Banking · Negotiable Instruments Act
A customer issues a cheque on October 1, 2025, to a vendor and passes away in an accident on October 3, 2025. The bank receives formal notice of his death on October 5, 2025. On October 6, 2025, the vendor presents the cheque for payment. The bank returns the cheque unpaid. What is the legal basis for the bank's action?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The death of a drawer does not affect the bank's mandate if presented within six months of issue.
- 2The bank should have paid the cheque because the debt was legitimate, and then recovered it from the heirs.
- 3The bank's authority to pay is revoked upon receiving notice of the drawer's death, and it must stop payments.✓
- 4The bank is liable for damages for wrongful dishonour because the cheque was issued before the death.
Correct answer
The bank's authority to pay is revoked upon receiving notice of the drawer's death, and it must stop payments.
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