cheque payment
TRANSCRIPT
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Cheque and Encashment Chapter No4
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Topic to be Covered
1. Definition of cheques
2. Types of cheques
3. The requisites of cheques
4. Parties of cheques, bouncing of cheques
5. Money paid by mistake
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According to the negotiable Act 1881
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The requisites of chequesThe requisites of chequesThere is no prescribe form of words or design of the
cheque. But in order to fulfills the requirements of
Act a cheques must have following points 1) It should be in written
2) The unconditional order
3) Drawn on a specified banker only
4) Payment on demand
5) Sum certain in money
6) Payable to specific person
7) Signed by drawer
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Parties of cheques
Sir John Paget says,
“The normal cheque is one in which there is a
drawer, a drawee, payee
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The drawer
The maker of cheque is called drawer. He must be an
account holder. In order to make the instrument a valid
cheques the drawer must sign it exactly in accordance
with specimen signature supplied to the banker.
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The drawee
The person directed t pay is called “drawee” in case of
cheque its always a banker with whom the drawer
maintains an account as customer.
So bank is drawee
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The payee
Payee is the person named in the cheque to
whom payment is to be made.
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Payment of cheques
It’s the primary responsibility of banker to repay the
customer money when ever he demand.
The must honored the customer cheques, if the
cheques meet the following criteria.
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Types of Cheque
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Essentials for cheque payment1) Cheque must be in a proper form
2) Cheque should not be crossed
3) Cheque should drawn on particular branch
4) Cheque should be payable to bear or order
5) Cheque should not be mutilated
6) No unauthorized material alterations
7) Funds must be sufficient
8) The cheque should not be post-dated or stale
9) Cheque should be presented during banking hours
10) no legal bar prohibition payment
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Cheque must be in a proper form
The customer contract reciprocally that in drawing his cheques, customer should fill the form in such manner which is clear and free from ambiguity .
In Afghanistan printed cheque are provided to customers.
If customer change the form it should be returned.
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Cheque should not be crossed
A crossed cannot horned at the counter of bank to any person but collecting bank.
If the bank honors a crossed cheque, than owner of the cheque claim the damages from bank.
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Cheque should drawn on particular branch
The payment of a cheque can be only by the branch of the bank particularly mentioned on the cheque where the customer is maintaining his account.
If arrangements have been made, encashment of a customer cheque.
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Cheque should be payable to bearer or order
The payment should be made to a person who is in possession of it as a bearer or as per order
The banker will pay the cheque to the legal possession of it
Therefore banker must establish the identity of the payee before making payment
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Cheque should not be mutilated
When a cheque is torn, worn out or does not give sufficient evidence of customer intention, it is called “mutilated cheque”
Banker should see the cheque should not be mutilated, if he ignore that point he will liable
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No unauthorized material
Act 1881 defines that “material alteration in relation to a promissory note, bill of exchange or cheque includes any alteration in the following
1. Date 2. The sum payable3. The of payment4. The place of payment Therefore, a banker must not pay a cheque
bearing apparent material alteration.
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Fund must be available
The drawee of the cheque having sufficient funds of the drawer in his hands.
Sir John Paget “ the obligation of the banker to pay cheques drawn on him by his customer is subject to the condition sufficient and available for the purpose to draw up to given limit.
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The cheque should not be posted date
A cheque is not out of date when it is posted dated cheque are those which are presented for payment before the due date.
If the banker pays a posted date cheque earlier than due date, he lose the protection by law and shall have to bear any loss that may arises out of his action.
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Cheque should be presented during banking hours
The banker must honors the cheque drawn on him if they are presented on working day and banking hours.
Banking hours established by DBA Afghanistan
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No legal bar prohibition payment
The banker must see that the none of the following clauses is applicable on the presented for payment
1. Payment stopped by the drawer (customer) through a notice in writhing
2. Notice of insolvency, insanity or death of the customer
3. Any court order restraining the customer from operation from his account
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Money paid by mistake
If a banker has made a payment by mistake he should naturally Endeavour to rectify the mistake and recover the amount.
The matter of recovery of the amount paid by mistake rests on the certain condition as mention below
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Mistake of facts
The mistake under which the money has been paid must be one of “fact” so law as to enable banker to recovery.
For instance, the money payable to Mr. Shahid has been paid to Mr. Reeshad.
This will be treated as a “mistake of fact”
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Money received malafide
If a person aware of the fact that he is not entitled to the money which he is receiving. It is payable to the payer on his claiming it.
However, if the money has been paid on the strength of a pass book entry, the cannot recover the amount
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Mistake between the parties
A mistake must pertain to some matter between the party paying and receiving the money.
Bank cannot recover money because bank paid it in ignorance of some fact
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