c.ii.Account may be Closed if the account is overdrawn .

(d)Retirement of a Partner
In the event of retirement of a partner, the partnership will be dissolved thereby unless the
partnership agreement provides otherwise, then,
d.i.Operation of the Account may be Closed if the account shows the debit balance.
d.ii. New Account can be opened with a fresh mandate from the rest of the partners.
(e) Admission of a New Partner
When a new partner is admitted into a partnership firm the banker's action will depend on whether the firm's
account is in credit or in debit balance:
e.i. If credit balance:Obtain a new mandate from the old partners and the new partner, which should clearly
state the mode of operation on the account in the future operation.
e.ii. If debit balance (i.e. where the firm is indebted to the bank)
The banker should stop the operation of the account and open a new one (by taking a fresh mandate
in the name of the new firm including the incoming partner). The banker usually also takes an
undertaking sign by the new partner to be liable for the outstanding debts of the firm in addition.

5. The Negotiable Instruments Act, 1881

[Act No. XXVI of 1881 (9th December, 1881)]
The act regulates the issue and negotiation of the various classes of Negotiable instruments which the bankers
commonly deal. It came into force on 1st March, 1882. The bankers should, therefore, have clear knowledge
of the various provisions of the Act as amended upto date. The most important sections of the Act are briefly
discussed below.
Sec.14: Negotiation
The term 8Negotiation9 means transfer of an instrument from one person to another person so as to constitute
that person the holder of the instrument. Negotiation is effected by transferring a negotiable instrument with
or without endorsement to another person. There are two ways of negotiation: (a) delivery; and (b)
endorsement and delivery.
Sec.51 Who may Negotiate
Every sole-maker, drawer, payee or endorsee, holder or all of several joint makers, drawers, payees or
endorsees, of a negotiable instrument may, if the negotiability of such instrument has not been restricted or
excluded as mentioned in Section-50, indorse and negotiate the same.
Example:
(i) 8B9 signs the following bearer cheques which exclude the right of further negotiation by 8C9:
a. <Pay to C Only=
b. <Pay to C for my use=
c. <Pay to C or order for the account of B=
(ii) 8B9 signs the following bearer cheques which do not exclude the right of further negotiation by 8C9:
a. <Pay to C=
b. <Pay C value in account with the ANC Bank=
Sec. 13: Negotiable Instrument
The negotiable instrument is not yet defined in the Act but literally, 8Negotiable9 means transferable and
8Instrument9 means document. So, 8negotiable instrument9 means a written document which creates a right in
favor of certain person(s) and which is freely transferable. According the Section 13 of the NI Act, 1881 a
<negotiable instrument= means a promissory note, bill of exchange or cheque, payable either to order or to
bearer. Accordingly by doing amendments of two sections of NI Act (Sec. 85A in 1930 & Sec.131A in 1947),
the Demand Draft has been included as negotiable instrument and it bears the status of order cheque.

Example:
(a) Pay to X
(b) Pay to X or Order
(c) Pay to X or Bearer/Order
(d) Pay to X only
(e) An instrument crossed <Account Payee Only=
Here, the instrument (d) and (e) are not transferable i.e. the word 8only9 prohibits further transfer and 8A/C
Payee9 crossing indicates the intention that it shall not be transferable. So these two instruments have lost their
status of negotiable instrument and are excluded from negotiable instruments.

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Characteristics of Negotiable Instruments
To identify negotiable instruments the characteristics of negotiable instruments under NI Act, 1881 are to be
clarified which are as follows:
(1) The instruments like money are transferable from hand to hand by way of negotiation without notice
to prior owner and carries unconditional order
(2) The instruments like money are transferable from hand to hand for value and are used for settlement
of debt
(3) The transferee9s title is not affected due to transferor9s defective title if the transferee can proof himself
as holder in due course
(4) The title of the Holder in due course does not affect for defective title of his prior holders due to fraud,
forgery etc.
(5) The holder in due course is entitled to sue in his own name against all the prior parties to realize
proceeds of the instruments
Sec. 3(b): Banker
8Banker9 means a person transacting the business of accepting, for the purpose of lending or investment, of
deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft,
order or otherwise, and includes any Post Office Savings Bank.
Sec. 3(c): Bearer
8Bearer9 means a person who by negotiation comes into possession of a negotiable instrument, which is
payable to bearer.
Sec.4: Promissory Note
A 8promissory note9 is an instrument in writing (not being a bank-note or a currency-note) containing an
unconditional undertaking, signed by the maker, to pay on demand or at a fixed or determinable future time a
certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.
Example:
(a) <I promise to pay B or order Taka 500.= 3Promissory note
(b) <I acknowledge myself to be indebted to B in Taka 1,000 to be paid on demand, for value received.= 3
Promissory note
(c) <Mr. B, I O U Taka 1,000.= - Is not promissory note.
Sec.5: Bill of Exchange
A <bill of exchange= is an instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money
only to, or to the order of, a certain person or to the bearer of the instrument.
Sec.6: Cheque
A <cheque= is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than
on demand. Basically a cheque is bill of exchange with three basic additional qualifications: (a) It is always
drawn on a specified banker; (b) It is always payable on demand; and (c) It does not require stamping to get
legal status
Cheque has 2 (two) parts:
a) General Parts/Printed Parts,
b) Essential Parts/Material Parts
General/Printed Part Essential Parts/Material Parts:

1) Printed Name of the Bank, Monogram, Branch 1) To fill in the column of date(D/M/Y)
Name (Routing No.), If online, payable at any 2) To write down the name of the 8payee9
branch in Bangladesh, Cheque Serial No. may be natural person or legal entity
2) Printed space of Date, Pay to ------or Bearer, 3) To fill in the amount column in words
The sum of Taka (in words & in figure) (Blank and figures (Exact amount of money both
Column) in word & figure)
3) Printed name of the customer & account 4) To put the Signature of the drawer on
number, Space of Signature bottom right side of the cheque
4) Printed Barcode/ MICR Encoding

Salient Features of Cheque:

(1) Instrument in Writing
(2) An Unconditional Order
(3) Drawn on a Specified Banker
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 (4) Payee to be Certain (natural or artificial person)
(5) A Certain Sum of Money
(6) Payable on Demand
(7) To be signed by the Drawer
(8) Printed Form
(9) Three parties Involve: Drawer (the maker of cheque is called the drawer), Drawee (the person
who has been directed to pay is drawee), and Payee (the person named in cheque, to whom or
to his order the money is directed to be paid is payee)
Types of Cheque based on Validity/Date
There are three types of cheque based on date.
(1) Post Dated Cheque: If a cheque bears a date in advance is considered as post-dated cheque. In
other words, when a cheque bears a future date in terms of presenting/drawing date is called
postdated cheque. Risk of Payment against Post Dated cheque:
i. It will be treated as negligence to conform the order of drawer and banker may liable
for that.
ii. The drawer may countermand the payment
iii. The drawer may make the bank liable for dishonoring other cheques on account of
insufficiency of fund
iv. The death or insolvency or lunacy of the drawer may occur
v. Garnishee order may be served by the court
(2) Ante Dated Cheque: Any cheque which bears a previous/earlier date in terms of
presenting/drawing is called ante dated cheque. It is not invalid but becomes stale/out of date
if ante-dated for more than 6 (six) months period.
(3) Stale Cheque: If a cheque is antedated for more than six months period in terms of date written
on the cheque is called as stale cheque/out dated cheque/expired cheque.
(4) Undated Cheque: If a cheque bears no date is considered as undated cheque. It is an inchoate
instrument. An undated cheque is a valid instrument but it must be dated when it is presented.
Types of cheque based on Beneficiary/Instruction
There are nine types of cheque based on beneficiary. These are- a) Bearer cheque; b) Order cheque; c)
Open/Uncrossed cheque; d) Crossed cheque; e) Blank cheque; f) Marked cheque; g) Bounced /Dud
Cheque; h) Travelers9 Cheque; i) Banker9s Cheque; k) Gift cheque, l) Mutilated Cheque, m) MICR Cheque,
etc.

Bearer Cheque: Order Cheque:

1. The words <or Bearer= are written after the 1. An order cheque is payable to the certain
name of the Payee. person or his ordered/endorsed person. That
2. The name of the payee or 8self9 is written in is order cheque is to be paid to the original
the space for payee. named payee/person or to his order. It
3. Bank may make payment of the cheque to the carries the words 8or order9 after the payee9s
bearer, even payee9s name is not mentioned. name and cutting the word 8bearer9 indicating
4. Bearer is entitled to receive money if there is that only the named person/payee or his
no reasonable ground to refuse payment. ordered person can encash it or transfer it by
5. Bearer cheque is negotiable by mere delivery endorsement and delivery.
and requires no endorsement for 2. While making payment against an order
negotiation. cheque, the Banker must identify the 8Payee9
6. The drawer, payee or any party to a cheque and must confirm that the cheque is encashed
can cross it. But once the cheque is crossed, it by him in whose favor cheque was given.
cannot be transformed into bearer one until 3. A bearer or order cheque may be crossed or
the drawer cancel crossing by putting his uncrossed/open. If crossed, it loses its ability
signature. to encash at the counter of the Bank i.e. it is
then payable through Account.

Sec. 3(f): Material Alteration

8Material Alteration9 in relation to negotiable instruments includes any alteration of the date, the sum payable,
the place of payment, the time of payment, etc. It means the alteration of important parts of negotiable
instrument not authorized by the drawer.
Immaterial Alteration
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 (1) Conversion of a bearer cheque into an order cheque through cancellation the word 8Bearer9 and
making the cheque payable to order.
(2) Conversion of open cheque into cross cheque
(3) Filing blanks of the instrument (Sec.20)
(4) Conversion of blank instrument into full endorsement (sec.89)
(5) Altering a general crossing into special crossing, addition of the words 8Account Payee9 or 8Not
Negotiable9 to a crossing; and where a cheque is crossed specially, the banker to whom it is
crossed, can cross it specially to another banker, his agent for collection.
(6) Any holder can cross a cheque (Sec.125)
Example of Material Alteration
(1) Alteration of Date
(2) Alteration of Place of Payment
(3) Alteration of Crossing
(4) Alteration of the Words 8or order9 to 8or bearer9
(5) Alteration of Amount
(6) Alteration of Payee
Material Alteration and the Banker
(1) Material alteration renders a cheque invalid. So the paying banker should not honor it.
(2) The banker should return the cheque to the drawer with remarks like 8Alteration requires
Drawer9s confirmation9.
(3) If a banker honors a materially altered cheque, he has no authority to debit the drawer account.
So, he should bear the loss.
Crossing of Cheque (Sec. 123, 123A, 124, 126, 127, 128 &130):
A cheque contains two 8parallel transverse lines9 across it (at the left top corner) is treated as cross
cheque. Crossing indicates that it can only be paid through account by depositing it into the account and
it cannot be encashed at cash counter of the drawee bank. Crossing minimizes risk of payment.
Depending on the nature of crossing, crossed cheque is further subdivided into following types:
(a) General Crossing: The significance of general crossing is that the cheque is payable at any bank
through A/C where the payee maintains his account. General crossing cheque contains two parallel
transverse lines with or without the words like <& Co.=, <and Company=, <Not Negotiable=, <A/C
Payee=, <Not Transferable= etc.
(i) A/C Payee or Not Transferable: It means that the negotiation is stopped or not to be
allowed i.e. it is payable to the A/C of the payee/beneficiary as mentioned in the cheque.
When cheque is crossed 8A/C Payee9, the effects are; (i) it shall cease the negotiability;
and (ii) it is the duty of the Banker to credit the proceeds of the cheque only into the A/C
of the payee named in the cheque (Sec. 123, NI Act, 1881). An <Account Payee= crossed
cheque ceases to be negotiable (Sec. 123A).
(ii) Not Negotiable: It does not mean that the negotiation is stopped i.e. such crossing does
not affect the transferability of the cheque. But it indicates that the next
transferee/endorsee will not get any better title than that of the endorser had from
whom he received the cheque (Sec.-130, NI Act, 1881)
(b) Special Crossing: In special crossing, the cheque is crossed by specifying the name of the bank
branch like 8ABC Bank Ltd., Mitford Branch9 only through it the cheque is to be paid. A cheque
crossed generally is payable to any banker and a cheque crossed specially is payable to a banker to
whom it is crossed or his agent for collection (Sec. 130).
(c) Double Crossing
When a cheque bears two separate special crossing, it is said to have double crossing. As per sec.
125, where a cheque is crossed specially, the banker to whom it is crossed, may again cross it
specially to another banker, his agent for collection. According to Sec.127, 8where a cheque is
crossed specially to more than one bankers, except when crossed to an agent for the purpose of
collection, the banker on whom it is drawn shall refuse payment thereon.9 Thus , a paying banker
shall pay a double crossing cheque only when the 9second banker9 is acting only as the 8agent9 of the
first collecting banker and this has been made clear on the instrument. Such crossing may be done
in those cases where the banker in whose favor the cheque has been specially crossed does not have
a branch at the place where the cheque is to be paid.

Payment of Cheque: Precautions before Honoring/Passing a Cheque

37
To safeguard the own and customer9s interests, the paying banker have to observe the following
precautions:
(1) Precaution regarding 8Form of Cheque9- Printed, Unconditional order, Not Mutilated, Material
Alteration, etc.
(2) Precaution regarding 8Branch9
(3) Precaution regarding 8Account9- whether it is inoperative, dormant, deceased, freeze, block A/C,
etc.
(4) Precaution regarding 8Date9 – whether it is post-dated or stale
(5) Precaution regarding 8Amount written on the Cheque9- The banker should see whether the
amount stated in the cheque, both in words and figures, agree with each other. Otherwise:
i. If the amount is stated only in figure the banker should not honor it
ii. If the amount is stated only in words, the banker may honor it
iii. If there is any difference between the amount in figures and words, the banker can
return the cheque, since, the amount is not certain (sec. 6 & 10). But the sec.18 of NI Act,
permits the banker to honor the cheque to the extent of the amount stated in words.
However in practice if the difference is significant, payment of the smaller amount
sometimes be made. But usually the paying banker returns the cheque under such
circumstance with a return memo containing <words and figures differ=. There is an
audit objection to the practice of honoring such cheque.
(6) Precaution regarding 8Account Balance9- it should be ensured that the minimum balance
required to be maintained is available.
(7) Precaution regarding <Drawer9s Signature= – whether the signature is genuine or not and put at
the right bottom corner of the cheque above line
(8) Precaution regarding 8Material Alteration9- it must be confirmed by the drawer with full
signature
However, if the cheque is materially altered and the banker makes payment, he shall be
discharged from liability only when he proves the following:
(i) The alteration could not be detected with reasonable care, prudence and scrutiny; and
(ii) The payment had been made in due course
(9) Precaution regarding 8Crossing9- it should not be paid over the counter but through an account,
either maintained with the branch or through collection. If there are 8A/C Payee9 and 8Not
Negotiable9 crossing, the paying banker need not worry, as these are directions to the Holder
and to the collecting banker.
(10) Precaution regarding 8Endorsement9 – Before honoring, it should be verified the
regularity of endorsement, if any.
(11) Precaution regarding 8Mutilated Cheque9 – Mutilation means it is torn into two or more
pieces. Such a cheque to be return with a mark <mutilated=. It may be honored if it is confirmed
by the drawer with signature by writing <accidentally torn by me=.
(12) Precaution regarding 8Legal Bar9 – banker should check whether there exists any legal
bar like garnishee order, attachment, freezing etc.
(13) Precaution regarding 8Banking Hour9-Banking hours means the period of time when a
bank transacts banking business with the customers.
(14) Other Minor Precautions
Before honoring a cheque a banker should look into the following:
(i) Banker must see whether there is any order of the customer not to pay the cheque or
stop payment order
(ii) Banker must see whether there is any evidence of misappropriation of money.
(iii) Banker must see whether he has got any information about the death or bankruptcy or
insanity of his customer. Failure to note those instructions will land him on trouble.
Payment in Due Course (Sec.10)
<Payment in due course= means payment in accordance with the 8apparent tenor9 of the instrument in
good faith and without negligence to any person in possession thereof under circumstances which do
not afford a reasonable ground for believing that he is not entitled to receive payment of the amount
therein mentioned.
Essential Conditions of payment in Due Course
(a) Apparent tenor of the instrument to be observed carefully before payment: To avail statutory
protection, the payment should be made according to the apparent tenor of the cheque.
38
 Apparent tenor refers to the intention of the parties as it is evident from the face of the cheque.
Say, if a drawer draws a cheque with a post-date, his intention is to make payment only after a
certain date. If it is paid before the due date, this payment does not amount to payment in due
course.
(b) Payment in good faith and without negligence: Good faith forms the basis for all banking
transactions. The banker may sometimes be careless in his duties which constitutes an act of
negligence. If negligence is proved, the banker will lose the statutory protection given under
Sec.85 of the NI Act.
Example:
(i) Payment of a crossed cheque over the counter
(ii) Failure to verify the regularity of an endorsement
(iii) Payment of a post-dated cheque before maturity
Where the banker on whom a crossed cheque is drawn, in good faith and without negligence
pays it, if crossed generally, to a banker, and if crossed specially, to the banker to whom it is
crossed or his agent for collection.
(c) Payment to be made to a person who is entitled to receive the payment: The banker should make
payment to the 8holder9 of the instrument. In other words, the banker must see that the person,
who presents the cheque, is in possession of the instrument and he is entitled to receive the
amount of the cheque.
The mere possession of a document does not make one a holder. He must have a genuine title
to it. For instance, if a person brings in a cheque which has been countermanded, or forged,
though, he is in possession of the instrument but he has no title to it. Therefore, if a banker
suspects the title of the person, he should not make payment. If a banker makes payment in such
cases, he can9t get statutory protection under sec. 85 of NI Act, 1881.

Circumstances under which a Cheque can be Dishonored

A paying banker is under legal obligation to honor his customer9s mandate. He is bound to do so under
his contractual relationship with his customer. A wrongful dishonor will have the worst effect on the
banker. However, under the following circumstances, the payment of a cheque must be refused:
(1) Where the Customer Countermands the Payment (Payment stopped by Drawer):
However, the instructions regarding <Stop Payment= should be exercised only if it is –
(i) In writing: Instruction for stopping payment of any cheque shall be obtained from the
Accountholder in writing.
(ii) Signed by the drawer
(iii) Contained/mentioned all the details of the cheque viz. the number, the date, name of the
payee and the amount of the cheque. Particulars of cheque shall also be noted in the stop
payment register.
 In case of partnership account or joint account, any partner or any one of the joint account
holders can stop the payment of a cheque. So also, any director of a company can stop
payment of a cheque.
 Instruction should be made during banking hour and should be served to the banker in the
banking house.
 Where a customer is maintaining two accounts and the account number is not specified in
the instruction, it is advisable to register the stop payment order on the both accounts.
 In case information regarding stop payment is received by telephone, fax or telegram the
payment should be postponed and in the meantime if such Cheque presented should be
returned with the objection <drawer9s confirmation required= and entry shall be made on
the relative ledger folio, pending receipt of written instructions from the Account holder and
the drawer asked to send a written confirmation so as to avoid the risk of any unauthorized
stopping of payment. It is not advisable to act upon the oral instructions/orders because if
the banker returns the chequs, the customer, if he happens to be an unscrupulous person,
may claim damages for wrongful dishonor of the cheque by saying that he never informed
the banker to stop payment of his cheque.
 The drawer alone has the right to countermand the payment of a cheque. In case a cheque
is lost by a holder, he should stop payment of that cheque only through it drawer. It is so
because, a banker is always answerable only to the drawer, in the case of dishonor of a
cheque. In the case of a draft, its purchaser has no right to countermand its payment.

39
  Any countermanding instruction given to one branch is not effective as a notice given to
another branch.
 If a banker , honors/pays a countermanded cheque:
(i) The payment does not amount to payment in due course
(ii) The banker will have to reverse the entry
(iii) The banker will have to pay damages for dishonor of the customer9s subsequent
cheques for want of funds in the account
Therefore, countermanding instructions, once received, must be kept as a constant record. A
8stopped payment9 register may be maintained for ready reference. It is advisable that a slip,
containing the details of the countermanded cheque should be pasted on the customer9s account, so
that, the official concerned with posting and passing of cheques may be careful. However, when a
banker dishonors a countermanded cheque, it would be advisable to give answers like <Orders not
to pay=.
(2) Upon the receipt of a notice of customer9s death:
(3) Upon the Receipt of a Notice of Customer9s Insolvency
(4) Upon the Receipt of a Notice of Customer9s Insanity
(5) Upon the Receipt of a Garnishee Order:
8Garnishee Order9 refers to the order issued by a court attaching the funds of the judgement
debtor (i.e. the customer) in the hands of the third party (i.e. the banker). The term 8Garnishee9
refers to the person who has been served with the order. If the order attaches whole amount of
customer9s account, then, the banker must dishonor the cheques drawn by that customer. He
can, however, honor the cheques to the extent of the amount that is not garnished. Hence, the
banker should go through the terms of the order very carefully. If this order is sent to the Head
Office, then, a reasonable time should be given for communicating this order to the concerned
branch.
Some Exceptions:
(a) A garnishee order issued against a husband9s account cannot attach a joint account in the
name of the husband and wife. If the order is so worded as to attach two accounts in different
capacities, then, it attaches both the accounts.
(b) A garnishee order in the name of a firm, attaches both firm9s account and the private account
of the partners.
(c) A cheque in favor of a judgement debtor can9t be attached by the order, because the cheque
is not the property of the payee until the money is paid to him.
(d) The proceeds of sale of shares, stock, bond etc. are not attached, if they are not received by
the bankers on the date of order.
(e) This order cannot attach cheques paid into the account of the judgement debter but not yet
collected. However, in the case where a cheque is sent for collection by one bank (principal
bank) to another (agent bank), the moment the cheque has been realized by the agent bank,
that realization is deemed to be a realization made by the principal bank itself, and as such,
it could be attached.
(6) Upon the Receipt of a Notice of Assignment
(7) When the funds are not properly applicable
(8) Defective Title
(9) Other Grounds
A banker is justified in dishonoring a cheque under the following circumstances also:
If a cheque is-
(a) Conditional one
(b) Drawn on an ordinary piece of paper
(c) A stale one
(d) A post-dated/ undated one
(e) A mutilated one
(f) Drawn on another branch where the account is not kept and absence of arrangement
(g) Presented during non-banking hours
(h) Differs the amount in figures and words
(i) If there is no sufficient funds. Here Amount Insufficient (A.I.) or Fund Insufficient (F.I.) - this
abbreviation is used in the case where the drawer does not have sufficient fund/money in the
account. According to the newly introduced Sec. 138 of the NI Act, 1881 (Amendment in 1994)
if a cheque is return with the words: (a)9 amount insufficient to honor the cheque9; and/or (b)
40
 8exceed the amount arranged to be paid from the account9 it constitutes an offence and is
punishable under the Act.
(j) If the signature of the customer is forged/unauthorized
(k) If the endorsement is irregular. Example, the spelling of the payee9s name as given on the face
of the cheque differs from that in the endorsement.
(l) If a crossed cheque is presented at the counter
(m) If the customer closes the account before the cheque is presented for payment
(n) Where a cheque is irregular, ambiguous or otherwise materially altered
(o) Where a joint account is operated by all jointly but the cheque is not signed by all of them, etc.
(p) MICR data & Image mismatched
(q) Incorrect Payee (mismatched with advice)

Statutory Protection to a Paying Banker:

Supposing a paying banker pays a cheque which bears a forged signature of the payee or indorsed, he
is liable to the true owner of the cheque. But it is quite unjustifiable to make the banker responsible for
such errors. It is so because, he is not expected to know the signature of the payee or indorsed.
Therefore, law relieves the paying banker from his liability to the true owner in such causes. This relieve
is known as 8Statutory Protection9.
To claim protection under Sec. 85 of the N.I Act, 1881, the banker should have fulfilled the following
conditions:
(a) He should have paid an order cheque in due course and such cheque may be endorsed by the payee
or his order
(b) He should have been paid a bearer cheque in due course though it bears blank or full endorsement
or endorsement purports to restrict or exclude further negotiation.
Sec.8: Holder
The <holder= of a promissory note, bill of exchange or cheque means the payee or endorsee who is in
possession of it or the bearer thereof but does not include a beneficial owner claiming through a
8benamidar9.

Essential requisites of a holder:

(a) Payee or endorsee of the instrument; and (b) in possession of it; and/or a person who is bearer
thereof.
Example: An Order Cheque
Pay to B or Order

Tk. 5.00 Lac only

(A)

For this order cheque, 8A9 is drawer, bank is drawee and 8B9 is payee. 8A9 keeps the cheque in his hand.
8B9 is payee but not possessor of the cheque. 8A9 is possessor but not payee of the cheque. So both the
parties are unable to encash the cheque. To encash the cheque, two conditions are to be fulfilled. The
party who will fulfill these will become the 8Holder9 of the cheque.
Sec.9: Holder in Due Course
<Holder in due course= means any person who for consideration becomes the possessor of a promissory
note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to
order, before it became overdue, without notice that the title of the person from whom he derived his
own title was defective.
Essential Conditions to Constitute a Holder in Due Course:
(i) Who receives an instrument innocently i.e. in good faith and without negligence and
without notice that the title of the transferor was defective.
(ii) Who has paid value for the same i.e. there is a consideration for this
(iii) Who has received the instrument before its maturity & still it is payable
(iv) Who is in possession of the instrument as a bearer or payee or endorsee
For all legal purposes, the title of the 8holder in due course9 is superior to that of the true owner.
Rights and Privileges of a Holder in Due course:
(i) He obtains a better title to the instrument than that of a true owner

41
 (ii) The defective title of the previous endorses (if any) will not adversely affect his right
(iii) He can pass on a better title to others
(iv) Until the instrument is finally discharged every party to that instrument is liable to him
(v) Even the drawer of a negotiable instrument can9t claim invalidity of the instrument against
him
(vi) His claim can9t be denied on the ground that the payee has no capacity to endorse

Sec.36 Liability of Prior Parties to Holder in Due Course

Every prior party to a negotiable instrument is liable thereon to a holder in due course until the
instrument is duly satisfied.
Example:
A: Holder of a cheque
B: Holder & Endorsee
C: Illegally received the cheque from 8B9
D: Legally received the cheque through negotiation from 8C9
<D= becomes the <Holder in due course= if-
 8D9 does not know 8C9 is illegal holder
 Pays value/consideration
 Taken it in good faith & without negligence and it is in his possession
 Instrument is valid in all respect.
<D= can sue against all the parties if the cheque is not honoured.
(Note: As per Transfer of Property Act-1882, <A man cannot give better title unless he has.= This law
contradicts with NI Act-1881).

Endorsement (Sec.15)
The section-15 of NI Act, 1881 defines <When the maker or holder of a negotiable instrument signs the
same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a
slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be
completed as a negotiable instrument, he is said to indorse the same, and is called the <endorser=.
The word 8Endorsement9 derived from Latin word 8Endorsum9 or 8Indorsum9. Here, 8en9 means 8upon9
and 8dorsum9 means 8the back9. So usually the endorsement is done on the back the instrument. However
it can be done on the front side also. For endorsement purpose a slip of paper may be annexed with the
instrument which is called <Allonge= in banking.
Essential of valid Endorsement
a. It must be on the back or face of the instrument. If no space is lefton the instrument, it must be
made on a separate paper attached to it.
b. It should be made in ink. An endorsement in pencil or rubber stamp is invalid.
c. It must be made by the maker or holder of the instrument.
d. It must be signed by the endorser.
e. It must be completed by delivery of the instrument.
f. It must be an endorsement of entire amount. A partial endorsement does not operate as a valid
endorsement

Types of Endorsement
According to NI Act,1881 endorsement may take place in any of the following forms:
1. Blank or General Endorsement [Sec. 16(1)]-When the payee or endorser simply sign his name,
face or back of the cheque,without specifying the name of endorsee. Example: a cheque payable
to 8X or order9 and 8X9 merely signs on its back, it constitutes blank endorsement.
2. Full or Special Endorsement [Sec. 16(1)]-When the payee or endorser sign his name with
specifies the endorsee to whom or to whose order the cheque to be paid. Example: <Pay to Y or
order= and is signed by 8X9 (the payee), it constitutes full endorsement.
3. Restrictive Endorsement (Sec.50)-When the endorsement prohibits the further negotiation of a
negotiable instrument. Example: If cheque is endorsed <Pay to X Only=, it cannot the endorse
further.
4. Partial Endorsement (Sec.56)- If only a part of the amount of the instrument is endorsed, it is
case of partial endorsement. It is invalid.

42
 5. Conditional Endorsement (Sec.52)- It is not a common form of endorsement. It may take many
forms, like (i) Sans Recourse Endorsement – it limits the liability of the endorser; (ii) Sans Frais
Endorsement: 8Sans Frais;9 means 8without expense9. The endorser does not bear the expenses
say, noting, protesting etc.; and (iii) Facultative Endorsement – Here the endorser waives some
of his rights on the instrument. Example: 8Pay to Raja or order notice of dishonor waived= –
Rashid.
6. Per Pro Endorsement: An endorsement make by an authorized agent. Prior information about
the delegation of authority to the agent must have been given to the banker.
Usual Forms of Banks9 Endorsement
1. Payee9s Account Credited
For ANC Bank Ltd.
Manager
2. Payee9s Account will be Credited
On Realization
For ANC Bank Ltd.
Manager
3. 1st Payee9s Endorsement confirmed
2nd Payee9s Account Credited
For ANC Bank Ltd.
Manager
4. Our Branch Endorsement confirmed
For ANC Bank Ltd.
Manager
5. Purchaser9s Account Credited
For ANC Bank Ltd.
Manager
Example of Endorsement
Correct & Incorrect Spelling A cheque is payable to <Ikram or <Pay to T. Uddin or Order=
Order= where the correct spelling
of the payee9s name is <Ekram= Ikram (Ekram)

Endorsement by woman A cheque payable to Miss Ahmed= <Pay to Ruma or Order=

Mitali Ahmed (Miss)

Endorsement by married A cheque payable to <Mrs. Haider= <Pay to Mamun or Order=

woman
Kabita Haider (Wife of Mr. Haider)

Endorsement by illiterate A cheque payable to <Karim= an <Pay to Hasan or Order=

person illiterate person
×

Left thumb impression of Karim

Witnessed and Attached by

Saifiul Islam

10, West Kazipara, Mirpur, Dhaka

Endorsement by deceased A cheque payable to <Haider or <Pay to Jamal or Order=

person Order= (now dead)
Anis haider

Son of Late Haider

43
 Endorsement by agent A cheque payable to Empire <Pay to Lucky Traders=
Trading Ltd
Per Pro Empire Trading Ltd

Munir Ahmed

Agent

Endorsement with Title A cheque payable to <Dr. S. Alam= <Pay to Dr.A. Salam or Order=

S.Alam

Sec.58 Defective Title

A person who receives an instrument which has been lost or by means of fraud or any other unlawful
means is not entitled to receive the amount due thereon unless he claims as holder in due course.
Sec.87: Effect of Material Alteration
Any material alteration of a negotiable instrument renders the same void as against anyone who is a
party thereto at the time of making such alteration and does not consent thereto, unless it was made in
order to carry out the common intention of the original parties; and any such alteration, if made by an
endorsee, discharges his endorser from all liability to him in respect of the consideration thereof.
The provisions of this section are subject to those of sections 20, 49, 86 and 125.
Sec.89 Payment of Instrument on Which Alteration is not Apparent
Payment of any negotiable instrument which has been materially altered but not apparent to identify
the alteration or any crossed cheque where crossing is not apparent and if otherwise in due course, the
paying banker shall be discharged from all liabilities thereon and such payment shall not be questioned
for alteration.
Sec.122A Revocation of Banker9s Authority
The duty and authority of a banker to pay a cheque drawn on him by his customer are determined by-
(1) countermand of payment;
(2) notice of the customer's death;
(3) notice of adjudication of the customer as an insolvent.
In addition, the banker can legally return a valid cheque without payment for insufficient fund,
garnishee order, standing instruction as assignment, etc.
Collection of Cheque & Collecting Banker
A collecting banker is one who undertakes to collect the amount of a cheque for his customer from the
paying banker. In collecting a cheque, the banker can act in two capacities viz. (1) as a holder for value;
and (2) as an agent for collection.
1. The banker would be as a holder for value:
i. If he allows his customers to withdraw money before cheque paid in for collection are actually
collected and credited
ii. If any open cheque is accepted and the value is paid before collection, and
iii. If there is a reduction in the overdraft account of the customer before the cheque is collected
and credited in the respective account
In all these cases, the banker acquires a personal interest.
2. A banker as an agent:
In practice, no banker credits a customer account even before a cheque is collected. He collects a cheque
on behalf of a customer. So, he cannot acquire any of the rights of a holder for value. He has to act only
as an agent of the customer.

Duties of a Collecting Banker : The collecting banker should observe the following duties &
responsibilities:
(a) Exercise Reasonable Care and Diligence in his Collection Work: When a banker collects a cheque
for his customer, he acts only as an agent of the customer. He should exercise reasonable care,
diligence and skill in collection work.
(b) Present the Cheque for Collection without any Delay: The banker must present the cheque for
payment without any delay. If there is delay in presentment, the customer may suffer losses due

44
 to the insolvency of the drawer or insufficiency of funds in the account of the drawer or
insolvency of the banker himself. In all such cases, the banker should bear the loss.
(c) Serving Notice to the Customer in the Case of Dishonor of a Cheque: The N.I Act has prescribed
a reasonable time for giving the notice of dishonor. If he fails to do so and consequently, any loss
arises to the customer, the banker has to bear the loss.
(d) Present the Bill for Acceptance at an Early Date: As per Sec.51 of the N.I Act; a Bill of Exchange
must be accepted. If a banker undertakes to collects bills, it is his duty to present them foe
acceptance at an early date.
(e) Present the Bill for Payment: The banker should present the bills for payment in proper time
and at proper place. If he fails to do so and if any loss occurs to the customer, then, the banker
will be liable. According to Sec. 66 of N.I Act a bill must be presented for payment on maturity.
(f) Protest and Note a Foreign Bill for Non-Acceptance: In case of dishonor of a bill by non-
acceptance or non-payment, it is the duty of the collecting banker to inform the customer
immediately. Generally, he returns the bill to the customer. In the absence of specific
instructions, collecting bankers do not get the inland bills noted and protested for dishonor. If
the bills in question happens to be a foreign bill, the banker should have it protested and noted
by a notary public and then forwarded it to the customer.
Sec.131 Non-liability of Banker Receiving Payment of Cheque i.e Statutory Protection to the Collecting
Banker
A banker who had in good faith and without negligence received payment for a customer of a cheque
crossed generally or specially to himself shall not in case the title to the cheque proved defective incur
any liability to the true owner of the cheque by reason only of having received such payment.
According to Sec.131 of the N.I Act, statutory protection is available to the collecting banker in the
following cases:
(a) Crossed Cheque Only: A collecting banker only for crossed cheques can claim statutory protection.
It is so because, in the case of an open cheque, it is not absolutely necessary for a person to seek the
service of a bank.
(b) Collection on behalf of Customer as an Agent: A banker can claim the above protection only for those
cheques collected by him as agent of his customers.
(c) In Good Faith and without Negligence: In order to get the protections under this section, a collecting
banker must act in good faith and without negligence. Matter of negligence is of great importance.

45
Cheque: Definition, Types of Cheque including MICR Cheque, Parties, Salient Features,
Material Alteration, Payment and Cancelation, Stop Payment of Cheque & Cheque Return
Memo. Cheque Book Issue, Delivery, Duplicate Issuance. Passing, Cancellation, Payment &
Transfer of Cheque, Important Checking Point etc.

Negotiable Instruments

As per Negotiable Instruments Act, 1881, the following are negotiable instruments.

1. Promissory Note
2. Bill of Exchange
3. Cheque
4. Demand Draft
Definition of Cheque:

As per Section-6 of the NI Act, 1881, 8A Cheque is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.9

Characteristics of Cheque:

1. Cheque must be in written

2. Cheque can be transferred or negotiated easily
3. Cheque is used to make safe, secure and convenient payments
4. Cheque should be drawn on banker
5. It contains an unconditional order to pay
6. Payee must be certain
7. The cheque must have an order to pay a certain amount
8. It should be signed by the drawer and should be dated
9. Cheque is payable on demand
10. A valid cheque is payable. A cheque is normally valid for six months from date it bears.
11. Cheque does not require acceptance and stamp
Types of cheques:
Cheques are of mainly two types:
1. Open Cheque: An open cheque is a cheque that is not crossed and payable over the counter by
the Bank.
2. Crossed Cheque: The cheque is crossed at the top left corner by drawing two parallel lines with
or without using some words.

Open cheques are of two types:

a. Bearer Cheque: Bearer cheque is payable over the counter to the bearer or the presenter of
the cheque by the drawee Bank. This cheque is transferable only by delivery.

Image of Cheque/Bearer Cheque:

95
 b. Order Cheque: When the word <Or Bearer= printed on the cheque is cancelled or the word
<Order= is written on the cheque, then the cheque is called an <Order Cheque=. The payee can
transfer the ownership of an order cheque to someone through endorsement & delivery.

Image of an Order Cheque:

Crossed cheques are of two types :

a. General Crossing:In a General crossing, simply two parallel lines , with or without the words
<Not Negotiable=, <& Co.=, <A/C Payee=, A/C Payee Only=, etc.

b. Special Crossing: In a special crossing, the name of the Banker is written between the two
parallel lines.

Classification of Cheques on the basis of date:

1. Stale Cheque: If a cheque is not presented to the bank within 6 (six) months from the date written
on the cheque is defined as a Stale cheque.
Example: A cheque dated 10 January, 2023 is presented to the bank on 11 July, 2023, the cheque
will be returned by the bank stating that the cheque is Stale.
2. Ante-Dated Cheque: If date entered on the cheque is prior to the current date; this type of cheque
is called an Ante-Dated Cheque.
Example: On 10 October, 2023, Mr. X issued a cheque to Mr. Y. Date written on the cheque is
10 August, 2023.
3. Post Dated Cheque: If a cheque issued by the drawer for the upcoming/future withdrawn date,
then this type of cheque is called a Post-Dated Cheque.

96
 Example: On 10 October, 2023, Mr. X issued a cheque to Mr. Y. Date written on the cheque is
10 December, 2023.
Other Types of Cheque:
1. Mutilated Cheque: A cheque which is torn, damaged, crushed or washed is called Mutilated
Cheque.
2. Traveller9s Cheque: This sort of cheque is used by traveler issued by a particular bank arranging
for payment at different Cities/Countries. The payee of the cheque signs in it at the time of
issuance. The Cheque can be encashed by putting same signature.
3. Gift Cheque
4. Blank Cheque, etc.
Elements/Parts of Cheque:

There are two kinds of elements/parts in a cheque:

• General Parts/Printed Parts
• Essential Parts/Material Parts.
General Parts/Printed Parts Essential Parts/Material Parts

i. Date (Blank Column), Name of the i. To fill in the column of date

Bank, Barcode, Monogram ii. To write down the name of the natural
ii. Branch Name, Online Banking (payable person or legal entity (Payee)
at any branch in Bangladesh) iii. Exact amount of money both in word &
iii. Printed serial number, account number, figure
name of the customer iv. Signature of the drawer
iv. Pay to bearer, Taka (words) & Taka
(figure)
v. MICR Encoding There are also 2 (two) vital essential parts
vi. Routing Number which make a basic change of a cheque:

v. Cancellation of the word <Bearer=

automatically makes the cheque an
<Order Cheque=
vi. Crossing the cheque by drawing two
parallel lines across the top left-hand
corner of the cheque

Parties of Cheque:
i. Drawer: The person who draws/signs the cheque and orders the Bank to pay the sum.
ii. Drawee: The Bank on which the cheque is drawn to pay the specified sum written on the
cheque.
iii. Payee: The beneficiary who is entitled to get the sum.

Apart from these three, there are two more parties of a cheque;
iv. Endorser: When a party transfers his right to another party through endorsement is called
the endorser.
v. Endorsee: The party in whose favor the right is transferred is called the Endorsee.
Material Alteration:
The term material alteration indicates alteration or change in the material parts of the cheque. All
changes in the instrument which alter the operation of the instrument or the rights and liabilities of
the parties shall be material alteration.
Instances of Material Alteration:
i. Alteration of the date of the instrument.
ii. Alteration of the sum payable.
iii. Alteration in time of payment.

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iv. Alteration in the place of payment. Even when a place of payment is added without the
acceptor9s Consent, it will also be taken as a material alteration.
v. Alteration by the addition of a new party.
vii. Alteration of an order instrument into bearer instrument.
In case a cheque is materially altered and the banker makes the payment, he shall be discharged from
liability when he proves that the alteration could not be detected with reasonable care, prudence and
scrutiny and the payment has been made in due course.
Some important Issues:

Holder: A person who legally obtains the cheque with his name to receive the payment is called the
<Holder= of the cheque.
Holder in due course:
Holder in course is defined as a holder who acquires the cheque in good faith for consideration
without any idea of a defective title of the party who transfers the title to him.
Example:
A (Holder),
B (Holder & Endorser),
C (Illegally received the cheque from B),
D (Legally received the cheque through negotiation),
<D= becomes the <Holder in due course= if:
D does not know <C= is illegal holder;
Considerations in such case:
i. In good faith without negligence,
ii. Instrument valid in all respect.
<D= can sue against all the parties if the cheque is not honored.
(As per Transfer of Property Act-1882, <A man cannot give better title unless he has.= This law
contradicts with NI Act-1881).
Conditions for Payment in due course:
a) Thorough verification of the instrument presented for payment,
b) Payment to be made only to a legally entitled person,
c) In good faith without negligence,
d) There is no reasonable ground for believing that he is not entitled to receive payment.
Cheque Book: A bundle of cheque leaves maintaining proper serial number attached together issued
by the Bank is called a Cheque Book

Issuance & Delivery of Cheque Book

a) The Customer would normally request for a Cheque Book when he opens his new account.
The existing customers are also applying for cheque books on requirement basis.
b) The Bank will issue a cheque book to Customer for the first time upon receipt of
acknowledgment of Thanks Letter. Customer will receive it in the mail or by courier in a few
days9 time.
c) The new cheque book will be issued only upon written request/cheque requisition slip.
d) Cheque book shall be hand delivered by the Branch to the customer/authorized representative.
e) Bank may also dispatch the cheque book at the customer address registered in his/her account
with the Branch. It would be the responsibility of the customer to notify the branch any change
in his/her communication address and contact details to avoid wrong delivery of cheque book.
Communication address and contact details such as tel. no./mobile no./email ID are required
to enable timely delivery and to facilitate identification for the customer to submit the details
to the branch with relevant documentary proof.
f) If the cheque book is to be issued through the bearer, his/her signature must be attested by the
account holder on the cheque requisition slip or the authority letter. Signature of the bearer
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 shall be obtained in acknowledgement on the requisition slip/ authorization letter. The party9s
acknowledgement of the receipt of cheque book shall also be obtained by sending him/her a
letter.
g) Delivery of cheque book by messenger shall be avoided.
Stop Payment of Cheques:
1. Instruction for stopping payment of any cheque shall be obtained from the Account Holders
in writing.
2. If such instructions are received over telephone, fax or by telegram a provisional note in
respect thereof shall be made on the relative ledger folio, pending receipt of written
instructions from the Account holder. In the meantime, if such Cheque presented should be
returned with the objection <drawer9s confirmation required.=
3. The date and time on Instructions received shall be marked on the letter. The signature of
Account holder shall be verified on the application and a <STOP PAYMENT= seal is affixed
on the right hand side of the ledger folio.
4. The relevant Officer shall check the relative account and ensure that the particular cheque has
not been paid. The respective officer shall enter the particulars of the Cheque with his initial
and the General Banking In-Charge shall authenticate the entries.
5. Particulars of the cheque shall also be noted in the stop payment register.
6. An acknowledgement Memo shall be prepared in triplicate. The original shall be sent to the
customer, the duplicate shall be pasted on the ledger folio of the account and triplicate shall
be retained in the Memo Pad as office record.
7. The stop payment application received from the parties shall be filed in the <Stop Payment
File=. When a stop payment cheque is presented, return the cheque with objection <Payment
Stopped by Drawer.=
8. When an account shall be carried forward to a new folio, the <Stop Payment= instructions
shall also be carried over to that folio.
9. Bank can also refuse to make payment of a Cheque, if the Bank is notified about the expiry
or of Insanity of the Drawer.
10. Bank can also Stop payment of Cheques if the Bank receives any Garnishee Order (An Order
implies a prohibiting Order by a court of Law attaching the funds of customer9s Account).
11. Bank can also Stop payment of Cheques receiving Freezing instruction from regulatory
authorities like NBR.
12. Bank can also refuse to make payment of a Cheque, if the Bank is notified about the
insolvency and winding up on the concern customer or company.

Return of a Cheque:
The cheque, if dishonored, cheque return memo to be issued stating the following causes as
applicable in case to case basis (In case of BACH):
1) Insufficient fund, 2) Amount in figure and word differs, 3) Stale Cheque, 4) Postdated/undated
cheque, 5) Drawer9s signature differs/missing, 6) Payment stopped by drawer, 7) Item represented
too often/more than three times, 8) Incomplete or missing endorsement, 9) Forged Endorsement, 10)
Material Alteration-Payee/amount/date/account no., 11) Forged or unauthorized signature, 12)
Missing corporate stamp, 13) Incorrect amount, 14) Item sent to wrong Bank/Branch, 15) Account
closed/dormant/blocked, 16) Advice not received, 17) Duplicate item-previously paid, 18) Incorrect
payee, 19) High value item presented to an ineligible Branch, 20) Cheque not activated, 21) Cheque&
Advice data mismatched, 22) 7 days9 notice required, 23) Test keys required /differ, 24) Not arranged
for, 25) Revenue stamp required, 26) Signature & seal required, 27) Budget required/refer to the
issuer, 28) Item required revalidation, 29) MICR data & image mismatched.
In terms of circular letter No. BRPD(P) 717/2002/1020 dated 12/12/2002 of Bangladesh Bank, Head
Office; the cheque return memo to be issued stating the following causes as applicable in case to case
basis (In case of counter payment):
1. Insufficient fund
2. Amount in figure and word differs.
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 3. Drawer9s signature differs.
4. Payment stopped by drawer.
5. Not arranged for
Cancellation and Payment of Cheques:
A banker on whom a cheque is drawn should pay the cheque when it is presented for payment. This
cheque-paying function is a distinguished one of a banker. This obligation has been imposed on
banker by section 31 of the N.I. Act. A banker is bound to honor his customer9s cheque, to the extent
of the funds available and the existence of no legal bar to payment. Further, the cheque must be in
order and it must be duly presented for payment at branch where the account is kept. The paying
banker should use reasonable care and diligence in paying a cheque, so as to, abstain from any action
likely to damage his customer9s credit. If the paying banker wrongfully dishonors a cheque, he will
be asked to compensate the loss.

So, a banker must be very cautious both at the time of honoring as well as dishonoring his customer
cheques. To get protection of the paying banker and to protect the interest of the customer, the paying
banker while making payments of his customer9s Cheque should take the following precautionary
measures:
Precaution:
1. Form of cheques: Although there is no specific specimen of cheque forms in Negotiable
Instrument Act., different banks provide in their rules of operating accounts that the Cheque must
be drawn in the printed forms i.e., the Cheque books supplied by them and the bank can dishonor
the Cheque if it is not on the printed cheque.
2. Date of Cheque: While receiving cheques for payment the banker should examine the date
very carefully as the banker can neither pay a post-dated cheques nor a stale Cheque.

Risks Involves in payment of Post Dated Cheque/ Stale Cheque:

A. Postdated cheque: In case a cheque is postdated. e. it bears a date which is yet to come, the
banker
should pay it only on due date or after the date mentioned in the cheque but not later than 6
months. If a bank pays such cheques, it will run the following risk:
a) The drawer may countermand the payments before the date mentioned on the cheque and then the
bank will not be entitled to debit the customer9s account with the amount of the cheque.
b) The drawer may make the banker liable for dishonoring of other cheques on account of
insufficiency of funds resulting because of payment of the post-dated cheques.
c) In case of insolvency or death of the drawer before the date mentioned on the cheque, the banker
shall not be entitled to debit the customer account if it has already made payment of the cheque.
d) The payment of post-dated cheque shall not be considered to be payment in due course and, therefore,
banker shall not get any statutory protection if the payment is made to wrong person.
B. Stale Cheque: It is the custom of the banker not to pay cheques which are presented after a
certain period has elapsed since the apparent date of the issue. Generally, the period of a cheque
is considered valid for 6 months.
3. Amount of cheques: The banker should examine that the amount mentioned in the cheque both
in words and figure are the same. If it differs, the banks usually return the cheque for the reference
to the customer.
4. Funds of customer: There should be sufficient fund in the account of the customer for payment
of the Cheque. Cheque has to be paid in full and not in part and, therefore, inadequacy of fund
will result in dishonor of the cheque.
5. Material alteration: All changes in the instrument which alter the operation of the instrument or
the rights and liabilities of the parties shall be material alteration. All material alteration must
have drawer9s approval with his full signature where the alterations are made.

100
In case a cheque is materially altered and the banker makes the payment, he shall be discharged from
liability when he proves that the alteration could not be detected with reasonable care, prudence and
scrutiny and the payment has been made in due course.
6. Drawer9s signature: Bankers make payment of cheques on verifying the recorded specimen
signature of the drawers of the cheque. If the drawer9s signature is forged, and the banker makes
payment of the cheque, the loss will be borne by the banker. When there is a joint account, both
or all the signatures on the cheque should be genuine. In case any of the signatures is forged, the
bank shall not make payment of such cheque.
7. Mutilated cheque: A cheque is said to be mutilated when it is torn or torn into two pieces or
more. Such a cheque should not be paid by the banker.
8. Banking Hour: The banker should make payment of only such cheques, which have been
presented, to it for payment during its banking hour. Any payment of cheque which was presented
after banking hour will not be taken as a payment in due course and the banker will not be entitled
to debit the customer9s account if in the, meanwhile, the customer has stopped the payment, or
some similar events had happened.
9. Crossing: The paying banker should make payment of a crossed cheque only through the
collecting banker. In case of special crossing, the payment of a cheque should be done only to the
banker whose name has been mentioned between the two parallel lines. In case the paying banker
makes payment of a crossed cheque in contravention of the above rules, its liability will be as
follows:
a. The paying banker will have to reimburse the true owner for any loss that he might have
suffered on account of payment being made to a wrong person.
b. The paying banker shall not be entitled to debit his customer9s account with the amount of
payment in case of payment has been made to a wrong person since it has not followed the
mandate of the customer. Such payment will not be taken as a payment made in due course.
Rules of Positive Pay Instruction:
To ensure safety & security of the customers money as well as to avoid the complexity of legal
proceedings, Bangladesh Bank introduces <Positive Pay Instruction= issuing a circular by Payment
Settlement Department on 26 November, 2013 (PSD Circular No.04/2013).
General Rules of Positive Pay Instructions :
1. For corporate & proprietorship concerns, to honour a cheque placed through BACH in case
of Tk.1,00,000.00 and above <Positive Pay Instruction= is mandatory.
2. For individual & joint account, to honour a cheque placed through BACH in case of
Tk.5,00,000.00 and above <Positive Pay Instruction= is mandatory.
If the customer fails to submit Positive Pay Instruction, Bank can return the cheque mentioning the
reason <Advice not received=.
Usually, a Positive Pay Instruction contains:
a) Customer Account Number & Title,
b) Name of the Holder,
c) The amount (as per cheque),
d) Date of the cheque,
e) Cheque number,
f) Name of the collecting Banker.
Circumstances under which a cheque can be dishonored (Section 122 A of NI Act);
i) Countermanding;
ii) Upon receipt of the notice of Death;
iii) Upon receipt of the notice of Insolvency;
iv) Upon receipt of the notice of Insanity;
v) Upon receipt of the notice of Garnishee Order;
vi) Upon receipt of the notice of Assignment;
vii) Defective Title;
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Paying and Collecting Banker - Definition, Duties and Responsibilities of Paying Bankers &
Collecting Bankers- Relevant Sections of N.I. Act for obtaining Protections of Paying Banker and
Collecting Banker, Rules of Garnishee Order and Case Study.

What is Collecting Banker?

The bank, which receives the payment of a crossed cheque on behalf of its customer, is known as the
collecting banker. There is significant risks involvement in receiving of crossed cheques payment.
The customer on whose behalf a cheque is collected may turn out to be not entitled to the cheque.
The banker may thus become legally responsible to the true owner of the cheque for conversion in
having helped a person to receive money to which he was not entitled. Doubtless thus, bankers
deserve to be protected against such liability. A branch of bank collecting the payment of a cheque
from another branch of the same bank is also designated as collecting banker.

Legal position: While collecting customer's cheques, a banker acts either:

i) As a holder for value, or
ii) As an agent of the customer.

As a holder for value: A collecting banker is regarded as a holder for value when he acts in any of
the following way: -

1. When a banker has given value of the cheque to the customer before its collection.
2. When the banker expressly or impliedly permits his customer to draw against the cheque deposited
for collection before its actual realization.
3. When a banker credits a cheque to his customer's account against the payment of an existing over
draft or loan.
Rights as a holder for value: A banker enjoys the rights of a holder in due course. If the cheque sent
for collection is returned or dishonored, the collecting banker can sue all the parties. Besides, as a
holder for values a collecting banker enjoy a complete defense against an action for conversion,
provided that the acts in good faith and the only or the last endorsement in the cheque is not a forged
one.

As an agent: A collecting banker acts as an agent of the customer if he credits the customer's account
after the amount is actually realized from the drawee Bank. As an agent, the collecting banker does
not possess better title to cheque than that of his customer. Thus when, the customer's title is found
defective the collecting banker may be held liable for "Conversion of Money".

Conversion by the collecting Banker: Conversion means wrongful or unlawful interference (i.e.
using, selling, occupying or destroying) with another person's property, which is inconsistent to the
true owner's right. Negotiable Instruments are also included in the term "property". Conversion is
independent of intention and knowledge and an innocent party may be held liable for conversion.
Hence, a collecting banker may be charged for conversion if he collects cheques for a customer who
has no title or defective title to the instrument.

Statutory Protection to the collecting banker: Keeping in view the importance of banking business
and in order to minimize the risks inherent to collecting of cheques by the bankers the Negotiable
Instruments Act provides statutory protection to the collecting banker against the risks of conversion
as follows: -
N.I. Act. Section 131 Non liability of banker receiving payment of cheque – A banker who
has in good faith and without negligence received payment for customer of a cheque crossed

103
generally or specially i to himself shall not, in case the title to the cheque proves defective, incur
any liability to the true owner of the cheque by reason only of having received such payment
Explanation- A banker receives payment of a crossed cheque for a customer within the meaning of
this section notwithstanding that he credits he credits his customer9s account with the amount of the
cheque before receiving payment thereof.

To avail statutory protection a Collecting Banker must fulfill the following conditions:
i) For Crossed Cheque only: The statutory protection is available to the collecting banker only
in case of cheques crossed generally or especially to himself. It is essential that the cheque is
a crossed one before it is deposited with the collecting bankers.
ii) Collection on behalf of a customer: A banker must collect cheque on behalf of his customer
only. If a cheque is collected on behalf of a person who is not a customer of the Bank, he
cannot claim protection under section 131 of the Negotiable Instruments Act. Such protection
is not also available to the banker when he acts as holder for value.
iii) Payment must be received in good faith & without negligence: The most important
prerequisite for availing the statutory protection is that the banker receives payment in good
faith and without negligence.
iv) BACH Rule 3 As per BACH Rule Collecting Banker is the presenting Banker & has to follow
presenting rules. Scrutiny to the genuineness of Instrument. Any erasing, overwriting, editing,
deleting in the material parts / MICR line of the Instrument. Because Paying Banker get the
only Image of Instrument,

Section -131B. Protection for <account payee=

Where a cheque is delivered for collection to a banker which does not at the time of such delivery
appear to be crossed <account payee= or to have had a crossing <account payee= which has been
obliterated or altered, the banker, in good faith and without negligence collecting payment of the
cheque and crediting the proceeds thereof to a customer, shall not incur any liability by reason of
the cheque having been crossed <account payee=, or of such crossing having been obliterated or
altered, and of the proceeds of the cheque having been credited to a person who is not the payee
thereof.

In Good Faith: A collecting banker is deem to be acted in good faith when it is in fact done
(Collection of cheque) honestly i.e. without notice of the defective title of the customer and without
any involvement in the act of conversion.

Without Negligence: Negligence depends upon the circumstances of each case, generally speaking
negligence, indicates lack of care, which is necessarily to be taken in any circumstance. Some
examples of negligence are given below: -

i) AML Compliance KYC, CPV & Opening of account without satisfactory introduction:
Failure on the part of a collecting Banker to obtain satisfactory introductions at the time of
opening the account in the name of a person whose title to the cheque collected turned out to
be defective, was held to be negligent sufficient enough to deprive statutory protection.

ii) Verification of endorsement: It is the duty of the collecting banker to verify the correctness
of endorsement, if any, on an order cheque tendered for collection and failure to do the same
may amount to negligence. Since the collecting banker's statutory protection is not adequate
enough to provide protection always in case of forged endorsement, a collecting banker
should take sufficient care in case of third party cheques about the genuineness of the
endorsement in addition to regularity of the endorsement. If the endorsement is a per pro

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 endorsement, or endorsement put on delegated authority, the collecting banker is to put on
inquiry as to authenticity of the authority of the person who signs.

iii) Failure to take note or "Account Payee" Crossing and 'Not Negotiable' Crossing: A
cheque crossed 'Account payee' should not be collected in an account other than the payee
named in the cheque. Whenever a cheque is crossed 'Not Negotiable' means that the title of
the transferee shall not be better than that of transferor. Therefore, the collecting banker
should carefully examine the title of the prior parties before accepting a cheque, with 'Not
Negotiable' crossing.

iv) Enquiry to be made in doubtful cases: It is essential for a collecting banker to make
sufficient enquiries in doubtful cases as a safe guard against an act of conversion. Some
examples are given below: -
a) If a person of ordinary means deposits a cheque for a large amount the banker should
properly enquire into the matter in order to ascertain the good title of the depositor.
b) A cheque drawn by a customer in the capacity of agent, attorney, manager, partner,
Director of a Company, Public Official or Trustee etc. should not be collected in the
private account of the customer without satisfactory enquiries.
c) Similarly instruments payable to Principal, Firm, Limited Company, Public Official,
Trust Account etc. and endorsed in favour of the Private account of agent, Manager,
Partner, Director, Public Official etc. should not be collected without satisfactory
enquiries.
While conducting such enquiries a banker should consider the following: -

i) Transaction profiles (as per Anti 3Money Laundering Act.)

ii) The amount of the cheque.
iii) The history of the account to which the amount is to be credited.
iv) Age of Account
v) Present perspective of customer business.

Duties of Collecting Banker: The duties of a collecting banker towards his customer are as follows:

1) Presentment for payment: A collecting banker should present the cheques received for
collection to the drawee within a reasonable time. Recognized practice in this regard is that the
collecting banker should present the cheques by the following working day if the drawee bank is
located at the same place and in case of outstation cheques, he should dispatch to the drawee bank
by the following working day. If the presentment of the cheque is to be made through an agent,
he (agent) can also hold for a single day. If undue delays are made in presentment and the
customer suffers, the collecting banker may be liable to reimburse such losses arising out of the
following circumstances: -

i) If the drawee bank fails:

ii) If the drawer becomes insolvent:
iii) Payment is received with delay and in the meanwhile a cheque drawn by the
customer is dishonored, which may be held wrongful.

2) Notice of dishonor: In case of cheques returned dishonored, the collecting banker must serve notice of
dishonor to the customer within reasonable time to enable him to claim the amount from the prior parties.
If collecting banker fails to do the same he will be liable to the customer for any loss suffered by him.

SCRUTINY OF PAY-IN-SLIP
1 On the Counterfoil and pay-in slip, the following should be checked;
i) Date of Deposit - Which should be current date.
ii) Account Number.

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 iii) Title of Account.
iv) Cheque(s), Number(s) & Name of drawee bank(s).
2 The depositor's name/ signature should be given in the larger portion of the pay- in- slip.

3 Customer should use separate pay-in- slip for Transfer, Transfer delivery & Clearing
cheques etc.
4 The amount noted should be the same as the amount of the instrument and the amount
in words and figures should be same.
Scrutiny of Instruments
1. The instrument should neither be stale nor postdated or impossible dated.
2. Collection may arise Money Laundering /Suspicious Transaction.
3. The Instrument should not bear any unauthorized alterations
4. The instrument should not be mutilated.
5. The amount in words and figure should be same.
6. The instrument should be crossed, but not specially crossed to another bank. If the cheque or
draft is not crossed ask the depositor to cross it.
7. It the cheque is crossed "A/c Payee" or "A/c payee only" or "Payee's Account"; it should be
accepted for collection for payee's Account only.
8. If the instrument is crossed "Not negotiable", it should not generally be collected for third
party. If instruments may, however be collected for third party with special precaution.
9. "Not transferable" instruments like T.T, M.T. receipts, pay slips and treasury receipts, FD
Receipts should not be collected for a person other than the payee. The payee on Revenue
Stamp should discharge instrument.
10. Should not collect an instrument in the account of an agent, or of the servant of the Payee.
11. A cheque payable to a firm should not be accepted for crediting to a personal A/C of the Partner.
12. A Cheque drawn by a customer in the capacity of an agent, attorney, or Manager of his
Company or firm should not be collected for credit to his personal account.
13. A cheque payable to one of the joint account holders should not be collected for the Joint
account without payee9s endorsement or consent.
14. If the payee is a Govt. Official, the instrument cannot be collected for the payee's own account.
15. Cheque payable to a trust account should not be collected for crediting to the Trustee9s own account.
16. If the account is new or balance & operation of the account is not satisfactory, satisfy yourself
about the title of the customer to the instrument before accepting

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 PAYING BANKER
What is Paying Banker?

Paying banker9 is the 8drawee bank9 or other words the banker upon whom a cheque is drawn. It
pays the cheques to the collecting banker who presents those before him on behalf of their customers.
He is responsible to the customers and duly bound to make payments to the right persons in
accordance with the instructions of the drawer. Paying Banker will get the protection if only made
the 8payment in due course9 as per :-

NI. Act. Section 3 10. <Payment in due course= means payment in accordance with the apparent
tenor of the instrument in good faith and without negligence to any person in possession therefore
under circumstances, which do not afford a reasonable ground for believing that he is not entitled
to receive payment of the amount therein mentioned.

Section 126. Payment of cheque crossed generally

Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise
than to a banker. -Where a cheque is crossed specially, the banker on whom it is drawn shall not
pay it otherwise than to the banker to whom it is crossed, or his agent for collection.

Section 127. Payment of cheque crossed specially more than once

Where a cheque is crossed specially to more than one banker, except when crossed to an agent for
the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.

Section 128. Payment of Cross Cheque: (Cross Cheque Payment in Due Course)

Where the banker on whom a crossed cheque is drawn in good faith and without negligence pays it,
if crossed generally, to a banker, and if crossed specially, to the banker to whom it is crossed or his
agent for collection, being a banker, 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 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: Provided…… Provided that where a cheque is presented for payment
which does not at the time of presentment appear to be crossed,

Duties of paying banker at the time of payment of cheque

a) Signature Verification.
Verify the signature of the drawer on the cheque to see if it agrees with the specimen of record.

Check whether all material alterations have been authenticated by the full signature(s) of the
drawer(s). Verify the date of the cheque to ensure that the cheque has not become stale. If a cheque
is stale it should not be paid unless revalidated.

b) Positive Pay Notice

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Verify the <Positive Pay Instruction= for BACH Collection Cheques

c) Check Crossing & Endorsements

Should not pay a crossed cheque across the counter except to another bank presenting it. Verify
the crossing whether special or general. Carefully scrutinize crossings with additions like 'Not
Negotiable' and 'A/c Payee'. See whether endorsements by the thumb impressions are
authenticated and attested by a known party. Ensure that the endorsements on the cheques are
regular and correct.

d) Payment of Company Cheque

Note whether a cheque is bearer or order. If a Cheque is made payable to a firm or company or joint
holders credit the proceeds to the respective firm or company or the joint payees, but not to an
account of any one person who is a partner employee, or director or one of the joint holders
respectively.

Check the Material Parts of the a Cheque

 Check whether the amount in words and figures agreed in the cheque. Should not pay
cheques, which have been stopped by the drawer. Pay only cheques that have been drawn
on to same branch of the bank in which the customer has his account.
 Examine that cheque is not torn or mutilated Pay the Cheque only during banking hours.
(Banker has no protection transactions beyond Banking hour)
 Check whether the cheque has been drawn in the correct form supplied by the bank or
not, cheque leaves issued to one party cannot be used by another. Do not pass cheques,
which has been drawn by pencil.
 Compute carefully the balance at the credit of the customer.
 Verify whether the number of cheque Routing Number entered in ledger with the
number of leaves of the cheque book issued to the customer concern.
 Where an individual depositor is reported to be deceased, payment of cheques on his
personal account shall be stopped.
 Verify whether there is any earmarking in the Account or any Garnishee order from
the courts or freezing of balance by income Tax Authorities, before passing the cheque
If there is a sufficient balance in this A/c for the purpose of making the payment.
e) Check Transaction Profile (TP) Try to ascertain that there is any scope of Money
Laundering / Tricky transaction or Suspicious Transaction

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Endorsement and Crossing of Negotiable Instrument-
Instrument- Types of Crossing & Endorsement and
Their Significance-
Significance-Rules/Legal Provisions of Endorsement
Endorsement - Regular and Irregular
Endorsement with Example including Bank9
Bank9s Endorsement.

Introduction:
A negotiable instrument may be transferred by negotiation or assignment. Negotiation can be effected
by mere delivery if the instrument is a bearer one and by endorsement and delivery in case it is an
order instrument. An order instrument means instruments payable to a specified person or to the order
of that specified person. If an instrument payable to order is transferred without endorsement, it is
merely
merely assigned and the holder thereof is not entitled to the rights of a holder in due course.
Negotiable Instrument:
The negotiable Instruments Act does not define a negotiable instrument but merely state that a
<negotiable instrument means a promissory note
note , bill of exchange or cheque payable either to order
or bearer ( Section-
Section-13) .
A negotiable instrument is a transferable document that passes freely from hand to hand & forms an
integral part of the modern business mechanism
Meaning of Endorsement:
Endorsement:
The word endorsement is said to have been derived from Latin 8en9 en9 means 8upon9
upon9 and 8dorsum9
dorsum9
meaning 8the back9.
back 9. Thus usually the endorsement is on the back of the instrument thought it may be
even on the face of it. Where no space is left on the instrument,
instrument, the endorsement may be made on a
slip of paper attached to it. This attached slip of paper is called 8Allonge9.
Allonge9.
An endorsement is the mode of negotiating a negotiable instrument. A negotiable instrument payable
otherwise than to a bearer can be negotiated
negotiated only by endorsement and delivery. An endorsement,
according to sec. 15 of the NI Act is <when the maker or holder of a negotiable instrument signs the
same, otherwise than as such maker. For the purpose of negotiation on the back or face thereof or on
a slip of paper annexed thereto, he is said to endorse. The same and is called the endorser. <The
person to whom the instrument is endorsed is called the endorsee=.
endorsee=.
Essentials of a Valid Endorsement:
An endorsement in order to operate as mode of negotiation must comply with the following
conditions, namely:
It must be written on the instrument itself and be signed by the endorser. The simple signature of the
endorser, without additional words, is sufficient. An endorsement written on an allonge is deemed to
be written on the instrument itself.
The endorsement must be of the entire instrument.
instrument. A partial endorsement, that is to say, an
endorsement which purports to transfer to the endorsee a part only of the amount payable, or which
purports to transfer the instrument
instrument to two or more endorsees severally (i.e. separately), does not
operate as a negotiation of the instrument.
Where a negotiable instrument is payable to the order of two or more payees or endorsees who are
not partners, all must endorse unless the one endorsee has authority to endorse for the others.
Wherein a negotiable instrument payable to order, the payee or endorsee is wrongly designated or his
name is misspelt, he should sign the instrument in the same manner as given in the instrument.
Though, he
he may add, if he thinks fit, his proper signature.
An endorsement may be made in blank or special. It may also be restrictive.
Types of Endorsement:
According to the N.I. Act, 1881 endorsement may take any of the following forms:
a. Endorsement in blank or general endorsement.
b. Endorsement in full or special endorsement.
c. Restrictive endorsement.
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 d. Partial endorsement.
e. Conditional endorsement.
Endorsement in Blank or General Endorsement:
In case of an endorsement in blank the payee or endorser
endorser does not specify an endorsee and he simply
signs his name (S. 16 NIA).
Endorsement in Full or Special Endorsement:
When the payee or endorser specifies the person to whom or to whose order the instrument is to be
paid, the endorsement is called special endorsement or endorsement in full. The specified person i.e.
the endorsee then becomes the payee of the instrument.
Restrictive Endorsement:
An endorsement is restrictive when it prohibits further negotiation of a negotiable instrument. Sec.
50 of the NI Act 1881 states. <The endorsement may, by express words, restrict or exclude the right
to negotiate or pay constitute the endorsee an agent to endorse the instrument or to receive its contents
for the endorser or for some other specified person.
Partial Endorsement:
If only a part of the amount of the instrument is endorsed, it is a case of partial endorsement.
According to Sec. C. 56 of the NIA. No writing on a negotiable instrument is valid for the purpose
of negotiability, if such a writing purport
purport to transfer only a part of the amount of the appearing to be
due on the instrument. Thus partial endorsement is invalid.
Conditional Endorsement (Qualified Endorsement):
This is not a common form of endorsement. It may take many forms. It may either limit limit the liability
of the endorser or create some liability on the endorsee to receive payment of the instrument. That is,
an endorsement may be proceeded by certain condition, which should have been fulfilled by the
endorsee, for obtaining payment.
A conditional
conditional endorsement may be in any of following forms:
Sans Recourse endorsement: It is an endorsement which limits the Liability of the endorser. The
effect of this endorsement is, to render the endorser free from all liability to any subsequent holder.
It also means <without recourse to the endorser=.
endorser=.
Example: A cheque payable to Rashid may be endorsed as follows: <Pay to Rahim or order Sans
Recourse=
Recourse= or <Pay to Rahim or order=
order= <without
<without recourse to me=
me=-Rashid
Facultative endorsement: It is an endorsement, whereby, the endorser waives some of his rights on
the instrument.
Example: Rashid the holder of a bill makes the following endorsement on the bill.
<Pay to Raja or order. Notice of dishonor waived=
waived=- Rashid.
Legal provisions regarding endorsements
The Negotiable Instrument Act contains many provisions regarding endorsement:
1. Effect of Endorsement. According to Sec. 50 The endorsement of a negotiable instrument
followed by delivery, transfers to the endorsee the property therein with the rights of further
negotiation. Thus the endorsee acquires property or interest in the instrument as the holder. He can
also negotiate further if not restricted by a restricted endorsement by the endorser.
2. Who can endorse. According to section 51. 8Every sole maker, drawer, payee or endorsee or all
of several joint makers, drawers, payees or endorsees, of negotiable instrument may endorse and
negotiate the same9. Thus, in case the instrument is held jointly by a number of persons, endorsement
by all of them is essential, one cannot present the other.
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3. Time. A negotiable instrument may be negotiated until its payment has been made9 by the maker
drawee or acceptor at or after maturity not after its payment.
4. Endorsement for a part of the amount. The instrument must be endorsed-for its entire amount:
According to section 56 8no writing on a negotiable instrument is valid for the purpose of
negotiation if such writing purports to transfer only a part of the amount appearing to be due on the
instrument9.
Thus an endorsement for a part of the amount of the instrument is invalid. But in cases where an
instrument has been partly paid, it may be negotiated for the balance of the amount provided a note
to that effect is given on the instrument. If the endorser intends to transfer the document to two or
more endorses separately, it will not constitute a valid endorsement.
5. The legal representative of a deceased person cannot negotiate by delivery only a promissory
note, bill of exchange or cheque payable to order and endorsed by the deceased but not delivered.
Thus if the endorser dies after endorsing the instrument payable to order but without delivering the
same to the endorsee, the endorsement is not valid and his legal representative cannot complete the
negotiation by mere delivery thereof.
6. Unless the contrary is proved it is presumed under section 118 that 8the endorsements appearing
upon a negotiable instrument were made in the order in which they appear thereon. It means that the
endorsement which appears on the instrument first is presumed to have been made earlier to the
second one.
Regular Endorsement
A regular endorsement is nothing but a general endorsement, writing something on the back of the
cheque with an intention of transferring the rights therein. The endorser simply puts down his/her
signature without
without writing the name of the endorsed, so the property of the cheque can be transferred
by mere delivery.
Irregular Endorsement
Endorsement Irregular: this is used when endorsement is not in order, e.g. the spelling of the payee's
name as given on the face the cheque differs from that in the endorsement.
endorsement.
Proper forms of regular Endorsement:
I. A. R Khan ii. M/S Kazal Brothers iii. A.B.C Limited iv. The Dhaka Club v. Miss Rahela Hoque
(Now married to Mr. Karim ) vi. Prof. Khairul Bashar
I. A.R Khan
ii . For M/S Kazal Brothers
Abul Kashem
Proprietor
iii.A.B.C Limited
Z.H Chowdhury
Managing Director/Chairman
iv. For & on behalf of
The Dhaka Club
Aminur Rahman
Treasurer
v. Rahela Karim nee Rahela Hoque

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vi. Khairul Bashar
Professor, Dhaka College
College
Bank9
Bank9s Endorsement:
A bank endorsement is a guarantee by a bank confirming that it will uphold a check or other
negotiable instrument, such as a banker's acceptance, from one of its customers.
customers. This assures any
third-
third-party that the bank will back the obligations of the creator of the instrument in the event the
creator cannot make payment.
Usual forms of Banks Endorsement:
Endorsement:
Payee9
Payee9s Account Credited
For Islami Bank Bangladesh Ltd
Dhanmondi Branch,dhaka
Authorized Officer
Where the payees name in the cheque and name in the depositors slip is same.
Payee9
Payee9s Account will be credited on realisation
For For Islami Bank Bangladesh
Bangladesh Ltd
Dhanmondi Branch,dhaka

Authorized Officer
In case of OBC
Depositors A/C Credited
For For Islami Bank Bangladesh Ltd
Dhanmondi Branch,dhaka

Authorized Officer
If, Bearer Cheque
Our Branch endorsement confirmed
For For Islami Bank Bangladesh Ltd
Dhanmondi Branch,dhaka

Authorized Officer
OBC received from other branch for collection
Purchaser9
Purchaser9s Account Credit
For For Islami Bank Bangladesh Ltd
Dhanmondi Branch,dhaka

Authorized
Authorized Officer

Crossing ofof Negotiable Instrument:

Introduction:
A cheque may be classified as:
a. An open cheque which is payable over the counter;
b. A crossed cheque which is payable only through a collecting banker.
A cheque (also a banker9
banker9s draft)
draft) can be crossed generally or specially to a banker by the drawer, or
the holder thereof. There cannot be any general crossing without transverse and parallel lines, with
or without any wards, whereas, the name of a banker without the lines is sufficient to constitute a
special crossing.
The crossing is a material part of any cheque. It may be written, stamped,
stamped, printed or perforated
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Significance of Crossing:
The addition of a crossing on a cheque provides security and protection for the drawer (or holder)
since the drawee bank (i.e. The paying bank cannot pay out cash against a crossed cheque. As
payment of a crossed cheque is required to be made through a banker it can, therefore, be easily
detected to whose use the money has been received.
General Crossing:
The term generally crossing implies the addition of two parallel transverse lines. Sec. 123 of the NI
Act, says; <Where a cheque bears across its face and addition of the words 8and company9
company9 or any
abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines simply,
either with or without the words, not negotiable9
negotiable9 that addition shall be deemed to be a crossing and
the cheque shall be deemed to be crossed generally=.
generally=.

Special Crossing:
A special crossing implies the specification of the name of a banker on the face of the cheque, Sec.
124 of the NI Act, 1881 reads. <Where a cheque bears across its fact and addition of the name of the
banker with or without the words 8not negotiable9,
negotiable9, that addition shall be deemed a crossing, and the
cheque shall be deemed crossed specially, and to be crossed to that banker=.
banker=.
Drawing of two transverse and parallel lines is not necessary in case of a special crossing. When a
cheque has been specially crossed, the banker upon whom it has been drawn will make the payment
only to that banker in whose favour it has been crossed.
Who can cross a cheque?
cheque?
A cheque may be crossed generally or specially by the drawer;
Where a cheque is uncrossed, the holder may cross it generally or specifically;
Where a cheque is crossed generally or specially the holder may add 8not negotiable9;
negotiable9;
Where
Where a cheque is crossed generally the holder may cross it specially;
Where a cheque is crossed specially the banker to whom it is crossed may again cross it
specially to another banker for collection;
Where an uncrossed cheque or a cheque crossed generally is is sent to a banker for collection he
may cross it specially to himself.
Opening of Crossing:
As crossing is a material part of the cheque, law does not make any provision for the cancellation of
a crossing. But the cancellation of crossing has been arisen out of custom and it is commonly termed
as 8opening of crossing9.
crossing9. When a drawer wants to cancel the crossing, he writes the words 8Pay Cash9
Cash9
upon the cheque, followed by his full signature. The drawer alone has a right to cancel the crossing

113