General Studies · Negotiable Instruments Act, 1881
A Paying Banker receives a cheque that is stale (presented six months after the date of issue, assuming the bank's policy validity period is three to six months). The bank inadvertently pays the cheque. Which of the following is the most likely consequence?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank is discharged from liability, but the customer must ratify the payment within 30 days.
- 2The payment is recoverable by the bank from the customer's account under the doctrine of Payment Under Mistake.
- 3The bank cannot claim Payment in Due Course protection, as the instrument was no longer payable at or after maturity, and the bank is liable to its customer.✓
- 4The bank can still claim protection under Section 85 of the NI Act, provided the payment was made in good faith.
Correct answer
The bank cannot claim Payment in Due Course protection, as the instrument was no longer payable at or after maturity, and the bank is liable to its customer.
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