Bank Draft: A bank draft is, by definition, an order drawn by an office of a bank upon another office of the same bank. In other words, it is, in a sense, an order drawn by one person upon himself, whereas in the case of bills, they are drawn by one person upon another person (Section 85A).
Section 131A of the Act makes all rules as regards crossed cheques, laid down in Sections 123 to 131, applicable to drafts definition by Section 85A, Thus a banker who collects a draft on behalf of a customer will not be protected by Section 131.
A draft is drawn either against cash deposited at the time of its purchase or against debit to the buyer’s current account with the banker. The buyer of the draft generally furnishes particulars of the person to whom the amount thereof should be paid. The banker charges for his services a small commission. The draft like a cheque, can be made payable to drawer on demand without any legal objection thereto, since the Reserve Bank of India. Act, under Section 31, specially allows such a draft be issued.
Moreover, where a draft purports to have been endorsed by or on behalf of the payee the paying bank is discharged from liability by its payment in due course even though the endorsement of the payee has been forged. This affords great protection to the paying banker in so far as it is always possible for the paying banker to identify the signature of the payee.
Section 131A of the Act makes all rules as regards crossed cheques, laid down in Sections 123 to 131, applicable to drafts definition by Section 85A, Thus a banker who collects a draft on behalf of a customer will not be protected by Section 131.
A draft is drawn either against cash deposited at the time of its purchase or against debit to the buyer’s current account with the banker. The buyer of the draft generally furnishes particulars of the person to whom the amount thereof should be paid. The banker charges for his services a small commission. The draft like a cheque, can be made payable to drawer on demand without any legal objection thereto, since the Reserve Bank of India. Act, under Section 31, specially allows such a draft be issued.
Moreover, where a draft purports to have been endorsed by or on behalf of the payee the paying bank is discharged from liability by its payment in due course even though the endorsement of the payee has been forged. This affords great protection to the paying banker in so far as it is always possible for the paying banker to identify the signature of the payee.
What is Bank Draft?
![What is Bank Draft?]()
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