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CS Professional · Banking and Insurance - Laws and Practice · Payment and Collection of Cheques and Other Negotiable Instruments

Arjun Enterprises draws a cheque and crosses it specially to Bank A and also to Bank B. Neither bank is acting as the other's agent for collection. Bank B presents the cheque to the drawee bank. What is the drawee banker's duty?

The drawee banker must refuse payment. Under Section 127, a cheque specially crossed to more than one banker cannot be paid, unless one of them is named as an agent for collection. Here no such agency exists, so neither bank can be paid.

  1. APay Bank A, being the first named banker
  2. BPay Bank B, being the presenting banker
  3. CRefuse payment of the chequeCorrect
  4. DPay half of the amount to each banker

Explanation

Section 127 provides that where a cheque is crossed specially to more than one banker, except when crossed to an agent for collection, the drawee banker shall refuse payment. Here neither bank is an agent for collection, so the exception does not apply. Paying either bank would breach the section.

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