Multiple choice

On the request of its customer, a Commercial Bank’s branch transferred the account to its another branch. A cheque was presented on the first (transferor) branch which it returned with the reason ‘refer to drawer’. Customer claimed damages from the bank.

  1. Bank is liable to the customer for not having returned the cheques with a proper reason.

  2. Bank is liable to the customer for having returned the cheques if the balance in the other branch was adequate, where the account was transferred.

  3. Bank is not liable to the customer as the cheque could not have been paid otherwise.

  4. None of the above
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A Correct answer
Explanation

The answer 'refer to drawer' often adopted by bankers would mean anything from shortage of time, to death or insolvency of the drawer and could also include insufficiency of funds. It could include serving of a garnishee order and could be milder form of refusal than 'no funds' or 'no arrangements'. At times it may not really reflect the financial position of the drawer and could only mean 'we are not paying, just ask the drawer why'. Thus, bank is liable to the customer for not having returned the cheques with a proper reason.

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