When banker will bound to dishonour a cheque?

A banker will be justified or bound to dishonour a cheque in the following cases, viz.;


(i) If a cheque is undated

(ii) If it is stale, that is if it has not been presented within reasonable period , which may vary three months to a year after its issue dependent on the circumstances of the case

(iii) If the instrument is inchoate or not free from reasonable doubt If the cheque is post-dated and represented for payment before its ostensible date

(iv) If the customer’s funds in the banker’s hands are not ‘properly applicable’ to the payment of cheque drawn by the former. Thus, should the funds in the banker’s hand’s be subject to a lien or should the banker be entitled to a set-off in respect of them, the funds cannot be said to be “properly applicable” to the payment of the customer’s cheque, and the banker would be justified in refusing payment.

(v) If the customer has credit with one branch of a bank and he draws a cheque upon another branch of the same bank in which either he has account or his account is overdrawn

(vi) If the bankers receive notice of customer’s insolvency or lunacy .

(vii) If the customer countermands the payment of cheque the banker’s duty and authority to pay on a cheque ceases [Mowji Shamji vs. The National bank of India 22 Bom. 499].

(viii)If a garnishee or other legal order from the Court attaching or otherwise dealing with the money in the hand of the banker, is served on the banker [Rogers vs. Whitely ( 1889), 22 Q.B.D. 236, affirmed 1892 A.C. 118].

(ix) If the authority of the banker to honour a cheque of his customer is undermined by the notice of the latter’s death. However, any payment made prior to the receipt of the notice of death is valid [Tata vs. Hbert 9 Ves, 111; in re Beaumant. 1 Ch. 889].