Sections 131, 131A and 132 of Negotiable Instruments Act 1881: Banker Protection, Drafts and Bills in Sets
Section 131 of the Negotiable Instruments Act, 1881 provides statutory protection to a banker receiving payment of a crossed cheque for a customer when the banker acts in good faith and without negligence. Section 131A extends the crossed-cheque chapter to specified drafts. Section 132, in Chapter XV, explains how bills of exchange may be drawn in sets.
Section 131 - Non-liability of Banker Receiving Payment of Cheque
A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.
Explanation I. A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer's account with the amount of the cheque before receiving payment thereof.
Explanation II. It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.
Conditions for protection under Section 131
The provision protects a collecting banker against liability to the true owner merely because the bank received payment of a cheque whose title later proves defective. The statutory protection depends on the bank receiving payment for a customer, the cheque being crossed generally or specially to the banker, and the banker acting in good faith and without negligence.
- The banker must receive payment for a customer.
- The cheque must be crossed generally or specially to the banker.
- The banker must act in good faith and without negligence.
- Explanation I preserves the protection even where the customer's account was credited before actual receipt of payment.
- For a truncated cheque, Explanation II expressly requires verification of prima facie genuineness and apparent fraud, forgery or tampering capable of detection with due diligence and ordinary care.
Section 131A - Application of Chapter to Drafts
The provisions of this Chapter shall apply to any draft, as defined in section 85A, as if the draft were a cheque.
Meaning of Section 131A
Section 131A extends the provisions of Chapter XIV concerning crossed cheques to a draft falling within Section 85A. For purposes of these crossing provisions, such a draft is treated as if it were a cheque.
Section 132 - Set of Bills
Bills of exchange may be drawn in parts, each part being numbered and containing a provision that it shall continue payable only so long as the others remain unpaid. All the parts together make a set; but the whole set constitutes only one bill, and is extinguished when one of the parts, if a separate bill, would be extinguished.
Exception. When a person accepts or indorses different parts of the bill in favour of different persons, he and the subsequent indorsers of each part are liable on such part as if it were a separate bill.
Meaning of a bill drawn in a set
Section 132 permits a bill of exchange to be prepared in numbered parts subject to the statutory condition that each part remains payable only while the others remain unpaid. Although there may be several parts, together they ordinarily constitute one bill. The exception deals with the situation where different parts are accepted or indorsed in favour of different persons and creates liability on those parts as if they were separate bills.
- A bill may be drawn in numbered parts.
- Each part must provide that it remains payable only while the other parts remain unpaid.
- All parts together ordinarily constitute one bill.
- Extinguishment of one part in circumstances that would extinguish a separate bill extinguishes the set.
- The statutory exception applies where different parts are accepted or indorsed in favour of different persons.
Related Provisions
Sections 128, 129 and 130 deal with payment in due course, improper payment of crossed cheques and the effect of a "not negotiable" crossing. Section 85A supplies the statutory definition relevant to Section 131A. Section 133 continues the rules relating to bills drawn in sets.
Official Statutory Source
For the authoritative statutory text and applicable amendments, refer to the Negotiable Instruments Act, 1881 through India Code and the Legislative Department of the Ministry of Law and Justice.