Basic obligation of a banker towards making sure customers money is safe?

Answer 1

A banker is under a statutory obligation (As per Sec. 31 of the N.I.Act) to honour the cheque of a customer drawn upon him when sufficient funds are available in his account and the cheque is otherwise in order. Thus this is not only contractual but also a statutory obligation on a banker to honour the cheques of customers. However this obligation is not absolute, but it is only qualified (i.e., subject to fulfillment of certain conditions).

These conditions are as follows:

i. The banker must have sufficient funds of the customer in his (Customer's) account to pay the cheque.

ii. Funds must be properly applicable to the payment of the cheque. This means, if the customer has a trust account and he is the managing trustee and he has given a cheque pertaining to his individual account, the trust account cannot be debited even if sufficient balance is available there. If the funds are given for a specific purpose by the customer, as a result of which the funds are not available to honour the cheque, then the cheque has to be returned.

iii. The banker must duly required to pay the cheque. This means, the cheque must be complete in all respects. 'Complete in all aspects' means the date must be ostensible (= apparent, supposed) date, the amount in words and figures must tally, drawer's signature must be genuine, etc. Further, 'the material part of the cheque like the date etc., must be correctly filled up and not left blank.

iv. The cheque must be presented before the cheque becomes stale. In India, a cheque has a life of three months. So a cheque must be presented to the banker within a reasonable time, i.e., within three months from its date of issue.

v. The cheque must be presented before business hours.

vi. There must be no legal bar preventing the payment of the cheque. No prohibitory order of the court or any other authority is standing against the accounts of the customer. For example, if there is a Garnishee order issued by a Court or an Income tax order issued by the Income Tax department, attaching the funds of the customer in a particular account and a cheque is drawn against this particular account, then it should not be paid. In such cases, a banker is fully justified in refusing payment.

vii. The bank's obligation does not apply to cheques drawn against uncleared cheques or bills.

viii. When a banker receives reliable information of customer's death, insolvency, etc. he should immediately stop payment of the cheque after noting the facts in the concerned records. In these cases banker should not pay the cheque.

M.J.SUBRAMANYAM, XCHANGING, MUMBAI