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Paying Banker 💸

Definition: The banker on whom the cheque is drawn (the drawee bank) and who is liable to pay the amount.

Example:

  • You have account in SBI.
  • You issue a cheque to Mr. X.
  • SBI is the Paying Banker.

Duties of Paying Banker 📋

  1. Duty to Pay: Must pay cheque if funds are sufficient and cheque is in order (Section 31).
  2. Duty to Verify:
    • Signature of drawer (Match with specimen).
    • Date (Not post-dated or stale).
    • Words & Figures match.
    • Material Alterations (Any cutting/overwriting signed).
    • Stop Payment instructions.

Statutory Protection to Paying Banker 🛡️

The NI Act gives protection to Paying Banker because he cannot verify everything (like genuineness of payee's signature).

1. For Order Cheques (Section 85(1))

Banker is protected if he pays in Due Course even if the payee's endorsement is forged.

  • Condition: The endorsement must look regular. Banker is not expected to know payee's signature.

2. For Bearer Cheques (Section 85(2))

Banker is protected if he pays to the bearer (person holding it), even if the bearer stole it.

  • Rule: "Once a bearer, always a bearer".

3. For Crossed Cheques (Section 128)

Banker is protected if he pays a crossed cheque to a banker (not cash at counter).

  • If he pays cash at counter for crossed cheque → Liable to true owner.

Payment in Due Course (Section 10) ✅

To get protection, payment must be "In Due Course". Conditions:

  1. In accordance with apparent tenor: Looks genuine.
  2. In good faith: Honest payment.
  3. Without negligence: Checked balance, signature, date.
  4. To person in possession: Paid to holder.
  5. Under circumstances not affording ground for suspicion.

When Banker Loses Protection ❌

Banker is LIABLE if:

  1. Drawer's Signature Forged: Banker MUST know customer's signature. If forged signature paid → Bank must refund money to customer.
  2. Material Alteration: If amount changed (₹1000 to ₹10000) and visible, but bank still pays.
  3. Stop Payment Ignored: Customer said stop, bank paid.
  4. Crossed Cheque paid Cash: Violation of crossing.

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 5

1. Paying Banker is the bank:

Where payee has account
On whom cheque is drawn
RBI
Clearing House

💡 Final Wisdom: "Paying Banker walks a tightrope. Pay wrong person? Liable. Refuse valid cheque? Liable. Caution is key!" ⚖️

Next up: Collecting Banker - The agent who collects money! 🕵️‍♂️

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