Multiple choice

A customer of your branch, Sham, deposits a cheque, which he steals from another person named Sham. Your branch collects this cheque (on which the customer is having a defective title) without being aware about the defect.

  1. Collecting bank is negligent.

  2. Collecting bank will get protection if it has complied the requirement u/s 131 of Negotiable Instruments Act, 1881.

  3. Collecting bank is responsible for conversion.

  4. Collecting bank is negligent but will get protection.

  5. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

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.

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