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Q 01.

Cheque is paid even though the date of

cheque may be prior to the date of opening of the account or issuance of the cheque dated prior to date of issue of cheque book.
1.

Ans.

Banks cannot make payment of post-dated

cheques but the cheques issued prior to date of opening of account or prior to issue of cheque book (called antedated cheques), can be paid till they become stale. On making payment of such cheques, the drawer, who has issued the cheque cannot claim that the cheque was not issued by him, as u/s 118 of NI Act, the date on a cheque is considered to be date on which the cheque is issued. Banks get valid discharge on payment of such cheques. Q 02. In deceased deposit accounts, while making

payment, the legal heirs are also required to sign a money receipt in addition to signing on the back side of bankers cheque / pay-order.
2.

Ans.

In deceased depositors accounts, the banks

make payment to the legal heirs on the basis of indemnity furnished by them to the bank and after observing other procedural formalities. The signatures on the back of the instrument represent the discharge of the instrument by the legal heirs or their representative but by obtaining the money receipt, bank gets proper discharge evidencing full and final payment of the claim of the legal heirs against the bank. Q 03. Crossing of a cheque by bearer, payee, holder

or holder in due course is considered valid. Why?

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3.

Ans.

Crossing of a cheque is done with a view to

make the payment through cheque, more secure, as after crossing, the payment is required to be made through a bank account only. Sections 8 and 9 of NI Act, vest powers in the holder, holder in due course, endorse or payee (also deemed Holder in due course), to cross the cheque, which is not considered a material alteration. By crossing, the mandate of the drawer is not changed to his disadvantage. Q 04. While issuing a duplicate fixed deposit

receipt, as indemnity bond is not insisted upon by banks, but they get such bond executed while issuing a duplicate draft. Why?
4.

Ans.

Fixed deposit is non-transferable and the payment

is to be obtained invariably by the account holder who is properly introduced and identified. The bank draft on the other hand is a negotiable instrument and a third party, called payee is also involved. Hence the risk involved is more in respect of a bank draft, which is covered by getting an indemnity bond issued. Q 05. instruments dishonour.
5.

Banks are required to return the dishonoured within 24 hours of their receipt after

Ans.

Banks act as agents of the customers in case

of collection of various kinds of negotiable instruments and are supposed to inform their customers, about dishonour within a of reasonable Goiporia period. As and per RBI recommendations Committee

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directions, such reasonable period has been fixed as 24 hours. This heirs the customer to take suitable action including u/s 138 of Negotiable Instrument Act for recovery of the due amount. This is part of providing better customer service. Q 06. saving bank An order cheque for Rs.10000, drawn by a customer, in favour of Dipankar Sen is

presented for payment by a person across the counter. You find that the cheque has been endorsed twice and the last signatures appear to be of one Mr. Shubhrendu Mandal. When he is told that payment can be made to the endorsee Mr. Shubhrendu Mandal only, Mr. Nupam Ghosh, the presenter writes above the signatures of Mr. Shubhrendu Mandal the words pay to Nupam Ghosh and insist on payment. How would you deal with situation?
6.

Ans.

In this case, Mr. Nupam Ghosh has claimed himself

to be the holder in due course and a holder, by putting his own name above the signatures of the last endorser, can convert a blank endorsement into an endorsement in full, as per the provisions of Section 49 of Negotiable Instruments Act, 1881. By making the payment to Mr. Nupam Ghosh in this case, the paying bank would get discharge provided the payment is made after proper identification. Q 07. You are handling the saving deposit counter

of your branch and in the account of Ms. Alivia Sengupta, you receive a cheque for payment through clearing which is originally payable to Mr. Debarshi but endorsed in favour of Mr. Rohan. Incidentally Mr. Debarshi has put his thumb impression instead of signature while endorsing in favour of

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Mr. Rohan. Collecting bank has confirmed the endorsement. What would you do with the cheque?
7.

Ans.

An endorsement u/s 15 of NI Act means signing for so as the constitute the transferee for

the purpose of transfer of the property in a negotiable instrument consideration, the owner, with better title. In this case, though the element of signatures appears to be missing but putting in of thumb impression by the payee also amounts to signing. Hence the endorsement by way of thumb impression will be considered proper endorsement provided it is duly witnessed. Since the collecting bank has confirmed the endorsement, the paying bank can pay the instrument. Q 08. You receive a cheque of Rs.5500 drawn on

current account in the name of Mr. Soumya, for payment across the counter by one Mr. Avishek, an advocate. The cheque is payable to Mr. Richik and endorsed by him in blank. You insist on identification of Mr. Avishek but he insists that you cannot demand identification because of endorsement in blank which makes the instrument bearer. What would you do with the cheque?
8.

Ans.

Under Section 54 of Negotiable Instrument Act, a If the bank apprehends the possibility of

cheque endorsed in blank, acquires the features of a bearer instrument. misplacement / loss of the instrument by Mr. Richik and it has to make payment to a 3rd party, it can ask for identification of the person asking for payment. In case of bearer instrument, the payment can be made to bearer, but where the circumstances so warrant, bank has a duty to follow the

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conditions stipulated u/s 10 of NI Act to ensure payment in due course. Q 09. Your branch gets a cheque for payment in

which the amount in words is written as Rs. One lakh and forty thousand and in figures it is stated as Rs.1400.00. The bank makes the payment of the amount written in words. When customer gets information about this, he claims that he never intended to make the payment due to which he had written the amount. In words and figures, differently and gave an ambiguous instruction. He asks for restoration of the amount. How would you handle the position?
9.

Ans.

U/s 31 of NI Act, a bank is under obligation to make

payment of the cheques issued by the customer, provided they are properly drawn and there is sufficient balance to make the payment. In this case, the mandate of the customer is not clear, so far amount is concerned. Going by this, the bank should not have made the payment. But Section 18 of the Act states that in case the amount in words and figures differs, the amount stated in words is to be paid. By paying the amount written in words, the bank will be considered to have complied tenable. Q 10. Ms Inderjit Kaur, a saving bank account holder Bank made payment of with the direction of the customer. Hence, customers claim that amount should be restored, is not

at Golf Club branch of West

Rs.10000 by way of a cheque, for purchase of a computer, to M/s Computer Point. Since there was not enough balance in the account at the time of presentation of cheque, Ms. Kaur made a written request to the payee of the cheque,

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not to present the cheque. But M/s Computer Point, who were in urgent need of funds presented the cheque through their bank in clearing, which was received back as un-paid. When criminal complaint was lodged against the drawer, she pleaded that she had requested the payee not to present the cheque. Despite her instruction, the payee did present? Discuss the position.
10.

Ans.

The plea taken by the drawer in this case is not

tenable. Once a cheque is issued in discharge of liability by the drawer, it has to be paid by the payee on presentation. If adequate funds are not kept in the account to meet the liability of the cheque issued by the drawer, the holder gets a right to complaint under the provisions of NI Act. The request made by the drawer to the payee for non-presentation of the cheque does not preclude the drawer from his liability as decided in case of Pankaj Mehra Vs- State of Maharashtra. Q 11. Bank A received a cheque of Rs.1242 in the

account of Ms Miti for payment of Insurance premium. At the time of presentation of this cheque, her saving bank account had a balance of Rs.1012. Looking into the nature of the payment (i.e. insurance premium), the bank paid the cheque by creating an overdrart of Rs.230. When bank demanded the money from Ms Miti by sending her a notice, she did not care to repay and told the bank that she had never requested the bank to allow overdraft. Bank has as TDR in her name which is about to mature. Bank wants to recover the amount by use of right of set off, once the TDR matures. Discuss the right of the bank and obligation of the customer, in this case.

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Ans.

In the given problem, M/s Miti is liable for the

amount of overdraft given to him by the bank. She has not objected to payment of the cheque by the bank of its own. As per provisions of Indian Contract Act (Section 69), where a party has taken advantage of a transaction under an agreement (which may be declared even void or illegal), party is under obligation to compensate the other party for that. Q 12. Why? 12. Ans. On loss of a bank draft, a duplicate there of is issued by the issuing branch after obtaining a confirmation about nonpayment by the drawee branch and indemnity bond from the purchaser. Since such original draft stops to operate as an instrument, with reported loss and issue of duplicate in its place, the bank becomes liable to make the payment of the duplicate draft only. The obligation of the bank to honour the original draft gets exhausted. Q 13.
13.

On presentation of a duplicate draft and

original drafts simultaneously, only the duplicate is paid.

Payment of Demand Draft cant be stopped. A demand draft is a value paid instrument, the value

Ans.

of which is paid by the purchaser with the objective of making payment to another person called payee. The purchaser of the draft cannot stop the payment once he parts with the possession of the demand drafts for transmitting the same to the payee. Being a value paid instrument, the issuing and paying bank can also not stop the payment, as the bank acts as Trustee for the payee.

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Q 14.

Your branch receives a bank draft of Rs.29576

for payment through clearing payable to PWD, but it is observed that the draft is not signed. The dealing official is of the view that being unsigned; the draft should not be paid and returned with the memo draft unsigned. The branch has not been able to contact the issuing branch that is located in a remote rural area, as the telecommunication network has not been functioning in that area for the last one week. List out various option the branch has before it, to deal with the circumstances.
14.

Ans.

The draft being in favour of PWD should be paid as

there does not appear to be much risk in payment since a govt. department is involved. The returning of the draft would amount to deficiency in service on the part of the branch since draft is a value paid instrument and bank cannot take the plea that it would not pay unsigned draft. Branch, however, should take steps to seek confirmation from the issuing branch. At the time of payment, the branch can also compare the printed serial number of the draft leaf with that of the drafts already paid by the branch, on behalf of the issuing branch. Q 15. A customer Mr. Rohan Endow of your branch

has a credit balance of Rs.2650 in his saving bank account. A cheque issued by him for Rs.3000 is presented by the payee, Mr. Abhijit. While the ledger keeper was posting the cheque, the payee oversaw the balance in the account. The ledger keeper returned the cheque and advised Mr. Abhijit that cheque cannot be passed due to insufficiency of balance. Mr. Abhijit deposited Rs.400 in the account in cash and got the cheque passed. Subsequently Mr. Rohan Endow

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comes to the branch and claims the amount by stating that due to banks negligence Mr. Abhijit could encash the cheque. What would you do under the circumstances?
15.

Ans.

In this case the bank will be held liable as due to

ledger keepers negligence, the payee could obtain the information about the balance available in the account. In the normal course bank is not supposed to take on record the signatures of all persons who sign the cash pay in slip. But in this case due to negligence on the part of an official of the bank, the customer has suffered loss.

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