AI Overview...
Cheque Not Honored by Banker as Per Negotiable Instruments Law
Main Points and Insights
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Honour and Dishonour of Cheques:
Cheques may be dishonoured due to reasons such as insufficient funds, account closure, or other defects in title. For example, a cheque returned with the endorsement full cover not received indicates insufficient funds or other issues V. PONNAPPA MOOTHAN SONS VS CATHOLIC SYRIAN BANK LTD. - Himachal Pradesh. -
Banker's Duty and Standard of Care:
Banks are expected to exercise due diligence and act in good faith when collecting or honouring cheques. The standard does not require microscopic scrutiny but does involve reasonable caution. A bank acting without negligence and in good faith is generally protected from liability, even if the cheque is ultimately dishonoured United Bank of India, Madras VS Bank of Baroda, Madras - Madras, THE KERALA STATE CO-OPERATIVE BANK LTD. vs STATE BANK OF INDIA - Kerala. -
Legal Presumptions and Rebuttal:
Under the Negotiable Instruments Act, the issuance of a cheque is presumed to be for discharge of a debt. The dishonour of a cheque triggers a legal presumption of liability, which the accused can rebut by proving lack of intent or other valid defenses M. Balaji VS Perim Janardhana Rao - Madras, Subanamma Ninan VS George Veeran - Kerala. -
Liability of Banks:
Banks that honor cheques in good faith and without negligence are generally protected, even if the cheque is dishonoured later. Conversely, if a bank acts negligently or without proper scrutiny, it may be held liable Hashmikant M. Sheth VS State of Gujarat - Crimes, United Bank of India, Madras VS Bank of Baroda, Madras - Madras. -
Legal Proceedings and Quasi-Criminal Nature:
Proceedings under the Negotiable Instruments Act are quasi-criminal, and the burden of proof lies on the complainant to establish dishonour and intent P. K. Selvaraj S/o. Kuppusamy VS Umadevi Sundaram W/o. Sundaram - Madras. -
Specific Cases:
- Cheque returned due to account closed is considered unpaid, and dishonour is established under Section 138 of the Act HASHMIKANT M SHETH VS STATE OF GUJARAT - Gujarat.
- A cheque issued for a debt is presumed to be for discharge of that debt, and dishonour does not negate this presumption unless proven otherwise M. Balaji VS Perim Janardhana Rao - Madras.
Analysis and Conclusion
The law emphasizes that banks must exercise reasonable care and act in good faith when honouring or returning cheques. Dishonour due to reasons like account closed or insufficient funds constitutes valid grounds for legal action under Section 138 of the Negotiable Instruments Act. However, banks acting negligently or without proper scrutiny may be held liable. The issuance of a cheque is presumed to be for debt discharge, and dishonour shifts the burden to the drawer to prove otherwise. Proceedings related to dishonoured cheques are quasi-criminal, requiring strict adherence to procedural safeguards. Overall, adherence to due diligence and good faith is critical for banks to avoid liability when cheques are dishonoured.
References:
- V. PONNAPPA MOOTHAN SONS VS CATHOLIC SYRIAN BANK LTD. - Himachal Pradesh
- Ponnappa Moothan Sons VS Catholic Syrian Bank - Kerala
- United Bank of India, Madras VS Bank of Baroda, Madras - Madras
- U. Ponnappa Moothan Sons, Palghat VS Catholic Syrian Bank LTD. - Supreme Court
- THE KERALA STATE CO-OPERATIVE BANK LTD. vs STATE BANK OF INDIA - Kerala
- P. K. Selvaraj S/o. Kuppusamy VS Umadevi Sundaram W/o. Sundaram - Madras
- HASHMIKANT M SHETH VS STATE OF GUJARAT - Gujarat
- Hashmikant M. Sheth VS State of Gujarat - Crimes
- Subanamma Ninan VS George Veeran - Kerala
- M. Balaji VS Perim Janardhana Rao - Madras
Search Results for "Cheque Not Honored by Banker as Per Negotiable Instruments Law"
1990 0 Supreme(HP) 92 • India - Himachal Pradesh
J.S.VERMA, K.JAYACHANDRA REDDY
cheques were not honoured. ... DUE COURSE - REQUIREMENTS - GOOD FAITH - DUE DILIGENCE - SUFFICIENT CAUSE TO BELIEVE DEFECT IN TITLE - PRESUMPTION - REBUTTAL - BANKER ... The cheques were returned by the Union Bank of India with the endorsement "full cover not received". ... If the banker becomes a holder for value, he may, in the absence of a forged endorsement and unless the cheque is crossed not negotiable, sue u....
1990 0 Supreme(Ker) 309 • India - Kerala
VARMA, JAYACHANDRA REDDY
that were not honored. ... The court also compared the Indian law with English law on the subject and emphasized the need for due diligence and caution in scrutinizing ... Case: The plaintiff, a banking company, filed a suit for the recovery of the balance amount from defendant No.6, who issued cheques ... ... If the banker becomes a holder for value, he may, in the absence of a forged indorsement and unless the cheque is crossed 'not neg....
1996 0 Supreme(Mad) 169 • India - Madras
RAJU
The defendant bank honored the payment without further scrutiny and even before the receipt of the advice from the issuing office ... In considering whether a Bank has been negligent in receiving a cheque and collecting the money for it, it has presumably to scrutinise ... The standard of care required of bankers does not include the duty to subject an account to microscopic examination. ... banker. ... The question should however in strictness be determined separately with regard to the collection of s....
1990 0 Supreme(SC) 550 • India - Supreme Court
J.S.VERMA, K.JAYACHANDRA REDDY
— a holder to be a holder in due course must not only have acquired the bill, note or cheque for valid consideration but without ... act in good faith and reasonable caution - Negligent disregard of circumstances arousing suspicion regarding title of bearer of instrument ... burden of proof of “holder in due course” — mere failure to prove bonafide or absence of negligence would not negative the claim ... ... If the banker becomes a holder for value, he may, in the absence of a forged indorsement and u....
2017 Supreme(Online)(KER) 30680 • India - High Court of Kerala
V.CHITAMBARESH, ANIL K. NARENDRAN, JJ
negligent in the encashment of the cheque, thus not liable for the claimed amount. ... - Sections 10, 131 - The court found that the defendant Bank acted in good faith and without negligence in honoring a disputed cheque ... Fact of the Case: Plaintiff Bank sued defendant Bank for ₹3,00,000/- for dishonoring a cheque the plaintiff claimed ... As per Section 131, a banker who has in good faith and without negligence received payment for a customer of a cheque crosse....
2021 0 Supreme(Mad) 2758 • India - Madras
A.D.JAGADISH CHANDIRA
cheque through her banker but the said cheque was returned by the banker of accused with an endorsement “Account Closed” vide bank ... stage of proceedings - proceedings under Chapter XVII of the Negotiable Instrument Act are quasi criminal in nature and that gravamen ... in favour of complainant and he assured her that cheque would be honoured on presentation - Complainant believing his words, presented ... The complainant believing his words, prese....
2004 0 Supreme(Guj) 384 • India - Gujarat
A.M.KAPADIA
is returned by a bank with an endorsement account closed, it would amount to returning the cheque unpaid because amount of money ... standing to the credit of that account is insufficient to honour the cheque as envisaged in Section - held that the decision of ... construed as to defeat all attempts to do, or avoid doing, to an indirect or circuitous manner that it has prohibited - When the cheque ... This Chapter was introduced in the Act by the Banking, Public Financial Institutions and Negotiable Instruments....
• India - Crimes
A.M.KAPADIA
138 of the Act only related to the fund and not to the cheque phrase "any cheque drawn by a person on an account by him with banker ... binding law laid down by Supreme Court would be a judgment per incuriam — It would lose all its efficacy as a binding precedent. ... issuing cheque becomes pertinent — Offence in terms of Section 138 of the Act would stand committed even if cheque issued after ... The Act was amended by the Banking, Public Financial ....
2019 0 Supreme(Ker) 681 • India - Kerala
A.HARIPRASAD, T.V.ANILKUMAR
, commences from the date of cheque and not from the date on which the loan is made-A suit for money on a dishonoured cheque drawn ... Section 3;;Negotiable Instruments Act-Section 138 -The period of three years of limitation applying to a suit on a dishonoured cheque ... 16 of 2009 before the Sub Court, Thiruvalla, seeking a decree for recovery of plaint amount of Rs. 4,41,337/- with 12% interest per ... The cheque by all means is an order issued by the drawer thereof directing his #H....
2020 0 Supreme(Mad) 958 • India - Madras
G.JAYACHANDRAN
drawn on a specified banker and not expressed to be payable otherwise than on demand – Cheque is therefore a negotiable instrument ... and not on fact whether cheque was honoured or dishonoured issuance of cheque is to be presumed to be issued for discharge of debt ... consequence event whether said cheque on presentation honoured or not is immaterial – Suit is dismissed. ... #HL....
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