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CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881

A drawer in Umballa issues a cheque on a Calcutta bank. The bank fails before the cheque could be presented in the ordinary course, and the drawer suffered no loss from any delay in presentment. Applying Section 84 and its illustrations, which statement is correct?

The drawer is not discharged. Section 84 discharges a drawer only to the extent of actual damage caused by delay in presenting the cheque. Where the bank fails before presentment could occur in ordinary course, there is no delay-related damage, so the drawer stays liable.

  1. AThe drawer is discharged because the bank has failed
  2. BThe drawer is discharged only for half the amount
  3. CThe drawer is not discharged because he has not suffered actual damage through delay in presenting the chequeCorrect
  4. DThe holder loses all rights against the drawer since the bank has failed

Explanation

Discharge under Section 84 depends on actual damage suffered through delay in presentment. Illustration (b) shows that where the bank fails before presentment could be made in ordinary course, the drawer is not discharged as he has not suffered damage through delay. Bank failure alone is therefore not enough, and there is no half-discharge rule.

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