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Thread: "A cheque is a bill of exchange drawn on a specified banker and not expressed to be

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    Word Icon 35px Jpg.ashx "A cheque is a bill of exchange drawn on a specified banker and not expressed to be

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    Q. When is a banker justified in dishonouring a cheque and when a bank is bound to dishonour the cheque. (2001)(2002)(2003)
    1. Introduction:

    A banker business consists receiving money from or account of a customer and to repay the same on demand or when drawn by a cheque. negotiable instruments act lays down the circumstances when a banker is justified in dishonouring a cheque and when a bank is bound to dishonour the cheque.
    Definition of bank:
    The word bank is Italian it is derived from three words. "Bancus" "Banque" and "Benchi" so it is a financial institution which receives deposit and advances loans.
    2. Definition of banker:
    According to Sec 3(b) "banker means a person transacting the business of accepting, for the purpose of lending or investment, of deposits of money from the public repable on demand or otherwise, and withdrawal by the cheque, draft, order or otherwise and includes any post office saving bank.
    3. Definition of cheque:
    According to Sec 6.
    "A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand."
    4. Essentials of a cheque:
    (i) It must be in writing.
    (ii) It must contain unconditional order.
    (iii) It must be signed by the person giving it.
    (iv) It must be payable on demand.
    (v) The sum of cheque must be certain money.
    (vi) It must be payable to specified person or bearer.
    5. Types of cheques:
    Following are various types of cheques.
    (i) Order cheque:
    It is a cheque made payable to a person or firm on order. the payee must endorse it unless he pays it into his own bank account. if the cheque is to be enchashed by someone, else, it will require endorsement.
    (ii) Bearer cheque:
    It is a cheque which bearer a right to get payment without any special formality from the bank on whom it is drawn.
    (iii) Crossed cheque:
    It is a cheque which is not encashable at a bank but the payee deposits it in to his bank account and gets credit for the cheque.
    6. Definition of customer:
    The word customer of the bank has not been defined in the negotiable instruments act.

    In order to plake a person a customer of a bank it is essential that there must be some sort of account, either a deposit or a current account or some similar relation. a person who has not any account with the bank is not the customer of the bank.
    7. Cases in which a banker is justified in dishonouring cheques:
    Following are the cases when a banker is justified in dishonouring cheques.
    (i) Post dated:
    When cheque is postdated presented for payment before its ostenible date.
    (ii) Insufficient balance:
    If balance of the drawer of cheque is insufficient.
    (iii) Funds are not available:
    When the funds of the customer are set aside for some special purpose and not available for the payment.
    (iv) Cheque not properly presented:
    If cheques is improperly presented e. g. presented after banking hours.
    (v) Cheque not presented with in Reasonable time:
    If cheque is not properly presented with in reasonable time. it is presented after six months.
    (vi) Forgery of the drawer's signature:
    If the bankers doubtful about the signature of the drawer.
    (vii) Difference in words and figure:
    Where amount of the cheque is different in words and figure.
    (viii) Mutilated cheque:
    A banker is justified in refusing payment of mutilate cheque.
    (ix) Were banker has a general lien:
    If banker has a general lien on the funds of customer.
    8. When bank is bound to dishonour the cheques:
    Cheque must be dishonoured in the following circumstance.
    I. Countermand of payment:
    The drawer of a cheque can stop the payment of a cheque by informing the banker either or telephone or message. the banker is bound to comply with such instructions.
    II. Insolvency:
    If customers of a banker becomes insolvent. banker is bound to dishonour the cheque.
    III. Unstamped cheques:
    banker is bound to refuse the unstamped cheques where such stamping is required by law.
    IV. Notice of customer's death:
    The banker will terminate the payment of a cheque if it receives the notice of customer's death.
    V. Defective title of the party:
    When bank becomes aware of the defective of the defective title of the party, the cheque must be dishonoured.
    VI. Notice of assignment:
    When a customer assigns the money of his account to some other person or for any other particular thing and sends a notice to the bank, cheque must be dishonoured.
    VII. Insanity of customer:
    When bank, receives the notice that customer has become insane, the cheque must be dischonoured.
    VIII. Loss of cheque:
    When the customer has informed the bank about the loss of cheque the bank must dishonour the cheque.
    IX. Garnishee order:
    When balance of the customer is attached by the order of the court. such order of the court is called garnishee order. the bank is bound so dishonour the cheque.
    X. Irregular cheque:
    If the endorsement in the cheque is irregular, the cheque must be dishonured by the bank.
    XI. Closing of account:
    If account of the customer has been closed, the cheque must be dishonoured by the bank.
    XII. Torn or cancelled cheque:
    If the cheque is torn or cancelled, bank is bound to dishonour the cheque.
    9. Conclusion:
    To conclude I can say that, customer is a person of a bank who has account with a bank. cheques drawn by the customer must be honoured by the bank. in default of such payment the bank must compensate the drawer for any loss. however bankers is bound to dishonour the cheques if not drawn according to the rules and regulations.

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