Business News Desk,In the digital world, our phones have made many tasks easier. Banking transactions now happen in the blink of an eye. Due to this, transactions through checks have also reduced. In such a situation, what will happen if someone reminds the bank of the 142 year old law related to check clearance? Hey sir, when this happens the bank has to pay compensation. This has happened in reality. Let us tell you the whole story? Now ‘Cheque Truncation System’ (CTS) has come for check clearance of banks in the country. Due to this, physical clearance of checks has almost stopped. But even today a law of 1881 is in force in the country, which legalizes many methods of physical check clearance. One of these rules proved costly for Bank of Baroda.
The bank had to pay compensation
This case pertains to the country’s financial capital Mumbai. According to a TOI news, Avinash Nuns, who works in the insurance sector, was given a check by Saraswat Bank, which he deposited in Bank of India. Saraswat Bank had endorsed this check in favor of Avinash Nuns. Along with this, signature verification also had to be done from other banks. Bank of India employees returned the check saying that it had a cross mark on it and as per law it was a non-transferrable cheque. Such checks cannot be endorsed in favor of any third party. This mistake proved costly for Bank of India as it had forgotten the ‘Negotiable Instruments Act-1881’ of 1881.
What is this 142 year old law?
The ‘Negotiable Instruments Act’ of the year 1881 gives the right to transfer the ownership of all payment instruments like cheques, promissory notes, bills of exchange and checks and bills to a third party. For this, the paying party has to endorse the back of the check in favor of a third party, that’s all. Banks today may not accept such check endorsement requests, but this 142-year-old law is still in effect.
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