A cheque issued for ₹1,20,00,000 is intercepted, and the payee name is altered using a chemical process. The alteration leaves a slight discoloration visible under close inspection. The collecting bank clears the cheque via CTS without verifying the physical instrument under magnifying inspection. Is the collecting bank liable for negligence?

Question

Law · Negotiable Instruments Act and Bank Liability

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Yes, because the collecting bank owes a duty of reasonable care, and any visible irregularity or discoloration mandates further verification.

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Answer 1

No, because clearing clerks are not expected to conduct forensic laboratory analysis on routine clearing instruments.

Answer 2

Yes, because the collecting bank owes a duty of reasonable care, and any visible irregularity or discoloration mandates further verification.

Answer 3

No, liability is split equally between the collecting bank and the drawee bank under joint clearing rules.

Answer 4

No, the drawer is solely liable for using ink susceptible to chemical erasing.

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