can anyone explain me section 85(protection available with forged endorsement) and section 131(statutory protection to the collecting banker) of negotiable instrument act 1881.iam really confused in it.
kindly relate with some examles.
1 Replies
Nirukt Sharma
(Student)
(133 Points)
Replied 10 August 2014
Both of the sections provide protection to banks from incuring liability in case of frauds or errors. Long story short, u/s 85 if a bank receives a fraudantly endorsed cheque and acts on it, it shall not be responsible, provided it worked with due dilligence.
For example, A drew a cheque in favor of B, but a theif T steals the cheque and and puts an endorsement in his name. Now, the bank shall not be liable to A if it transfers the funds to T. A shall not be able to recover the money from bank.
U/s 131, A payee banker who in good faith and without negligence receives a payment(cheque) for its customer, and if the title to the cheque turns out to be defective, the banker shall not be responsible to the true owner of the cheque.
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