Banking · Demand Draft Rules
A customer obtains a Demand Draft (DD) for 50,000 Rupees from Bank A, payable at another branch. The customer loses the DD and requests the issuing branch to stop payment. Meanwhile, the paying branch pays the open DD to the bearer before receiving advice from the issuing branch. The customer sues Bank A. What is the legal responsibility of the bank?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank is liable only if intentional delay in sending stop payment advice is proven.
- 2The bank is liable because the paying branch was negligent in paying a DD to a stranger without verification.
- 3The bank is not liable because a DD is drawn by one branch on another, and the remitter has no absolute legal right to stop its payment once issued.✓
- 4The bank is liable because a DD is a customer mandate that can be countermanded at any time.
Correct answer
The bank is not liable because a DD is drawn by one branch on another, and the remitter has no absolute legal right to stop its payment once issued.
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