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Bankers Study Material:N I Act:

Payment of Cheque

By: Ranjan,      Update:08 Sep 2010

Payment of Cheque

It is statutory obligation of bank to honour a cheque issued by the customer and it is defined in the section 31 of N.I. Act. The details of provisions are:  

. Obligation to pay: U/s 31 bank under statutory obligation to honour cheque issued by the customer where (a) there are sufficient funds (b) funds are meant for payment of the cheque and (c) there is proper demand to make the payment.

. Payment not to be made: Payment cannot be made in case of (a) death, insolvency, insanity of customer OR insolvency of partner or firm OR liquidation of company (b) stop payment (c) receipt of garnishee/attachment order (d) post dated and (e) stale cheque.

. Payment Can be made in case of death of agent (authorized signatory of a company, agent appointed by a customer etc.) Where cheque is not dated prior to date of authority to the agent and subsequent to date of date.  

 

Payment in Due Course

 

Banks are protected under section 10 of NI Act if payment made of cheque in due course. A payment considered in due course if:

As per Sec 10, a payment would be considered in due course if:

a: Payment as per apparent tenor of instrument.

b: Payment in good faith and without negligence

c: Payment to person in possession of instrument

d: Payment under circumstances which do not afford a reasonable group for believing that he is not entitled to receive payment of the amount mentioned therein

e: Payment must  be made in money only.


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