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NEGOTIABLE INSTRUMENTS - Coggle Diagram

- - - - Effects of general crossing
        
        Paying banker can only pay the amount of the cheque to a collecting banker
        
        Banker cannot pay cash for the cheque across the counter
      - Issues under general crossing
        
        a) Not negotiable crossing
        
        Section 81 of the Bill of Exchanged Act 1949
        
        Shall not be capable of giving a better title to the cheque than that which the person from whom he took it had
        
        It loses the full character of negotiability but remains transferable
        
        b) Account payee only crossing
        
        Section 81A of the Bill of Exchanged Act 1949
        
        Act to notice to the collecting banker that only the account of the payee is to be credited not third party
        
        Only be valid as between the parties thereto
    - - Section 76 (2) of the Bill of Exchanged Act 1949
      - Cheque bears across its face an additional of the name of banker, either with or without word ‘not negotiable’
      - The name of the bankers is written between the parallel lines or it is across the face of the cheque without the lines
- - - - a) cannot debit the customer’s account if non-compliance with the mandate
      - b) the true owner can sue the paying banker for conversion
        
        banker will not liable if he acts in good faith, in the ordinary course of their business and without negligence
    - - Payment in due course
        
        Sec 59 (1) of Bill Exchange Act 1949 provides a bill or a cheque is discharged by payment in due course (payments made at or after maturity of the bill to the holder in good faith & without notice that his (payee) titlte to the cheque is defective) by or on behalf of the drawee or acceptor.
      - Forged or unauthorised indorsement
        
        Sec 60 of the Bill of Exchange Act 1949 provides when the banker in good faith & in the ordinary course of business a cheque drawn on him which bears a forged or unauthorised indorsement, he is not prejudiced by the forgery
      - Cheque which is not indorsed or is irregularly indorsed
        
        Sec 82 (1) of the Bill of Exchange Act 1949 provides where a banker in good faith and in the ordinary course of business pays a cheque drawn on him which is not indorsed/irregularly indorsed & he is deemed to have paid it in due course
      - Protection to banker where cheque is crossed
        
        In Sec 80 of the Bill of Exchange Act 1949, a crossed cheque, the paying banker will be protected if he pays to a person other than the true owner in good faith without negligence and according to crossing
  - - - a) to his customer for breach of contract
      - b) to the true owner for wrongful conversion
    - - receives payment for a customer of an instrument to which this section applies or
      - having credited a customer’s account with the amount of such an instrument & the customer has no title to the instrument
    - - Acted by the customer
      - Acted in good faith/acted honesty
      - Acted without negligence
        
        if he has been negligent would no be protected
        
        examples of negligence by banker
        
        customer present cheque crossed “A/C Payee” and he is not the payee named
        
        customer pays in cheque for unusual large amount
        
        opening an account without inquiry into the identity of customer