Liability of drawee of cheque as per Negotiable Instrument Act

Liability of drawee of cheque (Section 31) The drawee of the cheque is always a banker. It is the duty of the banker to pay the cheque, provided he has in his hands sufficient found of the drawer and the founds are properly applicable to such payment. Trust money is not properly applicable to the payment of a cheque drawn in breach of trust. If the banker refuses payment without sufficient case being shown, he must compensate the drawer for any loss caused by such improper refusal. The bank is required to compensate, not the holder, but the drawer. The amount of compensation, that the drawee would have to pay to the drawer is to be measured by the loss or damage say loss of credit, suffered by the drawer). 

 

The principle is: “The lesser the value of the cheque dishonoured, the greater the damage to the credit of the drawer”. If there is any agreement between the drawer and the banker that the former shall not draw more than one cheque every week, the banker is not bound to pay the second cheque. The banker must pay the cheque, only when he is duly required to do so. If any trustee opens an account the banker is entitled to refuse to pay cheques drawn for purposes other than those of the trust.