Banking · Negotiable Instruments Act
A banker discounts a bill for a customer and becomes a holder in due course. If it is later discovered that the bill was originally obtained from the drawer by fraud, what is the banker's legal standing against the acceptor?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The banker can only recover the amount from the drawer and has no legal claim against the acceptor in cases of fraud.
- 2The banker must first prove that the customer who discounted the bill was not a party to the original fraud before suing.
- 3The banker can still recover the amount from the acceptor provided the banker took the bill in good faith and for value.✓
- 4The banker loses all rights because fraud nullifies the validity of the negotiable instrument from its inception.
Correct answer
The banker can still recover the amount from the acceptor provided the banker took the bill in good faith and for value.
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