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According to Section 31 of the Negotiable Instruments Act, who is obligated to honor the customer's mandate?
  • a)
    The drawee of a cheque
  • b)
    The drawer of a cheque
  • c)
    The endorsee of a cheque
  • d)
    The holder of a cheque
Correct answer is option 'A'. Can you explain this answer?
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According to Section 31 of the Negotiable Instruments Act, who is obli...
Understanding Section 31 of the Negotiable Instruments Act
According to Section 31 of the Negotiable Instruments Act, it is the drawee of a cheque who is obligated to honor the customer's mandate. Here's a detailed breakdown of why this is the case:
Role of the Drawee
- The drawee is the bank or financial institution that is responsible for paying the amount specified in the cheque.
- When a customer (the drawer) issues a cheque, they authorize the drawee to pay the specified amount to the payee upon presentation of the cheque.
Customer's Mandate
- The customer's mandate refers to the instruction given by the drawer to the drawee to pay a specific sum to the payee.
- This mandate is legally binding, meaning the drawee must comply with it as long as there are sufficient funds in the drawer's account.
Implications of Non-Honor
- If the drawee refuses to honor the cheque without valid reason, it can lead to legal consequences for the bank.
- Such refusal may result in the drawer facing penalties or damages, especially if the cheque was presented to fulfill a financial obligation.
Summary
- The drawee's obligation to honor the cheque is fundamental to the functioning of negotiable instruments.
- This ensures trust and reliability in financial transactions, as parties can depend on the drawee to execute the payment as per the drawer's mandate.
In conclusion, Section 31 emphasizes the critical role of the drawee in upholding the integrity of transactions involving cheques, making option 'A' the correct answer.
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According to Section 31 of the Negotiable Instruments Act, who is obli...
Section 31 of the Negotiable Instruments Act states that the drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required to do so.
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Direction: The payment and collection of cheques and other negotiable instruments are crucial aspects of modern business transactions. Cheques, promissory notes, bills of exchange, and other negotiable instruments are used to facilitate payments between parties. When a cheque is issued, it is a promise by the issuer to pay a specified amount to the payee on demand or at a future date. The payee can deposit the cheque in their bank account for collection, and the bank will process it by verifying the signature and ensuring that there are sufficient funds in the issuers account. If the cheque is valid and funds are available, the bank will credit the payees account. In cases where the cheque bounces, the bank will not honor it and return it to the payees bank. To prevent fraudulent activities, banks have implemented various security measures and procedures for the payment and collection of negotiable instruments.Q. What should a banker do if a cheque contains material alterations?

Direction: The payment and collection of cheques and other negotiable instruments are crucial aspects of modern business transactions. Cheques, promissory notes, bills of exchange, and other negotiable instruments are used to facilitate payments between parties. When a cheque is issued, it is a promise by the issuer to pay a specified amount to the payee on demand or at a future date. The payee can deposit the cheque in their bank account for collection, and the bank will process it by verifying the signature and ensuring that there are sufficient funds in the issuers account. If the cheque is valid and funds are available, the bank will credit the payees account. In cases where the cheque bounces, the bank will not honor it and return it to the payees bank. To prevent fraudulent activities, banks have implemented various security measures and procedures for the payment and collection of negotiable instruments.Q. What is a facultative endorsement?

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According to Section 31 of the Negotiable Instruments Act, who is obligated to honor the customers mandate?a)The drawee of a chequeb)The drawer of a chequec)The endorsee of a chequed)The holder of a chequeCorrect answer is option 'A'. Can you explain this answer?
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