Collecting banker

Collecting Banker: Duties, Statutory Protection and Concept of Negligence, Position of a Collecting Banker, Duties and Responsibilities of Collecting Banker,Statutory Protection to Collecting Banker, Holder
and
Holder in Due Course

1. Collecting Banker: Duties, Statutory Protection and Concept of Negligence Prepared by- Dr Ramandeep Assistant Professor Deptt. of Commerce GCW, Sirsa (Haryana)

2. Collecting Banker: Meaning Collecting Banker is the one who accumulates the proceeds of a cheque for the customer. A banker receives payment of a crossed cheque for a customer.

3. Position of a Collecting Banker Holder for value- On many occasions, the banker may credit the amount of the cheque and allow the customer to draw the amount before the amount is actually realised from the paying bank. In such case, the bank becomes “ Holder for Value and Holder in Due Course ”.

4. Position of a Collecting Banker Agent of the Customer- The collecting banker act as an agent of the customer and does not possess a better title to the cheque then that of its customer.

5. Duties and Responsibilities of Collecting Banker Exercise due care and diligence Present cheque for collection in time Notice to customer in case of dishonor of cheque Placing the proceeds to the account of customer

6. Precaution to taken by Collecting Banker Collection for a customer only Agent of a customer Checking of regularity of endorsement Must act in Good faith Must be Crossed

7. Statutory Protection to Collecting Banker The Collecting bank must satisfy the following conditions to get the statutory protection under Negotiable Instrument Act- Cheque must be crossed Payment must be received on behalf of customer only Payment received in good faith and withou negligence

8. Holder and Holder in Due Course

9. Holder: Meaning Whose name is mentioned in the instrument as the payee or an endorsee or the bearer of an instrument. Thus, any person who is legally entitled to the possession of a negotiable instrument is known as Holder.

10. Conditions to become a Holder Possession of Instrument – He must be entitled to the possession in his own name and under a legal title. He acquired it lawfully and in a proper manner. Receiving of amount- He must be entitled to receive the amount from the parties concerned in his own name. What about in the case of lost instrument?

11. Rights of Holder Blank endorsement may be converted into full endorsement . Can cross a cheque in general or special crossing Can negotiate a cheque to third person Can claim the payment of the instrument in his name Can take a duplicate copy of a lost cheque

12. Holder in Due Course: Meaning M eans any perso n who, for consideration , become the possessor of a instrument, if payable to bearer, or the payee or endorsee thereof payable to order, and without having sufficient cause to believe that defect existed in the title of the person from whom he has derived his title.

13. Conditions to become Holder in Due Course In possession of Holder in due course Regular and complete Valuable consideration Obtained before payable Good title

14. Rights or Privileges of Holder in Due Course Better title to instrument Right to enforce payment against prior party Privilege against incomplete instrument Bill drawn in fictitious name Instrument obtained for unlawful consideration

15. Payment in Due Course

16. Payment in Due Course: Meaning

17. Payment in Due Course: Meaning “Payment in due course means payment in accordance with the apparent tenor of instrument, in good faith and without negligence, to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.” -Section 10 of Negotiable Instrument Act, 1881

18. Essential Features of Payment in Due Course True intentions On behalf of drawer Payment in money Payment to actual possessor Payment in good faith Payment not to made under some circumstances

19. Certain Payments not D eemed Payment in due Course Payment to wrong person Payment after due date Forged signatures Forged endorsement Payment after receiving order to stop payment Payment in the another bank Payment having alterations not confirmed

20. Concept of Negligence

21. Negligence: Meaning The collecting banker has to prove that the act was made without any negligence to avail the protection under section 131 of the Negotiable Instrument Act, 1881. The banker sometimes be careless in his duties which constitutes an act of negligence.

22. Grounds of Negligence Opening of Account without proper introduction Irregular endorsement Failure to take note of ‘Not Negotiable’ crossing Collection of non customer Payment of crossed cheque over the counter

23. Types of Negligence 1. Gross Negligence- completely careless It includes- i . Collecting a cheque crossed A/c payee for other than payee’s account ii. Failure to verify the correction of endorsement iii. Failure to verify the authority in case of Per Pro Signature

24. Types of Negligence 2. Negligence connected with immediate collection It includes- i . Collecting a cheque against the principal’s account to the private account of the agent . ii. Collecting a cheque payable to firm to the private account of the partner . i . Collecting a cheque payable to company to the private account of the authorised officer . i . Collecting a cheque payable to trust to the private account of the trustee .

25. Duties of Collecting Banker to Avoid Negligence Exercise reasonable care and diligence Presentation of cheque for collection Notice to customer Present the bill for payment

26. Thank You