Any banker paying a cheque crossed generally, otherwise than to a banker or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection being a banker shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid.
It must be noted that where a cheque is presented for payment which does not at the time of presentation appear to have been crossed or appear to be crossed or to have had a crossing which has been obliterated payment thereof by a banker liable to pay according to the apparent tenor thereof shall discharge such banker from liability thereon. Such payment shall not be questioned by reason of the cheque having been crossed.
Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor of such electronic image and the truncated cheque shall be a material alteration an it shall be the duty of the bank or the clearing house, as the case may be to ensure the exactness of the apparent tenor of electronic image of the truncated cheque while truncating and transmitting the image.
Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque, shall verify from the party who transmitted the image to it, that the image so transmitted to it and received by it, is exactly the same.
The banker having sufficient funds of the drawer in his hands, properly applicable to the payment of such cheque must pay the cheque when duly required to do so, and in default of such payment must compensate the drawer for any loss or damage accused by such default It is the obligation of the banker to honor the customer’s cheque up to the amount in the hands of the banker. An unjustified dishonor of a cheque is not merely a breach of contract but also a tort as it damages the customer’s reputation. Therefore if the banker dishonors the cheque wrongfully the bank is bound to compensate the drawer for loss or damages suffered by the drawer.
Circumstances when holder can proceed against the bank:
The banker is liable only to the drawer and not to the holder of the cheque since there is no contract between the banker and the holder of the cheque and the cheque does not amount to assignment of drawer’s funds in favor of the holder. The holder has a remedy against the drawer of the cheque only, except in following to cases where the holder of a cheque can directly proceed against the bank:
Where the drawer is discharged because, the holder of the cheque does not present it for payment within a reasonable time of its issue and suffers actual damage through the delay. Section 84 (3) provides that a holder of the cheque shall be a creditor of such banker to the extent of the discharge of the drawer and is entitled to recover the amount from the bank. Banker becomes directly a debtor to such holder then.
A draws a cheque for Rs 1000 and when the cheque ought to be presented has funds at the bank to meet it. This fails before the cheque is presented. The drawer is discharged but the holder can proceed against the bank for the amount of the cheque.
When the banker makes payment of crossed cheque out of due course, i.e. where the cheque is crossed generally it makes payment otherwise than to the banker or where the cheque is crossed specially, it makes payment otherwise than to the banker to whom the cheque is crossed.
A cheque must, in order to charge the drawer be presented at the bank upon which it is drawn before the relation between the drawer and his banker has been altered to the prejudice of the drawer.
A cheque must, in order to charge any person except the drawer be presented within a reasonable time. In determining what reasonable time is, regard shall be had to the nature of the instrument the usage of trade and of bankers and the facts of the particular case.