Collecting Banker 🕵️‍♂️

Definition: The banker who collects the amount of a cheque from the Paying Banker on behalf of his customer.

Example:

• Mr. X gives you a cheque of SBI.
• You deposit it in your account in HDFC Bank.
• HDFC Bank collects money from SBI.
• HDFC Bank is the Collecting Banker.

Capacity of Collecting Banker 🎭

1. As Holder for Value

• If bank pays you money before clearing (e.g., Immediate Credit / Discounting).
• Bank becomes owner of cheque.
• If cheque bounces, bank can sue drawer in its own name.

2. As Agent for Collection (Usual Role)

• Bank collects as your agent.
• Credits your account only after realization.
• No risk for bank (if cheque bounces, bank just returns it to you).

Statutory Protection (Section 131) 🛡️

Risk: What if you stole a crossed cheque, forged endorsement, and deposited it in HDFC? HDFC collects money and gives to you. True owner sues HDFC for Conversion (wrongful interference with property).

Section 131 protects Collecting Banker from liability of Conversion if:

1. Cheque was Crossed: Must be crossed before reaching bank.
2. Collection for Customer: Not for stranger.
3. In Good Faith: Honestly.
4. Without Negligence: Most important!

What is Negligence? ⚠️

Bank is negligent if it fails to verify:

1. KYC: Opening account without proper KYC.
2. Account Payee Crossing: Crediting "Account Payee" cheque to wrong person.
3. Third Party Cheques: Crediting cheque drawn by company to director's personal account (Suspicious).
4. High Value: Sudden huge cheque in small account.

If Negligent: NO PROTECTION. Bank must pay true owner!

Duties of Collecting Banker 📋

1. Present within reasonable time: Send for clearing immediately (usually next day).
2. Notice of Dishonour: If cheque bounces, inform customer immediately.
3. Remit Proceeds: Credit customer's account promptly on realization.

Quiz Time! 🎯

💡 Final Wisdom: "Collecting Banker is the gateway. If he is negligent (lets thief deposit stolen cheque), he pays the price!" 🚪💸

Next up: Dishonour of Cheques - When the bank says NO! 🛑