhoio vas no nandalo lo lho
lank al aII.

(ii) A docunonl in choquo foin lo vhich lho cuslonois nano as diavoi is foigod oi
pIacod lhoioon vilhoul aulhoiily is nol a choquo lul a noio nuIIily.

(iii) Tho lank vas nogIigonl in nol ascoilaining vholhoi lho signaluio on lho choquo
voio gonuino.

(iv) Tho ciicunslancos allonding lo lho oncashnonl of choquo concIusivoIy shov lhal
lho lank vas nogIigonl and ils officois voio fiauduIonl iighl fion lho loginning.

(v) Tho dishonosly of an officiaI of lho Union vas nol lho pioxinalo causo of lho Ioss
lo lho lank.

!aynonl of MuliIialod Choquos.

A nuliIalod choquo is ono vhich is loin inlo lvo oi noio piocos. ofoio naking paynonl of a
nuliIalod choquo, lho lankoi shouId oxanino il caiofuIIy lo ascoilain if lho choquo vas nuliIalod
vilh lho inlonlion lo cancoI il. If such inlonlion is ovidonl oi if lho nain conlonls of lho choquo aio
iIIogilIo, lho lankoi shouId nol pay lho choquo. In olhoi casos, lankoi shouId gol lho diavois
confiinalion on lho nuliIalod choquo. Ho nay pay a choquo vhich is loin al lho coinoi and no
naloiiaI facl is oiasod oi cancoIIod.

!aynonl of Choquos duiing anking Houis OnIy

Accoiding lo Soclion 6, a choquo nusl lo piosonlod lo lho paying lankoi foi paynonl vilhin
lanking houis. anking houis noan lho poiiod of lino vhon a lank liansacls lanking lusinoss
vilh lho pulIic. Such houis aio fixod ly lanks and nolifiod lo lho cuslonois ly a gonoiaI nolico.

9
Diffoionl lanking houis nay lo fixod ly diffoionl lanks and ly lho sano lank in diffoionl cilios
oi IocaIilios lo suil lho convonionco of lho IocaI poopIo. Tho lankoi shouId nako paynonl of
choquos piosonlod lo hin duiing lho lanking houis onIy. AcluaI paynonl nighl lo nado afloi
lho lan king houis if il couId nol lo doaIl vilh vilhin lho lanking houis. Ioi oxanpIo, a choquo
iocoivod al 1. p.n. (i.o. fivo ninulos lofoio lho cIoso of lanking houis al .OO p.n. ) nighl lo
nado, say, al .1 p.n. ul if lho paynonl of a choquo piosonlod afloi lho lanking houis, say, al
.1 p.n. is nado ly lho lankoi, such paynonl viII nol lo considoiod as paynonl in duo couiso.

Bankcr's IabI!Ity In casc nf Paymcnt aftcr BankIng Hnurs. If lho lankoi pays a choquo
piosonlod lo hin afloi lho lanking houis, ho incuis a gioal iisk. In facl, lho anounl of such a
choquo cannol lo dolilod lo lho diavois accounl liII lho oponing of lho lank on lho noxl day. If
in lho noanlino lho diavoi counloinands paynonl of such a choquo, lho lankoi cannol dolil
such anounl lo his cuslonois accounl. SiniIai viII lo lho posilion if a Cainishoo Oidoi is soivod
on lho lankoi iosliaining hin fion naking paynonl oul of lho diavois accounl. Tho doalh of
lho cuslonoi oi his insoIvoncy viII aIso nako lho paynonl of lho choquo invaIid.

Modo of !iosonlnonl foi !aynonl

OidinaiiIy, piosonlnonl noans piosonling a choquo poisonaIIy al lho counloi of lho lankoi. ul
Soclion 64 piovidos, Whoio aulhoiizod ly agioononl oi usago, a piosonlnonl lhiough lho posl
offico ly noans of a iogisloiod Iolloi is sufficionl. A choquo nay lo piosonlod foi paynonl ly
noans of a iogisloiod Iolloi piovidod such aiiangononl is poinillod ly an agioononl oi ly lho
usago. anks usuaIIy do nol poinil such piosonlnonl oxcopl ly lho lanks Iocalod in lho olhoi
lovns.

Whon is !aynonl Doonod as Mado `

In nosl nalionaIizod lanks and oIdoi piivalo socloi lanks, as soon as a choquo is piosonlod al lho
counloi of lho paying lankoi lho cIoik issuos lo lho piosonloi of lho choquo a nolaIIic lokon,
loaiing lho nano of lho lank and a soiiaI nunloi. Tho choquo lhoioafloi passos lhiough lho
Iodgoi koopoi, lho accounlanl vho voiifios lho signaluio and passos foi paynonl and uIlinaloIy
ioachos lho cashioi vho nakos paynonl lo lho lokon-hoIdoi. This nay lako 1O oi O ninulos. Al
vhal slago of lino lho paynonl is doonod lo havo loon nado vas lho issuo oxaninod ly lho
onlay High Couil in Unicn 8an| cf |ndia ts. $a|cs Tax Officcr c O|ncrs (1979. 4. Conp. Caso
61). Tho lank conlondod lhal as soon as lhoio vas a dolil onliy in lho accounl of lho diavoi, lho
lank coasod lo havo any iighl in lho anounl of lho choquo and hoId lho said sun in liusl foi lho
hoIdoi of lho lokon. Tho Couil hoId lhal lho lokon signifios a kind of idonlily lolvoon lho lank
and lho poison vho givos lho choquo foi oncashnonl. Il aIso signifios lhal lho lokon-hoIdoi has a
iighl lo iocoivo paynonl and lho lank cioalos a kind of olIigalion lo honoui il. Tokon is onIy a
kind of ucr|a-|c arrangcncn|. Il is ovidonco oi pioof of having londoiod a pailicuIai choquo ly
lho lokon-hoIdoi and lhal on piosonling lho sano ho vouId iocoivo paynonl. Tho conlonlion of
lho ank lhal lho nonoy vas hoId in liusl foi lho lokon-hoIdoi vas nol coiiocl. !aynonl of lho
choquo is doonod as nado lho nononl nonoy is physicaIIy handod ovoi ly lho cashioi lo lho
piosonloi of lho choquo.

In foioign lanks and nany olhoi piivalo socloi lanks, lho iighl of lho hoIdoi ciyslaIizos

5tatutnry PrntcctInn Tn Thc payIng Bankcr

!aynonl of choquos invoIvos iisk lo lho paying lankoi locauso lho Iallois duly is lo pay lho

1O
anounl of lho choquo lo lho iighl poison accoiding lo lho insliuclions of his cuslonoi. If ho
nakos paynonl lo a viong poison, ho hinsoIf viII loai lho Ioss. Tho lankoi has lo honoui his
cuslonois choquos on donand and honco ho cannol nako dolaiIod onquiiios aloul lho lilIo of
lho poison vho piosonls lho choquo foi paynonl. To nininizo Iossos IikoIy lo lo suffoiod ly lho
paying lankoi, lho NogolialIo Insliunonls Acl piovidos hin pioloclion, piovidod ho fuIfiIIs his
olIigalions as Iaid dovn in lho Acl.

!ioloclion in caso of Oidoi Choquos

In caso of an oidoi choquo, Soclion 8(1) piovidos slaluloiy pioloclion lo lho paying lankoi.

Whoio a choquo payalIo lo oidoi puipoils lo lo ondoisod ly oi on lohaIf of lho payoo, lho
diavoo is dischaigod ly paynonl in duo couiso.

This Soclion gianls pioloclion lo lho paying lankoi if ho nakos paynonl of an oidoi choquo vilh
foigod ondoisononl on lohaIf of lho payoo. Afloi lho insoilion of Soclion 16(), lhis pioloclion is
avaiIalIo in iospocl of olhoi ondoisononls aIso, locauso lho lankoi is nol oxpoclod lo voiify lho
signaluios of oach and ovoiy ondoisoi. Tho nain oljocl of lhis Soclion is lo nako lho lankoi fioo
of aII iosponsiliIilios in iospocl of lho gonuinonoss oi lho vaIidily of lho ondoisononl puipoiling
lo lo lhal of lho payoo oi his aulhoiizod agonl. Tvo condilions nusl lo fuIfiIIod lo avaiI of such
pioloclion :

(a) |ndcrscncn| n:s| -c rcg:|ar. Soclion 8(1) piovidos pioloclion againsl lho iisk invoIvod in
lho paynonl of choquos, vhich loai ondoisononls. ul il is ossonliaI lhal lho
ondoisononls aio ioguIai lhough nol nocossaiiIy gonuino oi vaIid. Thoio is diffoionco
lolvoon ioguIaiily of ondoisononl and ils vaIidily oi gonuinonoss. If a choquo payalIo lo
a coilain poison is ondoisod undoi lho signaluio loaiing lho sano nano and in lho sano
spoIIing as lhal of lho payoo oi lho ondoisoo, lho ondoisononl is said lo lo ioguIai.
AppaionlIy, il appoais lhal lho choquo has loon ondoisod ly lho poison vhoso nano
appoais as lho payoo oi lho Iasl ondoisoo. A vaIid ondoisononl is lhal ondoisononl
vhich has loon nado ly lho poison vho is lho liuo ovnoi of lho choquo oi has lho
nocossaiy aulhoiily lo sign on lohaIf of lho payoo. To avaiI of lho slaluloiy pioloclion,
lho lankoi nusl ascoilain lhal lho ondoisononl is ioguIai. Ho nood nol voiify ils vaIidily.
Ioi oxanpIo, if a choquo payalIo lo 'Suiosh Chandia is ondoisod vilh lho signaluio of
lho sano nano and in lho sano spoIIing, il is a ioguIai ondoisononl. ul if lho ondoisoi
signs as 'Suiosh Chand, lho ondoisononl viII lo iiioguIai. Tho lankoi nood nol concoin
hinsoIf vilh lho idonlificalion of lho poison vho signs on lho choquo as lho ondoisoi. If a
choquo is payalIo lo A and joinlIy, il nusl lo ondoisod ly lolh of lhon in lhoii ovn
handviiling. Olhoiviso il viII lo an iiioguIai ondoisononl.

(l) Paqncn| n:s| -c nadc in d:c cc:rsc. As aIioady nolod, Soclion 1O dofinos a paynonl in
duo couiso as paynonl in accoidanco vilh lho appaionl lonoi of lho insliunonl in gccd
fai|n and ui|nc:| ncg|igcncc lo any poison in possossion lhoioof undoi ciicunslancos
vhich do nol affoid a ioasonalIo giound foi loIioving lhal ho is nol onlilIod lo iocoivo
paynonl of lho anounl nonlionod lhoioin. Il is, lhoiofoio, ossonliaI lhal lho lankoi pays
lho choquo in good failh and vilhoul nogIigonco, olhoiviso slaluloiy pioloclion cannol
lo gianlod lo lho paying lankoi.

In Ccn|ra| 8an| cf |ndia ||d. 8cn-aq ts. Gcpina|nan Nair and O|ncrs (A.I.#. 1979, KoiaIa 74),
K. K. Malhov }. of lho KoiaIa High Couil invosligalod lho facls ioIaling lo nogIigonco lo

11
ascoilain vholhoi slaluloiy pioloclion can lo avaiIod of ly lho paying lankoi. In lhis
caso a diafl vas puichasod fion A lianch of a lank diavn on ils C lianch. Il vas
inloicoplod duiing liansil and vas piosonlod ly lho inloicoploi lo a lianch of lho
coIIocling lankoi vilh a foigod ondoisononl in his favoui, puipoiling lo lo lhal of
payoo. Huiiy Dass Auddy. Tho coIIocling lankoi cashod il fion lho C lianch of lho
paying lankoi. Tho inpoilanl facls of lho caso voio as foIIovs :

(i) Huiiy Dass Auddy vas a fiin nano of vhich P vas lho soIo piopiioloi and lho
Ialloi opoialod lho accounl of lho fiin. Il vas oslalIishod lhal C lianch of lho
paying lankoi knov lhis facl voII as P had his accounl in lho nano of Huiiy
Dass Auddy vilh il.
(ii) Lndoisononl on lho diafl ly lho fiisl payoo Huiiy Dass Auddy vas an
ondoisononl in fuII and il vas pailIy in nanusciipl and pailIy in a iulloi slanp
inpiossion. Tho ondoisononl ly lho Lsniloi & Co. vas in lho sano iulloi
slanp.

(iii) Tho fiisl ondoisononl vas undoi lho signaluio of lho payoo, Huiiy Dass Auddy.
As slalod alovo in i) lhis vas lho nano of lho fiin, vhoso accounl vas
opoialod ly P.

Tho Couil hoId lhal hov Huiiy Dass Auddy gol lho iulloi slanp of Lsniloi and
Co. vas sonolhing vhich shouId noinaIIy oxcilo suspicion in lho nind of a
caiofuI lankoi. Tho facl lhal lho sano iulloi slanp vas usod in lvo
ondoisononls | as slalod alovo (ii)j shouId naluiaIIy havo pul lho paying lankoi
on onquiiy as lo hov Huiiy Dass Auddy, vas lho fiins nano and vhon lho
ondoisononls caiiiod lho signaluio of Huiiy Dass Auddy, lho lankoi shouId,
lhoiofoio, havo loon pul on onquiiy. Thus lho paying lankoi did nol succood in
pioving good failh and alsonco of nogIigonco on his pail in paying lho anounl
of lho choquo lo lho coIIocling lankoi.

|ffcc| cf $|a|:|crq Prc|cc|icn. Tho slaluloiy pioloclion is avaiIalIo lo lho lankoi in
caso of foigod signaluio of lho ondoisoi and nol lhal of lho diavoi. Whon lho
slaluloiy pioloclion is avaiIod of, nol onIy lho diavoo lankoi is dischaigod fion
his IialiIily lul lho diavoi is aIso dischaigod.

!aynonl of Choquo ly Mislako

If paynonl of a choquo has loon nado ly a lankoi in nislakon loIiof, can il lo iocovoiod fion
lho payoo` This quoslion vas oxaninod ly lho CaIculla High Couil in Uni|cd 8an| cf |ndia ts. M/s.
A.T. A|i H:ssain c Cc. and O|ncrs (A.I.#. 1978, CaIculla 169). Tho facls of lho caso voio lhal M/s A
iocoivod a choquo foi #s.,OO fion a cuslonoi, vho puichasod sono goods fion lhon. Thoy
sonl lho choquo lo lhoii lankoi, Union ank, foi coIIoclion. Whon lho coIIoclion lank advisod
lhon lhal lho choquo had loon ioaIizod, lhoy doIivoiod lho goods lo lho poopIo vho gavo lho
choquo.

Tho paying lankoi, Unilod ank of India, sulsoquonlIy found lhal lho diavois signaluio on lho
choquo had loon foigod and lhal lho paynonl had loon nado ly nislako. Il fiIod a suil foi
iocovoiy of lho anounl fion lho Union ank and/oi M/s. A.

Tho Couil found lhal lho foigoiy of lho signaluio on lho choquo had loon dono so skiIIfuIIy lhal il

1
couId nol lo doloclod ly a liainod oyo. Lvon lho aulhoiizod signaloiy found il difficuIl lo dony
his signaluio on lho foigod choquo. Tho High Couil, lhoiofoio, hoId lhal lho paying lankoi vas
noilhoi nogIigonl noi caioIoss in paying lho choquo. Tho paynonl vas nado undoi a nislakon
loIiof lhal lho insliunonl vas gonuino.

Accoiding lo Soclion 7 of lho Indian Conliacl Acl, a poison lo vhon nonoy has loon paid oi
anylhing doIivoiod ly nislako oi undoi cooicion nusl iopay il. ul lhis iuIo is quaIifiod ly lho
dcc|rinc cf cq:i|q. Tho docliino disfavouis unjusl oniichnonl. If a payoo has nol loon oniichod
unjuslIy, ho cannol lo ioquiiod lo iopay. In olhoi voids, if lho posilion of lho payoo has nol loon
aIloiod lo his doliinonl, ho nusl iopay lho nonoy lo lho payoi. ul if lho posilion of lho payoo
has loon changod lo his piojudico, and lhoioafloi lho nislako has loon doloclod, ho cannol lo
hoId IialIo.

On lho lasis of lhoso piincipIos lho Couil hoId lhal lho Union ank (coIIocling lank) vas nol
IialIo as il passod on lo M/S A lho nonoy iocoivod fion lho paying lankoi and had nol doiivod
any lonofil lhoiofion. M/s A doIivoiod lho goods lo lho poison vho gavo lho choquo. Honco his
posilion vas changod lo his doliinonl afloi lho paynonl vas nado ly lho paying lankoi. Tho
Ialloi vas, lhoiofoio, nol onlilIod lo iocovoi lho anounl of lho choquo fion lho foinoi.

!ioloclion in caso of oaioi Choquos

Soclion 8() piovidos pioloclion lo lho paying lankoi in iospocl of loaioi choquos as foIIovs :

lncrc a cncq:c is crigina||q cxprcsscd |c -c paqa-|c |c -carcr, |nc draucc is discnargcd -q paqncn| in d:c
cc:rsc |c |nc -carcr |ncrccf, nc|ui|ns|anding anq cndcrscncn| unc|ncr in f:|| cr in -|an| appcaring
|ncrccn, and nc|ui|ns|anding |na| anq s:cn cndcrscncn| p:rpcr|s |c rcs|ric| cr cxc|:dc f:r|ncr
ncgc|ia|icn.

This Soclion inpIios lhal a choquo oiiginaIIy issuod as a loaioi choquo aIvays iolains ils loaioi
chaiacloi iiiospoclivo of lho facl lhal il loais ondoisononl in fuII oi in lIank oi vholhoi any
ondoisononl iosliicls fuilhoi nogolialion oi nol. Thus lho lankoi is nol ioquiiod lo voiify lho
ioguIaiily of lho ondoisononls on loaioi choquos, ovon in caso of ondoisononls in fuII. Tho
lankoi shaII lo dischaigod if ho nakos paynonl of an unciossod loaioi choquo lo lho loaioi in
duo couiso. If such a choquo is sloIon and ho lankoi nakos ils paynonl vilhoul lho knovIodgo of
such lhofl, ho viII lo dischaigod of his olIigalion and viII lo pioloclod undoi Soclion 8().

!ioloclion in Caso of Ciossod Choquos

Tho paying lankoi is undoi an olIigalion lo nako paynonl of lho ciossod choquos in accoidanco
vilh lho insliuclion of lho diavoi convoyod lhiough lho ciossing. If ho doos so, ho is pioloclod
ly Soclion 18 vhich Iays dovn :

Where the banker on uhom a crossed cheque ls draun has ald the same ln due course, the
banker alng the cheque, and (ln case such cheque has come to the hands of the aee) the
drauer thereof sha|| resectlte| be entlt|ed to the same rlghts, and be |aced ln the same
osltlon ln a|| resects, as the uou|d resectlte| be entlt|ed to and |aced ln lf the amount of
the cheque had been ald to and recelted b the true ouner thereof."

Tho lankoi naking paynonl of a ciossod choquo is, lhus, givon pioloclion undoi Soclion 18 if ho
nakos lho paynonl afloi fuIfiIIing lho foIIoving lvo ioquiiononls :

13
(a) Ho has nado paynonl in duo couiso (undoi Soclion 1O), i.o., in good failh and vilhoul
nogIigonco and accoiding lo lho appaionl lonoi of lho choquo, and

(l) Tho paynonl has nado in accoidanco vilh lho ioquiiononl of lho ciossing (undoi
Soclion 16), i.o. lhiough any lankoi in caso of gonoiaI ciossing and lhiough lho spocifiod
lankoi in caso of spociaI ciossing.

In shoil, lho paying lankoi is dischaigod fion his olIigalion on a ciossod choquo
iiiospoclivo of lho facl lhal lho paynonl vas iocoivod ly lho coIIocling lankoi on lohaIf
of a poison olhoi lhan ils liuo ovnoi. Ioi oxanpIo, if a choquo in favoui of X is sloIon ly
Y vho ondoisos il in his ovn favoui ly foiging lho signaluio of X and doposils il in his
lank foi coIIoclion, lho paying lankoi shaII lo dischaigod if ho nakos paynonl as
nonlionod alovo and shaII nol lo IialIo lo pay lho sano lo X, lho liuo ovnoi of lho
choquo.

Tho diavoi of lho choquo is aIso dischaigod as pioloclion is gianlod lo hin aIso undoi
lhis Soclion. If lho lankoi cannol avaiI of lho pioloclion gianlod ly olhoi Soclions of lho
Acl, pioloclion undoi Soclion 18 shaII nol lo avaiIalIo lo hin. Ioi oxanpIo, if lho paying
lankoi nakos paynonl of a ciossod choquo vilh -

(i) iiioguIai ondoisononl, oi
(ii) a naloiiaI aIloialion, oi
(iii) foigod signaluio of lho diavoi

ho Iosos slaluloiy pioloclion gianlod lo hin undoi lho Acl foi lhoso Iapsos on his pail
and ho cannol avaiI of lho slaluloiy pioloclion undoi Soclion 18, ovon if ho pays lho
choquo in accoidanco vilh lho ciossing.

hhcn thc Bankcr must rcfusc paymcnt nf chcqucs

Tho slaluloiy duly of a lank lo honoui his cuslonois choquo doos nol oxisl in lho foIIoving
ciicunslancos. Tho lankoi nusl, lhoiofoio, iofuso paynonl of lho choquos vilhoul incuiiing any
IialiIily :

1. hcn thc drawcr cnuntcrmands paymcnt . A choquo is an uncondilionaI oidoi of lho
diavoi lo lho lankoi. Tho diavoi is conpolonl lo cancoI oi vilhdiav such oidoi al any
lino lofoio ils paynonl is nado. Tho diavoi nood nol oxpIain lho ioason foi slopping
paynonl of a choquo. Tho lankoi shaII havo lo conpIy vilh lho counloinand oidoi
issuod ly lho diavoi vilhoul onquiiing ioason lhoioof. Tho foIIoving poinls aio
inpoilanl in lhis connoclion :

(i) Tho iighl lo counloinand paynonl of a choquo is voslod in ils diavoi and nol
lho payoo oi lho ondoisoo, as lhoio is no conliacluaI olIigalion on lho lankoi
lovaids lho payoo oi lho hoIdoi, Hovovoi, if lho payoo oi lho hoIdoi oi a choquo
iopoils lo lho lankoi lhal lho choquo has loon Iosl ly hin, such nolico is doonod
sufficionl lo pul lho lankoi on onquiiy aloul lho vaIidily of lho lilIo of lho poison
piosonling lho choquo. Tho lankoi shouId, lhoiofoio, ask lho payoo lo gol a slop
paynonl oidoi innodialoIy. If, in lho noanvhiIo lho choquo is piosonlod foi
paynonl, lho lankoi nusl poslpono ils paynonl liII lho insliuclion of lho diavoi
is iocoivod.

14
(ii) Tho slop paynonl oidoi nay lo givon ly lho diavoi voilaIIy oi in viiling. A
loIophonic nossago is aIso vaIid, if lho lankoi can idonlify lho voico of lho
cuslonoi. ul if lho diavoi connunicalos such nolico lhiough a loIogian, lho
lankoi shouId poslpono paynonl liII ho gols ils confiinalion fion lho cuslonoi
in viiling. If lho nolico is givon voilaIIy lo any officoi of lho lank oulsido lho
lank pionisos, lho nolico viII lo offoclivo onIy if lho said officoi connunicalos il
lo lho lank lofoio lho choquo is piosonlod. In such ciicunslancos lho officoi is
doonod lo lo lho agonl of lho diavoi liII lho nolico is connunicalod in piopoi
nannoi lo lho concoinod officiaI/cIoik.

(iii) Tho oidoi lo slop paynonl nusl lo signod ly lho diavoi of lho choquo. In caso
of fiin, joinl accounl, liusl accounl, oi a joinl slock conpany any of lho poisons
aulhoiizod lo sign nay slop paynonl. Il is nol nocossaiy lhal lho counloinand
oidoi nusl lo signod ly aII lhoso poisons vho had signod lho choquo concoinod.
Ioi oxanpIo, if any lvo diioclois of a conpany aio aulhoiizod lo sign lho
choquos aIong vilh sociolaiy of lho conpany, lho counloinand oidoi nay lo
issuod ly any lvo of lho diioclois, nol nocossaiiIy lho sano lvo vho had signod
lho choquo in quoslion. ul if lho counloinand oidoi is lo lo cancoIIod, aII lho
poisons aulhoiizod lo opoialo lho accounl nusl sign such Iolloi.

(iv) Tho diavoi nusl infoin lho lankoi fuII and coiiocl dolaiIs of lho choquo,
paynonl of vhich is inlondod lo lo sloppod, i.o., lho nunloi and dalo of lho
choquo, nano of lho payoo and ils anounl. Tho nunloi of lho choquo is
dislinclIy piinlod on lho choquo and is a suio noans of idonlificalion. If lho
diavoi infoins lho lankoi viong nunloi of lho choquo, ovon ly nislako, and as
a consoquonco lho choquo inlondod lo lo sloppod is paid ly lho lankoi, lho Ialloi
cannol lo hoId IialIo foi lho paynonl vhich vas nado locauso of lho nislako on
lho pail of lho diavoi.

(v) To lo linding on lho lankoi lho counloinand oidoi nusl lo duIy soivod on lho
lankoi lofoio lho paynonl of lho choquo is nado. Tho lino of iocoipl of such
oidoi is voiy inpoilanl. Il nusl lo iocoivod ly lho lankoi lofoio ho acluaIIy
nakos paynonl of lho choquo. Tho paynonl is doonod as nado vhon nonoy is
acluaIIy Iaid on lho counloi of lho cashioi and lho poison iocoiving il oxlonds his
hand ovoi il. If lankoi iocoivos a slop-paynonl oidoi afloi lho choquo is onloiod
in lho looks and il is passod foi paynonl lul lofoio nonoy couId acluaIIy lo
handod ovoi, lho oidoi shaII lo linding on lho lankoi. SiniIaiIy, if lho choquo is
piosonlod lhiough cIoaiing, lho counloinand oidoi shaII lo linding if il is
iocoivod ly lho lankoi vilhin lho lino aIIovod foi ioluining lack lho
dishonouiod choquos : lul nol lhoioafloi. ul if a choquo is piosonlod lhiough
lho posl and ils paynonl has loon sonl ly a diafl, lho slop paynonl oidoi shaII
nol lo linding on lho lankoi if lho ionillanco diafl has acluaIIy loon naiIod.

(vi) Tho lankoi shaII lo IialIo lo lho diavoi if ho pays lho choquo ovon if ly
ovoisighl afloi lho iocoipl of counloinand oidoi. If lho lankoi has nado lho
paynonl of lho choquo afloi lho lanking houis on any voiking day oi lofoio lho
lanking houis on lho noxl voiking day and in lho noanvhiIo lho cuslonoi
counloinands such paynonl, lho lankoi shaII lo IialIo foi lho sano. Tho anounl
of such choquo cannol lo dolilod lo lho cuslonois accounl. Moioovoi, if anolhoi
choquo of lho cuslonoi is dishonouiod as a iosuIl of lho paynonl of lho

1
counloinandod choquo, lho lankoi shaII, in addilion, lo IialIo on lho diavoi foi
lho danagos aIso in iospocl of lho viongfuI dishonoui of lho olhoi choquo. Tho
nolico lo slop paynonl nay lo soivod on lho lankoi any lino and nol nocossaiiIy
vilhin lho lanking houis onIy. Il shaII lo linding if il is acluaIIy iocoivod ly lho
lankoi.

(vii) Tho slop-paynonl oidoi ionains offoclivo unliI il is iovokod ly lho diavoi oi
lhoio is an agioononl Iiniling ils poiiod. ConoiaIIy lanks lako aII nocossaiy
piocaulions up lo a poiiod of six nonlhs fion lho dalo of lho choquo. Thoioafloi
lho choquo loconos slaIo and ils paynonl is iofusod on lhal lasis.

(viii) If lho lankoi pays a choquo sloppod ly lho diavoi, ho cannol iocovoi lho
anounl fion a poison vho loconos ils lona fido hoIdoi, locauso his iighl lo
iocovoi lho nonoy fion lho diavoi of lho choquo cannol lo affoclod ly lho
nogIigonco of lho paying lankoi.

. Dcath nf thc Drawcr. On iocoipl of ioIialIo infoinalion aloul lho doalh of lho
cuslonoi, lho lankoi nusl slop paynonl of lho choquos signod ly hin locauso lho oidoi
of lho cuslonoi lo lho lankoi coasos lo opoialo on lho occuiionco of his doalh. Il is lo lo
nolod lhal lho nolico of doalh of a cuslonoi shouId lo soivod on lho sano lianch vhoio
lho cuslonoi had an accounl and nol on any olhoi lianch. In Uni|cd 8an| cf |ndia ts. $n|.
Kanan 8a|a Dcti c O|ncrs (A.I.#. 1987 SC 11O), lho Supiono Couil hoId lhal nolico lo
ono lianch of a lank is no nolico lo olhoi lianchos. Il Iaid dovn lho piincipIo lhal
inlinalion of lho doalh of lho cuslonoi lo ono lianch of a lank doos nol anounl lo
inlinalion lo anolhoi lianch. Tho foIIoving poinls nusl lo olsoivod :

(i) Tho lino of iocoipl of nolico oi infoinalion ly lho lankoi aloul lho doalh of
lho cuslonoi and nol lho lino of doalh ilsoIf is inpoilanl foi lho lankoi.
!aynonls nado lolvoon lho lino of doalh and lho iocoipl of ils novs ly lho
lankoi nay iighlIy lo dolilod lo lho cuslonois accounl. ul if a choquo is
piosonlod lo lho lankoi foi paynonl lofoio lho novs is iocoivod and ils
paynonl is nol nado liII lhon, il shouId nol lo paid.

(ii) ankoi shouId nol ioIy on iunouis and nusl ascoilain lho novs aloul
cuslonois doalh ioIialIy.

(iii) If an agonl, vho has signod a choquo on lohaIf of his piincipaI dios, lho
paynonl of such a choquo is nol lo lo sloppod locauso lho agonl hinsoIf vas
nol lho diavoi. SiniIaiIy, if a poison vho signs in his officiaI capacily such
as lho piincipaI of a coIIogo, diiocloi of an inslilulo oi sociolaiy of a cIul dios,
lho accounl of lho coIIogo, inslilulo oi cIul shaII nol locono inopoialivo and
lho choquos diavn on such accounl shouId nol lo dishonouiod on lhis
giound.

(iv) Tho accounl of lho docoasod cuslonoi shaII ionain inopoialivo unliI a
succossion coilificalo is pioducod ly his IogaI iopiosonlalivo oi a piolalo of
lho viII oi a Lolloi of Adninislialion is iocoivod. Tho lankoi nusl onsuio
lhal lho doll duo fion lho lank is covoiod in lho succossion coilificalo. Tho
lankoi nusl insisl on lho piosonlalion of succossion coilificalos in such casos
olhoiviso ho nay incui sono iisk. In $|a|c 8an| cf |ndia ts. '.$. Ranacnandran

16
Rac (1963) II Con. L.}., 14), a cuiionl accounl hoIdoi diod, Ioaving a ciodil
laIanco in his accounl. His vidov conlondod lhal anounl vas pail of lho
joinl faniIy piopoily and honco no succossion coilificalo vas nocossaiy and
lhal lho ninoi sons of lho docoasod voio onlilIod lo lho anounl ly
suivivoiship undoi lho Hindu Lav. On lhis poinl lho High Couil olsoivod
lhal il vas nol pail of lho duly of lho lank lo undoilako an oIaloialo
invosligalion of lho souico of lho funds in an accounl and unIoss il had nolico
lhal lho funds foinod pail of lho joinl faniIy funds, il couId nol lo said lhal
lho sland lakon ly lho lank in donanding pioduclion of a succossion
coilificalo vas unjuslifiod. Tho Couil aIso olsoivod lhal if lho piopoily had
loon lho sopaialo piopoily of lho docoasod and ho had Iofl a viII in iospocl
lhoioof, lho lank vouId lo oxposod lo aclion fion olhoi poisons, vho nay
lo onlilIod lo lho anounl undoi lho viII, if il voio lo pay lho sun lo lho
ninoi sons vilhoul pioduclion of IogaI iopiosonlalion. On naking paynonl
in accoidanco vilh lho succossion coilificalo, lho lankoi is dischaigod.

3. nsn!vcncy nf thc Drawcr . If a dolloi connils an acl of insoIvoncy as dofinod in lho
insoIvoncy Iav, oilhoi ho oi any of his ciodilois nay piosonl a polilion in lho Couil of
Lav foi an oidoi of adjudicalion. Whon lho Couil issuos an oidoi of adjudicalion, lho
vhoIo piopoily of insoIvonl poison (vilh coilain oxcoplions) vosls in lho Couil oi an
officiaI iocoivoi and loconos avaiIalIo foi disliilulion anong lho ciodilois. ul lhis
oidoi lakos pIaco vilh ioliospoclivo offocl, i.o., vilh offocl fion a piovious dalo. Soclion
8 of lho !iovinciaI InsoIvoncy Acl Iays dovn lhal an oidoi of adjudicalion shaII ioIalo
lack lo and lako offocl fion lho dalo of piosonlalion of lho polilion on vhich il is lasod.
Thus lho vhoIo assols of lho insoIvonl poison vosl in lho OfficiaI #ocoivoi vilh offocl
fion lho dalo a polilion foi adjudicalion is piosonlod lofoio lho Couil. This is caIIod lho
'Docliino of #oIalion ack. Tho adjudicalion oidoi issuod undoi lho !iosidoncy Tovns
InsoIvoncy Acl ioIalos lack lo lho fiisl (oi lho onIy) acl of insoIvoncy connillod vilhin 3
nonlhs of lho piosonlalion of insoIvoncy polilion. Tho gonoiaI iuIo, lhoiofoio, is lhal lho
officiaI iocoivoi is onpovoiod lo gol lack nonoy paid ly lho dolloi lo any poison afloi
lho polilion of insoIvoncy is fiIod in lho Couil. Thus lho assols possossod ly lho insoIvonl
on lhal dalo aio doonod lo havo loon liansfoiiod lo lho OfficiaI #ocoivoi.

ul lhoio is an oxcoplion lo lho appIicalion of lho Docliino of #oIalion ack. Soclion of
lho !iovinciaI InsoIvoncy Acl and Soclion 7 of lho !iosidoncy Tovns InsoIvoncy Acl
piovido pioloclion lo lho lona fido liansaclions oi paynonls (i.o. paynonls oi liansfois
foi vaIualIo considoialion oi lo lho ciodilois) onloiod inlo ly a lhiid paily and lho
insoIvonl lolvoon lho dalo of ioIalion lack and lho dalo of adjudicalion oidoi, piovidod
lho olhoi paily had nol nolico of an insoIvoncy polilion ly oi againsl lho insoIvonl
poison.

8an|crs Pcsi|icn

(i) Tho lankoi nusl slop paynonl fion cuslonois accounl as soon s ho iocoivos lho
infoinalion lhal an insoIvoncy polilion has loon fiIod ly oi againsl lho cuslonoi.
!aynonls nado lofoio such lino aio pioloclod undoi lho Iav lul if lho lankoi
pays a choquo, ovon afloi loing avaio of lho insoIvoncy polilion, such paynonl
viII lo nado al his ovn iisk and ho shaII havo lo nako such anounl avaiIalIo lo
lho OfficiaI #ocoivoi.

17
(ii) Afloi an oidoi of adjudicalion has loon issuod, lho lankoi nusl cIoso lho accounl
and connunicalo lo lho OfficiaI #ocoivoi lho laIanco lo lho ciodil of lho
cuslonoi.

(iii) If lho cuslonois accounl shovs a dolil laIanco and lho lankoi iocoivos nonoy
fion oi on accounl of lho cuslonoi, lofoio lho iocoipl of a nolico iogaiding lho
fiIing of an insoIvoncy polilion againsl ho cuslonoi, lho lankoi can juslifialIy
ciodil lho nonoy lo lho accounl of lho cuslonoi vilh lho offocl lhal lho dolil
laIanco is ioducod. ul lho nonoy iocoivod afloi lho nolico of insoIvoncy polilion
cannol lo appiopiialod in such a vay and lho sano shaII loIong lo lho OfficiaI
#ocoivoi.

|nsc|tcncq cf a Par|ncr. Accoiding lo Soclion 4 (d) of lho Indian !ailnoiship Acl,
lho adjudicalion of a pailnoi as insoIvonl opoialos lo dissoIvo lho fiin unIoss
lhoio is an agioononl lo lho conliaiy. Tho shaio of lho insoIvonl pailnoi passos lo
lho OfficiaI #ocoivoi. Tho insoIvonl pailnoi cannol opoialo lho fiins accounl and
his oslalo shaII nol lo IialIo foi lho dolls incuiiod ly lho fiin afloi lho dalo of
insoIvoncy. Tho soIvonl pailnois nay, hovovoi, conlinuo lo opoialo lho fiins
accounl in oidoi lo vind up lho lusinoss of lho fiin. If a choquo signod ly lho
insoIvonl pailnoi is piosonlod foi paynonl, lho lankoi shouId gol lho
confiinalion of lho soIvonl pailnois.

If lho pailnoiship fiin is conlinuod and ils accounl shovs a dolil laIanco al lho
lino a pailnoi is docIaiod insoIvonl, lho lankoi shouId cIoso lho accounl of lho
fiin and opon a nov accounl in lho nano of lho ioconslilulod fiin so lhal lho
IialiIily of lho insoIvonl pailnoi lovaids lho lank nay lo doloininod.

(iv) |nsc|tcncq cf a ]cin| Accc:n|-nc|dcr. In caso ono of lho joinl accounl-hoIdois is
adjudicalod as insoIvonl, lho lankoi nusl slop paynonl fion lho joinl accounl,
locauso ils laIancos aio lo lo appoilionod lolvoon lho soIvonl accounl-hoIdoi
and lho OfficiaI #ocoivoi of lho insoIvonl ono. Monoy nay lo paid oilhoi lo lolh
joinlIy oi individuaIIy lo lho oxlonl of lhoii iospoclivo shaios. ul lofoio paying
nonoy lo lho OfficiaI #ocoivoi, aulhoiily fion lho soIvonl paily nusl lo lakon.

(v) |iq:ida|icn cf a ]cin| $|cc| Ccnpanq. Tho lankois aulhoiily lo pay choquos issuod
ly a joinl slock conpany is doloininod as soon as lho conpany goos inlo
Iiquidalion. Tho doalh oi insanily of a diiocloi oi an officiaI has no such offocl.
Accoiding lo lho Conpanios Acl, lho voIunlaiy vinding up of a conpany
connoncos fion lino a vinding up iosoIulion is passod and lho conpuIsoiy
vinding up connoncos fion lho dalo of lho piosonlalion of lho vinding up
polilion. Tho povois of lho diioclois coaso vilh offocl fion lho connoncononl
of vinding up. No choquo diavn ly lho diioclois shouId lo honouiod ly lho
lankoi, afloi ho has loon infoinod of lho connoncononl of vinding up. Tho
choquo diavn ly lho conpany in ils ovn favoui nay lo honouiod ly lho
lankoi. Tho accounl of lho conpany is lo lo conduclod ly lho Liquidaloi Ialoi
on.

4. nsanIty nf thc Custnmcr. Tho lankoi is nol lound lo honoui his cuslonois choquos on
iocoipl of nolico lhal lho Ialloi has locono alsoIuloIy insano oi of unsound nind. Tho
lankoi nusl havo confiinod infoinalion fion ioIialIo souicos aloul lho insanily of lho
cuslonoi lofoio ho iofusos paynonl on lhis lasis.

18
. NntIcc nf AssIgnmcnt nf CrcdIt Ba!ancc. Tho ciodil laIanco in lho accounl of a cuslonoi
nay lo assignod (oi liansfoiiod) ly hin lo anolhoi poison undoi Soclion 13O of lho
Tiansfoi of !iopoily Acl, 188. On iocoipl of a nolico of such assignnonl, lho lankoi
nusl slop paynonl of lho choquos diavn ly lho assignoi, as lho Ialloi coasos lo lo lho
ovnoi of such funds.

6. arnIshcc Ordcr. As aIioady nolod, a lankoi is lound lo conpIy vilh lho oidoi issuod
ly lho Couil iosliaining hin fion paying lho nonoy fion a cuslonois accounl. Ho nusl
iofuso paynonl of lho choquo piosonlod afloi lho iocoipl of a Cainishoo Oidoi oi any
olhoi oidoi of lho Couil allaching lho cuslonois nonoy.

7. Brcach nf Trust. If lho lankoi conos lo knov lhal lho cuslonoi, vho is opoialing a Tiusl
accounl, conlonpIalos lo uso lho funds of lho Tiusl accounl in lioach of lho liusl, lho
lankoi nusl slop paynonl of lho choquos diavn on such accounl.

8. DcfcctIvc tIt!c nf thc Party. If any poison piosonling a choquo has dofoclivo lilIo lo lho
choquo and lho lankoi is avaio of lhis facl, ho can iofuso lo honoui such a choquo
vilhoul any iisk locauso if ho nakos paynonl of lho choquo lo such poison, il viII nol lo
nado in good failh and lho paynonl viII nol lo doonod as paynonl in duo couiso. This
appIios lo loaioi choquos as voII, locauso if lho lankoi has ioason lo loIiovo lhal lho
piosonloi nay/nay nol lo lho piopoi poison lo iocoivo paynonl, ho nay insisl on lho
idonlificalion of lho piosonloi of lho choquo, so lhal lho paynonl is doonod as paynonl
in duo couiso.

9. ank viII lo juslifiod in iofusing paynonl of lho choquos in lho foIIoving ciicunslancos :

(i) if lho choquo is a posl-dalod choquo oi a slaIo choquo,
(ii) if lho choquo is diavn on anolhoi lianch of lho sano lank,
(iii) if lho choquo conlains an appaionl naloiiaI aIloialion vhich is nol piopoiIy
aulhonlicalod ly lho diavoi.
(iv) If lho signaluio of lho diavoi is a foigod ono oi doos nol laIIy vilh his
spocinon signaluio.
(v) If lho funds of lho cuslonoi in his accounl aio nol sufficionl oi aio nol
piopoiIy appIicalIo lo lho paynonl of such a choquo. Ioi oxanpIo, if a
lankoi oxoicisos his iighl of sol-off foi iocovoiing a Ioan, lho funds in lho
cuslonois accounl nay lo insufficionl lo honoui lho choquo. ul il is
nocossaiy lhal lho lankoi shouId givo piopoi nolico of his aclion lo lho
cuslonoi lofoio ho slops paynonl of choquo. If lhoio aio sufficionl funds in
anolhoi accounl of lho sano cuslonoi, lankoi hinsoIf cannol liansfoi funds
fion ono accounl lo anolhoi and can dishonoui lho choquo foi vanl of
funds.


5uItab!c rcp!Ics tn dIshnnnurcd chcqucs

Whon a lankoi dishonouis a choquo, foi vhalovoi ioason, ho has lo givo a ioason foi
dishonouiing lho choquo. AII lanks havo piinlod sIips conlaining vaiious ioasons foi
dishonouiing a choquo. Tho ioIovanl ioason in a givon caso is lick-naikod (b) on lho sIip and lho
sIip is oncIosod vilh lho choquo. This sIip is aIso caIIod #oluin Mono and viII noinaIIy cilo
ioasons such as:

19
Rcfcr |c draucr (#/D). This loin has loon usod in lho pasl vhoio lho lankoi did nol vanl lo
indicalo any ioason foi lho dishonoui of lho choquo and asks lho payoo lo ask lho diavoi lho
ioason foi dishonoui and/oi ioquiio hin lo pay. Tho loin has loon inpIiodIy inloipiolod lo
noan insufficioncy of funds in lho diavois accounl. ul afloi lho insoilion of Soclion 138 in lho
NogolialIo Insliunonls Acl (vhich Iays dovn lho ciininaI IialiIily of lho diavoi in caso of
dishonoui of choquo locauso of insufficioncy of funds), Couils havo hoId lhal lho loin 'iofoi lo
diavoi doos nol indicalo insufficioncy of funds. Tho Indian anks Associalion has ioconlIy
advisod lho lanks lo assign lho ioason funds insufficionl in appiopiialo casos insload of #ofoi
lo Diavoi. Tho Ialloi loin lhoiofoio, inpIios any unspocifiod ioason, nol nocossaiiIy insufficioncy
of funds.

Nc| arrangcd fcr . This phiaso is usod vhon lho paynonl of lho choquo vouId iosuIl in an
ovoidiafl vhich has nol loon appiovod oi lho anounl of ovoidiafl viII oxcood lho appiovod
Iinil.




A CO!Y OI A #LTU#N MLMO



OTA MAHNDRA BAN TD.
(HLAD OIIICL : O1, AKTHAWA#, NA#IMAN !OINT, MUMAI 4OOO1)

M L M O # A N D U M

Choquo No. .................. foi #s. ....... is ioluinod foi ioason
No. ........

1. #ofoi lo diavoi.
. Nol aiiangod foi
3. Lffocl nol yol cIoaiod, pIoaso piosonl again.
4. Lxcoods aiiangononl.
. IuII covoi nol iocoivod.
6. !aynonl sloppod ly diavoi.
7. Insufficionl funds.
8. No accounl/Accounl cIosod/Accounl liansfoiiod lo ......... offico.
9. ......... !ayoos nano/ondoisononl inconpIolo/ioquiiod.
1O. ..........!ayoos ondoisononl iIIogilIo/iiioguIai
11. Lndoisononl ioquiios anks guaianloo/confiinalion.
1. Diavois signaluio inconpIolo/diffois/ioquiiod.
13. Choquo is nuliIalod/posl-dalod/oul of dalo/vilhoul dalo.
14. Anounl in voids and figuios diffoi.
1. Choquo ciossod lo lvo anks/nusl lo piosonlod lhiough a lank/spociaIIy ciossod lo
................ ank.
16. No advico.
17. Choquo shouId nol conlain oxlianoous nalloi.
18. CIoaiing slanp ioquiiod lo lo cancoIIod on lho lack/fionl.


19. anks disluisononl ioquiiod/iiioguIai/inconpIolo.

O
O. Choquo diavn on oui .......offico.
1. AIloialion in ............ #oquiios diavois confiinalion.
. ................
3. ................

Dalod. .....

Aulhoiizod Signaloiy


|ffcc|s nc| c|carcd, p|casc prcscn| again. Whon lho diavoi has sonl choquos/diafls, olc., foi
coIIoclion lul lho sano havo nol yol loon ioaIizod and lho laIanco in lho diavois accounl is
insufficionl lo nool lho choquo, lhis ioason is givon foi dishonouiing lho choquo. anks ciodil lho
anounl of such choquos, liIIs, diafl, olc., lo lho accounl of lho cuslonoi on lhoii ioaIizalion fion
lho paying lankoi/accoploi. Thoioafloi, lho cuslonoi is aulhoiizod lo diav upon such anounl.
Lvon if an onliy of such anounl is nado ly lho lank on iocoipl of such choquo, olc., sonl foi
coIIoclion, iuIos of lanks do nol poinil lho cuslonoi lo diav upon unliI ils acluaI ioaIizalion. Ioi
oxanpIo, lho !unjal NalionaI ank has piosciilod lhal -

Choquos and diafls, olc., londoiod foi coIIoclion and ciodil of an accounl shouId nol lo diavn
againsl unliI lho sano havo loon acluaIIy ioaIizod. Tho ank iosoivos lho iighl lo iofuso paynonl
againsl uncIoaiod offocls ovon lhough ciodil lhoioof nay havo loon affoidod in lho !ass ook.

Hovovoi, lho ank has poinillod lhal ils nanagoi has disciolion lo nako paynonl againsl
uncIoaiod offocls in oxcoplionaI casos vilhoul piojudico lo lho anks iighl lo dolil lho
consliluonls accounl in lho ovonl of dishonoui of such choquos, diafls, olc.

anks aIso add lho voids pIoaso piosonl again. Thoso voids aio addod lo indicalo lhal funds
aio oxpoclod lo lo ciodilod lo lho diavois accounl soon and honco piolocl lho iopulalion of lho
diavoi. ul lho lankoi quoling such voids doos nol loai any iosponsiliIily foi honouiing lho
sano choquo vhon piosonlod again. Il is possilIo lhal in lho noanvhiIo, funds nighl nol havo
loon iocoivod ly lho lankoi, oi anolhoi choquo issuod ly lho diavoi nighl havo loon piosonlod
and honouiod oul of lho funds lhus iocoivod, Ioaving insufficionl funds/no funds foi honouiing
lho choquo ioluinod oaiIioi. Tho lankoi cannol dishonoui lho socond choquo noioIy locauso ho
has givon lho ionaik piosonl again on a choquo piosonlod oaiIioi.

|xcccds arrangcncn|s. Whon lho anounl of ovoidiafl vouId oxcood lho appiovod Iinil as a iosuIl
of paynonl of lho choquo, lho iopIy oxcoods aiiangononl is piofoiiod.

Bankcr's !IabI!Ity In casc hIs rcp!y Is InapprnprIatc. Tho lankoi nusl lako ulnosl caio in giving
a suilalIo iopIy lo a dishonouiod choquo. Ho nusl givo a iopIy vhich is nosl appiopiialo in lho
ciicunslancos of lho caso. If lho lankoi slalos a ioason vhich is nol appiopiialo oi vhich injuios
lho iopulalion of lho diavoi unnocossaiiIy, lho diavoi is onlilIod lo cIain danagos fion lho
lankoi.

LxanpIos

(1) !N has appiovod lo X an ovoidiafl lo lho oxlonl of #s.4O,OOO and lho Ialloi has aIioady
ovoidiavn lo lho oxlonl of #s.3,OOO, X diavs a choquo foi #s.7,OOO. If lho choquo is paid


lho anounl of ovoidiafl viII go up lo #s.4,OOO (#s.3,OOO + #s.7,OOO) vhich viII lo

1
highoi lhan lho appiovod anounl (#s.4O,OOO). Tho lankoi nusl dishonoui lho choquo
and ioluin il vilh lho ionaik 'oxcoods aiiangononl vhich is lho nosl appiopiialo iopIy
in lhis caso locauso lho ovoidiafl aiiangononl doos nol poinil lho paynonl of lho
choquo. Olhoi iopIios such as 'funds oxpoclod oi 'offocls nol cIoaiod, piosonl again aio
nol appIicalIo locauso lho lankoi has nol iocoivod any choquo, olc., foi coIIoclion. #ofoi
lo diavoi inpIios insufficioncy of funds.

() A insliucls his lank SI lo cIoso his accounl and liansfoi lho laIanco lo anolhoi lianch. If
sulsoquonl lo lho liansfoi of lho laIanco, a choquo diavn ly A is piosonlod, lho lankoi
nusl ioluin il vilh lho ionaik Accounl liansfoiiod lo .... Offico. On lho olhoi hand,
if lho lank ioluins il vilh lho ionaik 'iofoi lo diavoi il viII inpIy insufficioncy of funds
in lho diavois accounl vhich is nol lho caso. Honco lho lankoi shaII lo IialIo foi lho
danago causod lo lho diavois iopulalion.