BANKING AFFAIRS

Detailed explanation-1: -131 gives statutory protection to the collecting banker only when he acts as “agent for collection” and not as a “holder for value”. As an agent, the collecting banker credits the account of the customer, only after realisation of the cheque.

Detailed explanation-2: -The paying banker gets protection under the Negotiable Instrument Act section 85, and the collecting banker gets protection under section 131. If a banker plays both roles at the same time, then the banker can be called a collecting banker but not liable as a paying banker.

Detailed explanation-3: -The banker shall free from any liability (discharged) if he makes payment of an uncrossed bearer cheque to the bearer in due course. If such cheque is a stolen one and the banker makes its payment without the knowledge of such theft, he will be discharged of his obligation and will be protected under Section 85(2).

Detailed explanation-4: -6:-What are the conditions for availing statutory protections available to a banker under section 131: The payment is received for a customer of the Bank. Cheque is crossed generally or specially before it is presented to the paying bank. Banker has in good faith and without negligence received payment.

Detailed explanation-5: -Liability of drawee of cheque-The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default.