Non-liability of banker receiving payment of cheque
Section 131 of the Negotiable Instruments Act, 1881 deals with non-liability of banker receiving payment of cheque. A banker who has 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 proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment. The Act came into force on 01 Mar 1882.
A banker who has 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 proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.
1[Explanation 2[(I)].-- A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer's account with the amount of the cheque before receiving payment thereof.]
3[Explanation II.-- It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.]
Section 131, The Negotiable Instruments Act, 1881 (Act 26 of 1881).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Pradeep Kumar vs Post Master General
Court's Decision & Legal Precedent
When a negotiable instrument (including Kisan Vikas Patras) is presented for encashment at a post office, the post office must verify that the person presenting the instrument is the 'holder' as defined under Section 8 of the Negotiable Instruments Act, 1881, by following the prescribed rules and procedures including verification of identity slip and obtaining written application from the actual holder. Payment made to a person in possession of the instrument but not entitled to receive payment in his name is not a valid discharge under Section 78 or Section 82(c) of the NI Act. Such payment constitutes negligence and violates the requirement of 'payment in due course' under Section 10 of the NI Act. The post office is vicariously liable for fraudulent acts of its employees committed during the course of employment, and such liability cannot be avoided by claiming that the employee acted in individual capacity or that the fraud was committed by a third party.
On this section: Protection of banker receiving payment - the Court clarified that this section requires good faith and without negligence, and the burden is on the banker to prove compliance
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Punjab & Sind Bank vs Vinkar Sahakari Bank Ltd.
Court's Decision & Legal Precedent
A Pay Order issued by a bank is a cheque within the meaning of Section 138 of the Negotiable Instruments Act, 1881, and the holder of such Pay Order has the legal standing to file a criminal complaint for dishonour. The fact that the drawer and drawee are the same banking institution does not prevent the instrument from being a cheque when held by a third party. The holder is presumed to be a holder in due course under Section 118(g) unless the contrary is proved, and such presumption cannot be rebutted at the stage of quashing the complaint but only during trial.
On this section: Protection of collecting bank; respondent relied on this for protection
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… It is that which is under challenge. 6. The learned counsel for the plaintiff contends that the suit as against defendant no.1 ought to have been decreed. It is asserted that the said defendant could not have been held entitled to protection under Section 131-A of the Negotiable Instruments Act, 1881 (Hereinafter referred to as the 'NI Act', for brevity). It is contended that as a collecting banker, the first defendant was negligent in opening an account in the name of the second defendant without verifying the credentials of the said person. The first defendant …
Questions about Section 131
What have the courts held on Section 131 of the Negotiable Instruments Act?
Pradeep Kumar vs Post Master General (07 Feb 2022) is the leading judgment on this section among those set out below: Protection of banker receiving payment - the Court clarified that this section requires good faith and without negligence, and the burden is on the banker to prove compliance. Another 1 judgment on this section is set out below, all of them from the Supreme Court. They run from 2001 to 2022.
How do I find court cases under Section 131 of the Negotiable Instruments Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: NI Act 131, section 131 NI Act, section 131 of the Negotiable Instruments Act. People searching for it also type negotiable instruments act 131. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Pradeep Kumar vs Post Master General (07 Feb 2022).
When did Section 131 of the Negotiable Instruments Act come into force?
Section 131 of the Negotiable Instruments Act, cited as NI Act 131, came into force on 01 Mar 1882, having been enacted on 09 Dec 1881. It is in force as at the date shown on this page.
Other sections of this Act
- 138. Dishonour of cheque for insufficiency, etc., of funds in the account312 words
- 142A. Validation for transfer of pending cases299 words
- 143. Power of Court to try cases summarily297 words
- 143A. Power to direct interim compensation291 words
- 142. Cognizance of offences290 words
- 141. Offences by companies287 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.