BANKING AFFAIRS

Detailed explanation-1: -Under this Section, a collecting bank has protection only if the collecting bank, in good faith and without negligence, receives payment of the customer by a cheque, i.e. if there is negligence in receiving of a cheque on behalf of the customer, the collecting bank would be liable for negligence.

Detailed explanation-2: –A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.

Detailed explanation-3: -As an agent, the collecting banker credits the account of the customer, only after realisation of the cheque. In such case only, he can avail the protection under 131, provided he acted in good faith and without negligence.

Detailed explanation-4: -The NI Act provides protection under Section 131 to the collecting banker in this respect provided the following conditions are satisfied: 1. The protection under the law is available only if he collects a crossed cheque for collection. No protection is available for uncrossed or open cheques.

Detailed explanation-5: -The definition gives clearly the conditions, the paying banker has to fulfil before making payment of any cheque. If he fulfils the same, the paying banker gets the statutory or legal protection under NI Act (Negotiable Instruments Act).