cheque to the account but before payment, the bank can technically pay the cheque,
though it would be better to refuse payment. If the cheque is received through clearing
and the garnishee order is received before the time stipulated for return of cheques, the
cheque must be returned. If the cheque has been credited to another person’s account and
then the garnishee order is received, the credit can be cancelled and the cheque returned
unpaid provided that the account holder has not been advised of the credit.
– The customer has died or been declared insolvent or a lunatic.
– The cheque contains material alterations or irregular signature.
– Notice of closure of account has been served on the bank.
– The customer has countermanded payment.
– Ambiguity in the material part of the cheque.
– Difference between the amount of the cheque in words and in figures.
– Irregular indorsements.
– The cheque is mutilated.
– Signature of the drawer has been forged.
• Cheques written in Hindi with a valid Hindi date are valid.
• The paying banker must ensure that the signature on the cheque compares with the
• If it differs or the signature is false, payment must be refused.
• The banker is liable on the payment of forged cheques even if the client was negligent.
• The Mumbai High Court in a decision in 2005 held that banks must pay the value of
cheques they have sent if they were lost in transit/ sent for collection
• Dishonor of cheque
– If on presentation the banker does not pay, the cheque is said to be dishonored.
– On dishonor, the cheques negotiability is lost.
– Dishonor can be rightful or wrongful. If wrongful, the drawee can bring an action
against the bank.
– Dishonor of a cheque due to lack of funds is an offence and action can be taken against
• Holders of cheques must present these at the bank upon which it is drawn. If payment is
refused by the bank, the holder may sue the drawer. If the holder sues the drawer without
first presenting the cheque at the bank, the suit