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Liability of banker for negligently dealing with bill presented for payment

Section 77 of the Negotiable Instruments Act,1881.

When a bill of exchange, accepted payable at a specified bank, has been duly presented there for payment and dishonoured, if the banker so negligently or improperly keeps, deals with or delivers back such bill as to cause loss to the holder, he must compensate the holder for such loss.

A person while accepting a bill may make it payable at a certain specified bank where he has an account. The bank in the absence of any previous instruction from the acceptor is not bound to honour the bill on presentment. It is optional with the bank to make or not to make the payment. The banker on the authority of the acceptance alone is entitled to honour the bill by drawing upon the funds of the drawer. If in doing so the fund of the drawer runs short and a subsequent bill is dishonoured the bank will not be liable.1) If he chooses not to make the payment he is bound to return the instrument to the holder in the same condition in which he received it. The section makes the bank to whom presentment is made a bailee for the holder. Therefore, like a bailee the banker is bound to exercise due care to preserve and to return the document to the holder and he will be liable to compensate the holder for causing any loss or damage to the holder by his negligent or improper act2), as for instance, negligently delivering it to a wrong person or improperly refusing to deliver it or cancelling an endorsement or acceptance by mistake etc. A bona fide mistake in spite of due care will not make him liable.3)

Kaymer v. Laurie
Kushkanta v Chandra Kanta, 1924 Cal 1056
Warwick v Rogers

Created on 2021/02/21 08:48 by LawPage • Last modified on 2021/02/21 08:48 by LawPage