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This document discusses key aspects of cheques under Indian law, including:
1. The definition and characteristics of cheques as defined in the Bills of Exchange Act 1949.
2. The types and objectives of crossing cheques, such as general and special crossing, to minimize fraud and restrict negotiability.
3. Protections provided to paying and collecting bankers when honoring cheques, including for alterations, unauthorized signatures, and negligence.
This document discusses key aspects of cheques under Indian law, including:
1. The definition and characteristics of cheques as defined in the Bills of Exchange Act 1949.
2. The types and objectives of crossing cheques, such as general and special crossing, to minimize fraud and restrict negotiability.
3. Protections provided to paying and collecting bankers when honoring cheques, including for alterations, unauthorized signatures, and negligence.
This document discusses key aspects of cheques under Indian law, including:
1. The definition and characteristics of cheques as defined in the Bills of Exchange Act 1949.
2. The types and objectives of crossing cheques, such as general and special crossing, to minimize fraud and restrict negotiability.
3. Protections provided to paying and collecting bankers when honoring cheques, including for alterations, unauthorized signatures, and negligence.
• CROSSING OF CHEQUES, • ALTERATION ON A CHEQUE AND • PROTECTION OF COLLECTING AND PAYING BANKER. • The Act governing CHEQUES is the BILL OF EXCHANGE ACT 1949 (revised 1978) • S 73 of the Act defines cheques as “bill of exchange drawn on a banker and payable on demand”. • The combination of S3 & 72 of the Act provides the following CHARACTERISTICS:- 1. Its an unconditional order in writing 2. Signed by the drawer 3. Drawn on a banker 4. Orders bank to pay sum certain in money(drawee) 5. Drawn in favour of a specified person(payee) Crossing of Cheques • A drawer crosses a cheque to make it difficult for a thief to obtain payment across a counter. • The OBJECTIVE is to minimise fraud by giving instructions as to the manner of payment. These instructions are to the PAYING BANKER but a crossing a crossing ‘Account Payee’ or A/c payee is an instruction to the collecting banker. • The PAYING BANKER is the bank on whom the cheque is drawn. The COLLECTING BANKER is the bank which collects payment for its customer who pays in the cheque for the credit of his account. He could be the payee or a holder in due course. • S 78 provides crossing is a material part of the cheque and cannot be altered by anyone except under s77. TYPES OF CROSSING • S76 - GENERAL CROSSING consists of two parallel transverse lines drawn across the face of the cheque. The EFFECT a paying banker can only pay the amount of the cheque to a collecting banker. Cannot pay cash across the counter. Consequently it acts as a “hindrance” for anyone who obtain it wrongfully. S76(2)- SPECIAL CROSSING IS when a name of the banker is written between the parallel transverse lines or it is written across the face of the cheque without the lines. The EFFECT is that a paying banker must pay the amount of the cheque only to the collecting banker named in the crossing. Negotiability is restricted . “ Not Negotiable crossing” • The word “not negotiable” may be added to a crossing of a cheque. The EFFECT IS under S 81.It means the cheque loses the character of negotiability but remains transferable. In other words it can be transferred but the person taking it however honest and for value cannot get a better title. (He will not get more or less on what is written on the cheque). Case: Wilson and Meeson v Pickering (P357) • “ACCOUNT Payee only” – the object of such an addition is to minimise the chances of fraud as these words operate as notice to the collecting that only the account of the payee is to be credited. ALTERATIONS ON A CHEQUE • S 64 (1) &(2) • Apparent & Non Apparent Alterations
PROTECTION OF THE PAYING BANKER
• Payment in due Course – S59 & S90 • Forged or Unauthorised Indorsement – S 60 & 95. • No Indorsement or Irregular Indorsement- S82 • Crossed cheques – S 79 & 80 PROTECTION OF COLLECTING BANKER • A COLLECTING BANKER may be liable a) to his customer for breach of contract b) To the true owner for wrongful conversion Protection is in S 85. • Collecting Banker may be negligent…….P368 TERMINATION OF BANKERS AUTHORITY TO PAY A BANKER is under a duty to honour his customer’s cheques up to the amount of his credit balance or any agreed overdraft.