Section 31 NI Act: Liability of drawee of cheque
Negotiable Instruments Act, 1881
Section 31 NI Act at a Glance
Section 31 NI Act requires the drawee of a cheque to pay it when duly required if holding sufficient, properly applicable funds of the drawer. In default, the drawee must compensate the drawer for any loss or damage caused.
Section 31 NI Act Bare Act Text
31. Liability of drawee of cheque.
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 so to do, and , in default of such payment, must compensate the drawer for any loss or damage caused by such default.
Section 31 NI Act in Simple Words
Section 31 NI Act sets out the duty and liability of the drawee of a cheque. Section 31 NI Act states that when the drawee has sufficient funds of the drawer in the drawee's hands that are properly applicable to the payment of the cheque, the drawee must pay the cheque when duly required to do so.
Three conditions must be met for this duty to arise. First, the drawee must have sufficient funds belonging to the drawer in the drawee's hands. Second, those funds must be properly applicable to the payment of that cheque. Third, the drawee must be duly required to make the payment.
If all these conditions exist and the drawee defaults in paying the cheque, Section 31 NI Act makes the drawee liable to compensate the drawer. The compensation covers any loss or damage caused to the drawer by the default in payment.
When Section 31 NI Act Applies
- The instrument is a cheque drawn by the drawer on the drawee.
- The drawee has sufficient funds of the drawer in the drawee's hands.
- Those funds are properly applicable to the payment of the cheque.
- The drawee is duly required to pay the cheque.
- The drawee defaults in making the payment, causing loss or damage to the drawer.
Example of Section 31 NI Act
FAQs on Section 31 NI Act
What is Section 31 NI Act?▼
Section 31 NI Act states the duty of the drawee of a cheque to pay the cheque when duly required if the drawee holds sufficient funds of the drawer properly applicable to the payment. If the drawee defaults in paying, the drawee must compensate the drawer for any loss or damage caused by the default.
Who must the drawee compensate upon default under Section 31 NI Act?▼
The drawer. Section 31 NI Act states that in default of payment, the drawee must compensate the drawer for any loss or damage caused by that default.
When is the drawee bound to pay a cheque under Section 31 NI Act?▼
When three conditions are met. The drawee must have sufficient funds of the drawer in the drawee's hands, those funds must be properly applicable to paying the cheque, and the drawee must be duly required to pay.
Does Section 31 NI Act apply if the drawer's funds with the drawee are not properly applicable to the cheque?▼
No. Section 31 NI Act requires the drawee to pay only when the drawee holds sufficient funds of the drawer that are properly applicable to the payment of that cheque.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·