Banking · Negotiable Instruments Act
A bank receives a cheque for collection crossed 'Account Payee Only'. The presenter's name differs from the payee name on the instrument. The bank credits the presenter's account after taking a simple indemnity letter. What is the bank's legal standing if sued for conversion?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1The bank is legally safe because an indemnity letter shifts all legal liability to the customer.
- 2The bank is protected as a holder in due course because it gave value for the instrument.
- 3The bank is liable for negligence because an Account Payee crossing mandates crediting proceeds only to the named payee's account.✓
- 4The bank is protected under Section 131 provided the cheque was crossed generally prior to collection.
Correct answer
The bank is liable for negligence because an Account Payee crossing mandates crediting proceeds only to the named payee's account.
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Banking?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Negotiable Instruments Act MCQs →Want more practice questions on Negotiable Instruments Act?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Banking · Negotiable Instruments Act