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

Anil draws a cheque for Rs 50,000 on his bank in Pune in favour of Ravi. Ravi does not present it for a long, unreasonable time. Meanwhile the bank fails, and Anil had enough funds at the time presentment ought to have been made. Under Section 84, what is the position?

Anil is discharged to the extent of the actual damage he suffers through the delay, and Ravi takes his place as creditor of the failed bank for that amount. Section 84 does not leave the holder without remedy or keep the drawer fully liable.

  1. AAnil is discharged to the extent of actual damage suffered, and Ravi becomes creditor of the bank to that extentCorrect
  2. BAnil is fully discharged and Ravi has no remedy against anyone
  3. CAnil remains liable in full because delay never affects a drawer
  4. DRavi can recover only from the drawee bank's directors

Explanation

Section 84 discharges the drawer to the extent of actual damage through delay in presentment, here the funds lost with the failed bank. The holder then stands as creditor of the banker in place of the drawer for that extent, as in illustration (a). Full liability ignores the section.

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