Banking · Negotiable Instruments Act
In the context of the Cheque Truncation System and the Negotiable Instruments Act, if a cheque is altered by a customer to increase the amount and the alteration is done so skillfully that it is not visible to the naked eye or under ordinary light but can be detected using specialized forensic tools, which of the following describes the legal protection available to the paying banker?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The customer is responsible for the loss only if the bank can prove that the customer was negligent in keeping the cheque book in a secure location.
- 2The presenting bank is solely liable because the physical instrument remains in their custody and they are responsible for ensuring the material integrity of the image sent to the grid.
- 3The paying banker is protected under Section 89 of the Negotiable Instruments Act if the payment was made in due course and the alteration was not apparent at the time of payment.✓
- 4The paying banker is strictly liable for the loss because they are the final authority in the clearing process and must have advanced forensic tools at every branch.
Correct answer
The paying banker is protected under Section 89 of the Negotiable Instruments Act if the payment was made in due course and the alteration was not apparent at the time of payment.
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