Section 128 NI Act: Payment in due course of crossed cheque

Negotiable Instruments Act, 1881

Section 128 NI Act at a Glance

Section 128 NI Act protects the paying banker and drawer when a crossed cheque is paid in due course. It places the banker, and the drawer if the cheque reached the payee, in the same position as if the true owner received payment.

Section 128 NI Act Bare Act Text

128. Payment in due course of crossed cheque.

Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be entitled to the same rights, and be placed in the same position in all respects, as they would respectively be entitled to and placed in if the amount of the cheque had been paid to and received by the true owner thereof.

Section 128 NI Act in Simple Words

Section 128 NI Act states the legal effect of paying a crossed cheque in due course. When the banker on whom a crossed cheque is drawn has paid the cheque in due course, Section 128 NI Act protects the paying banker by giving that banker the same rights, and placing that banker in the same position in all respects, as if the amount of the cheque had been paid to and received by the true owner of the cheque.

Section 128 NI Act also extends this protection to the drawer of the crossed cheque, subject to one condition: the crossed cheque must have come to the hands of the payee. In case the crossed cheque has come to the hands of the payee and the banker on whom it is drawn has paid it in due course, the drawer is entitled to the same rights, and placed in the same position in all respects, as if the amount of the cheque had been paid to and received by the true owner of the cheque.

When Section 128 NI Act Applies

  • A crossed cheque is drawn on a banker.
  • The banker on whom the crossed cheque is drawn has paid the cheque in due course.
  • The banker paying the cheque is entitled to the same rights and placed in the same position in all respects as if the amount of the cheque had been paid to and received by the true owner.
  • In case the crossed cheque has come to the hands of the payee, the drawer is also entitled to the same rights and placed in the same position in all respects as if the amount had been paid to and received by the true owner.

Example of Section 128 NI Act

Sandeep in Dehradun draws a crossed cheque for ₹80,000 on Sandeep's banker in favour of Sunita, the payee, and delivers the cheque into Sunita's hands. The cheque is later presented through a banker, and Sandeep's banker pays the crossed cheque in due course. Under Section 128 NI Act, both Sandeep's paying banker and Sandeep (since the cheque came to the hands of the payee, Sunita) are entitled to the same rights and placed in the same position in all respects as if the ₹80,000 had been paid to and received by the true owner of the cheque.

FAQs on Section 128 NI Act

What is Section 128 NI Act?▼

Section 128 NI Act sets out the rights and legal position of the paying banker and the drawer when a crossed cheque is paid in due course. It places the paying banker, and the drawer in case the cheque has come to the hands of the payee, in the same position in all respects as if the amount of the cheque had been paid to and received by the true owner.

Who is protected when a crossed cheque is paid in due course under Section 128 NI Act?▼

The banker on whom the crossed cheque is drawn and who pays it in due course, and the drawer of the cheque if the cheque has come to the hands of the payee, are protected under Section 128 NI Act. Both are placed in the same position as if the true owner had received payment of the cheque.

What condition must be met for the drawer to get protection under Section 128 NI Act?▼

The crossed cheque must have come to the hands of the payee, and the banker on whom it is drawn must have paid it in due course. When both conditions are met, Section 128 NI Act places the drawer in the same position as if the amount had been paid to and received by the true owner.

How does Section 128 NI Act relate to Section 129 NI Act?▼

Section 128 NI Act protects the paying banker when a crossed cheque is paid in due course. Section 129 NI Act imposes liability on a banker to the true owner when a crossed cheque is paid out of due course in breach of the crossing.

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Disclaimer: This is for informational purposes only. Always consult a qualified advocate for legal advice.

Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·