PAYMENT OF CHEQUES

• Payment in due course:

• Section 10 of the negotiable instruments Act
1881
• ”Payment in due course means payment in
accordance with the apparent tenor of the
instrument in good faith and with out negligence
to any person in possession thereof under
circumstances which do not afford a reasonable
ground of believing that he is not entitled to
receive payment of amount therein mentioned”
 PAYMENT OF CHEQUES
• The responsibility of the paying banker as
regards payment or non payment of cheque.
• If the paying banker honours a cheque which
should have been dishonored the paying banker
may loose the money.
• If the paying banker dishonors a cheque which
should have been paid he is liable to pay
damages for wrongful dishonor.
• The banker to whom the order to pay a cheque
is addressed is called the paying banker.
 PAYMENT OF CHEQUES
• It is contractual obligation of a banker to honour his
customers cheques if the following essentials are
fulfilled.
• Cheque should be in proper form:
• The customer will draw a cheque on such a form which
is supplied by the banker. The customer/holder cannot
change the form of the cheque and cannot make it
conditional.
• 2. Cheque should not be crossed:
• A crossed cheque cannot be honored over the counter to
any person but a collecting banker.
•
 PAYMENT OF CHEQUES
• 3. Cheque should be drawn on a particular branch.
• Cheque should be presented for payment on that
particular branch where the account is being maintained.
Where on line payment facility is available the cheque
may be presented at any other branch providing such
facility.
• 4. Cheque should not be mutilated.
• When the cheque is torn, worn-out or does not give
sufficient evidence of the customer’s intention it is called
a mutilated cheque. The banker will not pay such
cheques where facts are destroyed due to mutilation.
•
 PAYMENT OF CHEQUES
• 5. No unauthorized material alteration.
• Section 3(f) of negotiable instrument Act1881 defines that “materials
alteration in relation to a promissory note, bill of exchange or cheque
includes any alteration of the date, the sum payable the time of
payment the place of payment” Crossing is also a materials
part of the cheque. Section 87 says that any alteration of a
negotiable instrument renders the same void.
• Therefore a banker will never pay a cheque bearing apparent
material alterations without authentication of the drawer.
• 6. Funds must be sufficient and available.
• The obligation of the banker to pay cheque drawn on him by his
customer is suspect to the condition that there are in his hand funds
of that customer sufficient and available for the purpose or that
customer has the right to over - draw upto a given limit not yet
reached.
 PAYMENT OF CHEQUES
• 7. Cheque should not be post dated or stale.
• Post dated cheques are those which are presented for
payment before the due date and a stale cheque is more
than 6 months old form the date of issue.
• Non payment or post dated cheque by a banker is
justified for the following reasons.
• A post dated cheque is not a cheque payable on demand
and it will not be a payment in due course.
• The customer may stop the payment before the due date
of the cheque.
• The customer may become insolvent, insane or he may
die before the due date of payment
 PAYMENT OF CHEQUES
• 8. Cheque should be presented during banking hours.
• A banker must honour cheques drawn on him if they are
presented on a working day and during the banking hours.
• 9. No legal bar prohibiting payment.
• The banker should sec that none of the following clauses is
applicable on the cheque presented for payment
• Payment stopped by the drawer
• Defective title of the payee.
• Notice of insolvency insanity or death of the drawer.
• Notice of assignment of the available credit balance.
• Notice of garnishee injunction or attachment of account by the
court.