Report No. 11

171. Section 131.-

In view of the recognition of "account payee" cheques, an exception relating thereto had to be made in section 131.1

1. Section 152, ibid.

172. Our attention has been drawn to the recent legislation in England relating to cheques (Cheques Act, 1957-5 and 6 Eliz. 2, c. 36).

The main purpose of the Act seems to be to extend the legal protection to paying and collecting banks, acting in good faith, in respect of uncrossed cheques, banker's drafts and like instruments which, prior to this Act, was confined to crossed cheques, and practically to exonerate the paying banks from the duty of insisting on the endorsement of the payee (except where the cheque is negotiated), provided that payment is made bona fide and in the ordinary course of business.

The implications of these provisions have not yet been clearly appreciated even by the Banks in England as appears from an article in The Law Times, Vol. 224, p. 207. The Banks in England have issued instructions to their branches to move cautiously in this behalf and they have not taken full advantage of the provisions of the Act.

The instructions issued by the Banks contain the following directions: Cases in which endorsement will not be required are:-

(a) where the cheques are paid into the account of the payee;

(b) where they are paid in for the credit of a joint or partnership account. Endorsement will still be necessary in the following cases:

(i) cheques cashed or exchanged over the counter;

(ii) negotiated cheques, that is, those tendered for the credit of an account other than that of the ostensible payee;

(iii) cheques payable to joint payees, if tendered for the credit of an account to Which all are not parties; and

(iv) bills of exchange (other than cheques) and promissory notes.

Having regard to the conditions in India, it may be dangerous to enact legislation on the lines of the Cheques Act, 1957. As the learned writer in the Law Times points out, "nothing is said in the new Act about the users of cheques". It looks solely to the convenience and protection of the bankers and we are not sure what repercussions it may have upon the interests of the customers, in a country like India. Further, there appears to have been no demand that we in India should have a legislation on those lines.

We think it advisable that we should wait until the implications of the Cheques Act, 1957, are fully known, and until there is sufficient demand by the banks and the members of the public in India for such a legislation.

173. Section 131A.-

No change has been considered necessary in section 131A.