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Paying Banker and Collecting Banker

Precautions to be Taken by a Paying Banker


Meaning of a Paying Banker Precautions: Nature of the Cheque, Branch,

Reference to the Account, Working Hours, Unmutilated, Dating, Amount of the Cheque, Material Alteration, Balance in the Account, Signature of the Drawer, Printed Forms, Regularity of Endorsement

Collecting Banker
Meaning Holder for Value Agent of the customer

Rights of a collecting banker as a holder for value


Liabilities of a banker as a holder for value

Duties of a Collecting Banker


Prompt presentation Prompt Credit to Customers Account Prompt Notice of Dishonour

GENERAL DUTIES: Proper opening, collection for customer only, regularity of endorsement,title of the customer, multiple accounts, crossing, no suspicious circumstances

Cheque
The negotiable instruments acts,2002(w.e.f 06.02.2003) defines a cheque as a bill of exchange drawn on a specifics banker and not expressed to be payable otherwise than on demand and includes an electronic image of a truncated cheque and a cheque in the electronic form A cheques in the electronic form means a cheques which contain the exact mirror image of a paper cheque, written & signed in a secure system ensuring the minimum safety standards with the use of digital signature and asymmetric system. A truncated cheques mean a cheques which is truncated during course of a clearing cycle either by the clearing house or the bank whether paying or receiving payment, immediately on generation of an electronic image for tramisson, substituting further physical movement of the cheques in writing.

Crossing of a cheque
only a cheque can be crossed. It is a direction to the banker by the drawer not to make

payment over the counter. Payment shall be made only through a bank to paying banker and a collecting banker. In case of crossing there is always a paying banker and collecting banker. Paying banker is not liable to see to which account it is being credit to except on case of not negotiable crossing. He should only see that it is through a bank. The liability is on the collection banker to ensure about the account to be credited.

Types of Crossing
a) General Crossing:- It refer to drawing two parallel transverse lines

with or without the words A/C payee, And Co., Not Negotiable. The paying banker is not liable to see as to which A/C the amount is being credited to, except on case of not negotiable crossing. A cheques which contains not negotiable crossing is still transferable; however there is no transfer of better title. Similarly , Holder in due course(HIDC) will not get better title than the person from whom he received if the cheques is crossed not negotiable. *Account payee crossing is a direction to the banker to credit only to the account of payee/ endorse . The cheques remain remains legally negotiable but account payee crossing hinders the negotiability of the cheques in practice.

B) Special Crossing:- Name of a particular banker is mentioned with or without lines. The paying banker releases payment only if it is presented through the specified collecting banker.

Dishonour of a Cheques/Circumstances under which the a banker can refuse for making payment
1) Instruction by customer for stop payment. 2) In case of receipt of notice of insolvency, insanity or 3) 4) 5) 6) 7) 8) 9) 10)

death of the customer . In case of suspicion as to title. Stale cheques. Signature not tallying or not signed, if signed by one in case of joint account. Material Alteration. Account is close. Post dated cheques. Mutilated cheques. Insufficient of Fund or Bouncing of a cheques.

Bouncing of cheques:
It refer to Dishonour of a cheques due to insufficient funds. Sec 138 to

142 provide for criminal penalties if cheque is dishonored for insufficient funds. Dishonour for insufficiency of funds include stop payment, accunt close request to payee not to present tilll futher inforation ETC. It must be toward a legally enforcement debt or liability. Notice must be given to drawer demanding payment within time limit. Notice must be given within 30 days on receipt of information of Dishonour to drawer demanding payment. Drawer is liable only if he fail to make payment within in 15days from date of receipt of notice. Payee should have made a complaint within 1month of default. Court may waive or condone the delay. Imprisonment upto two years or with fine which may extend to twice the amount of the cheques or both. If the person committing an offence is a company or a person incharge of the company, then he as well as the company shall be deemed guilty of offence.

30DAYs
Dishonour

15 Days
Notice of Dishonour

1 Month

Liability to pay Complaint(FIR)

*In case of wrongful Dishonour, i.e. the Drawer had sufficient funds to make payment but the bank fails to honour, then the Drawer is discharged the from liability.

Holder in Due Course (Sec 9)


Consideration Possessor of bearer cheque or payee or endorsee of

order cheque Before the amount became payable No reason to suspect the title of the endorser Privilege: Good title, claim on parties, transfer good title

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