Bank's Status in Honoring the Cheque

The situation described in the question pertains to the authority of a partner to operate the firm's current account and the subsequent refusal of the firm to accept the debit made by the bank. In such cases, it is essential to understand the legal implications and the status of the bank that honored the cheque. Let's discuss the bank's position in this scenario.

1. Mandate Authorization
The first crucial aspect is the mandate given by Partner A to 'M' to operate the firm's account on their behalf. When a partner gives a mandate to another person, it implies that the person has the authority to act on their behalf and conduct transactions related to the firm's account. In this case, Partner A has authorized 'M' to operate the account.

2. Bank's Role
The bank, in this case, is the Bank of Hindustan Ltd., where Yashswi Traders holds its current account. As per the mandate given by Partner A, the bank has the responsibility to honor the instructions given by 'M' and carry out the transactions accordingly. The bank has the obligation to ensure that the mandate is valid and that the person operating the account has the necessary authority.

3. Liability of the Bank
When the bank pays a cheque drawn by 'M' under the authorized mandate, it implies that the bank has recognized 'M' as a person with the authority to operate the account. The bank assumes the liability and responsibility for verifying the authenticity of the mandate and the signature on the cheque. By honoring the cheque, the bank acknowledges the fact that it has followed due diligence in verifying the authorization.

4. Firm's Refusal
However, the situation becomes complicated when the firm refuses to accept the debit made by the bank. It is important to note that the firm's refusal does not automatically absolve the bank of its liability. The bank has already honored the cheque based on the valid mandate given by Partner A. The firm's refusal to accept the debit may be due to internal disputes or disagreements among the partners, but it does not invalidate the bank's obligation.

5. Legal Recourse
In case of disputes arising from such situations, legal recourse can be sought by the parties involved. The firm can take legal action against Partner A or 'M' for unauthorized transactions or breach of authority. However, the bank cannot be held directly responsible for the firm's internal matters, as it has fulfilled its obligation by honoring the valid mandate and paying the cheque.

In conclusion, the bank's status in honoring the cheque drawn by 'M' under the mandate given by Partner A is that it has fulfilled its duties and obligations as a banking institution. The bank assumes liability for verifying the authenticity of the mandate and the signature on the cheque. The firm's refusal to accept the debit does not absolve the bank of its responsibility, and any disputes among the partners should be resolved separately from the bank's involvement.