Section 129 NI Act: Payment of crossed cheque out of due course

Negotiable Instruments Act, 1881

Section 129 NI Act at a Glance

Section 129 NI Act makes a banker liable to the true owner when the banker pays a crossed cheque out of due course. The banker must compensate the true owner for any loss sustained owing to the cheque having been paid in that manner.

Section 129 NI Act Bare Act Text

129. Payment of crossed cheque out of due course.

Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid.

Section 129 NI Act in Simple Words

Section 129 NI Act sets out the liability of a banker who pays a crossed cheque in breach of its crossing. It covers two situations. First, a banker pays a cheque crossed generally otherwise than to a banker. Second, a banker pays a cheque crossed specially otherwise than to the banker to whom the cheque is crossed, or to that banker's agent for collection, being a banker.

In either situation, Section 129 NI Act makes the paying banker liable to the true owner of the cheque. The banker's liability is for any loss that the true owner may sustain owing to the cheque having been paid in that manner.

When Section 129 NI Act Applies

  • A banker pays a cheque crossed generally otherwise than to a banker, or pays a cheque crossed specially otherwise than to the banker to whom it is crossed or that banker's agent for collection, being a banker.
  • The true owner of the cheque sustains a loss owing to the cheque having been so paid.
  • The paying banker is liable to the true owner of the cheque for any such loss.

Example of Section 129 NI Act

Usha in Agra is the true owner of a cheque for ₹90,000 that is crossed specially to Usha's named banker. Instead of paying the cheque to Usha's named banker or to an agent for collection that is a banker, the banker on whom the cheque is drawn pays the ₹90,000 to someone who is not that banker or its banker agent. Because of that payment, Usha loses the ₹90,000. Under Section 129 NI Act, the paying banker is liable to Usha, as the true owner of the cheque, for the loss sustained owing to the cheque having been so paid.

FAQs on Section 129 NI Act

What is Section 129 NI Act?▼

Section 129 NI Act makes a banker liable to the true owner of a crossed cheque when the banker pays the cheque out of due course in breach of its crossing. The paying banker is liable for any loss the true owner may sustain owing to the cheque having been paid otherwise than to a banker (for a cheque crossed generally) or otherwise than to the named banker or its banker agent for collection (for a cheque crossed specially).

To whom is the paying banker liable under Section 129 NI Act?▼

To the true owner of the cheque. Section 129 NI Act makes the banker liable to the true owner for any loss sustained owing to the cheque having been paid in breach of the crossing.

Does Section 129 NI Act require an agent for collection of a specially crossed cheque to be a banker?▼

Yes. Section 129 NI Act specifies that for a cheque crossed specially, payment to an agent for collection must be to the named banker's agent for collection, being a banker.

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