General Studies · Negotiable Instruments Act, 1881
Under the Negotiable Instruments Act, 1881, for a Paying Banker to claim statutory protection when honoring a bearer cheque, which of the following is the most critical condition required for the payment to be considered 'Payment in Due Course'?
- 1The payment must be made to the person named on the cheque as the payee, even if the cheque is crossed generally.
- 2The payment must be made at or after maturity of the instrument, to the person in possession thereof, under circumstances that do not afford reasonable ground for believing that he is not entitled to receive payment.✓
- 3The payment must be made to a person in possession of the instrument, made honestly and without negligence, but not necessarily in good faith.
- 4The payment must be made to the bearer who has provided proof of identity.
Correct answer
The payment must be made at or after maturity of the instrument, to the person in possession thereof, under circumstances that do not afford reasonable ground for believing that he is not entitled to receive payment.
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