Negotiable Instruments Act Section 131 — Non-liability of banker receiving payment of cheque
CHAPTER XIV O F CROSSED C H E Q U E S
General
Summary
A banker who collects payment on a crossed cheque for their customer is protected from being sued by the true owner if the cheque later turns out to be defective, as long as the banker acted honestly and without carelessness. This protection applies even if the banker credited the customer's account before actually receiving the money from the other bank. However, when a cheque is presented as an electronic image, the banker must check the image for obvious signs of fraud, forgery, or tampering that could be spotted with reasonable care and attention.
Official Text
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. 1[Explanation 2[(I)].— A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer’s account with the amount of the cheque before receiving payment thereof.] 1[Explanation II.—It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.] 2