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CONSEQUENCES OF WRONGFUL DISHONOR OF CUSTOMER’S CHEQUE ?

(i) Gibbons vs. Westminster Bank A Housewife issued a cheque to a departmental store for purchases made by her.

When the cheque was presented by the departmental store, the banker negligently dishonored the cheque. When the account holder sued the bank, it was held that the bank must pay the cheque, dishonored negligently.
 
 
(ii) Davidson vs. Barclays Bank: Davidson is a book maker and he issued a cheque for 15sh-10d to a client as part of dividend. When the cheque was presented by the client, the banker, negligently dishonored it. Davidson sued the bank for negligence. The court observed that the bank by dishonoring the cheque with a paltry sum of {}{}{15sh10d has brought damage toe the reputation of the businessman. The smaller the amount of the cheque dishonored.
 
 

I.V.RAJAGOPAL VS. CANARA BANK:

 
In this case, Raja opal was employed as a liaison officer by a group of companies at Delhi. He gave a cheque for Rest. 294.40 towards telephone charges to the telephone department. When the cheque was presented to Canada Bank, it was dishonored negligently. Consequently, the telephone line was disconnected for non-payment and the employers of I.V Raja opal dismissed him from service, taking it as his negligence.
 
 

GROUNDS FOR REFUSING PAYMENT OF A CUSTOMER’S CHEQUE:

 
Dishonoring a cheque is different from refusing payment on a cheque. Dishonour takes place when there is defect in the instrument or when there are insufficient funds in the accounts. Refusing payment of a cheque takes place on the happening of certain events. We can see the grounds under which a bank refuses payment.
 
 
(1) Countermanding of payment: When a customer after having issued the cheque to third party, instructs the banker to stop payment on the cheque before the instrument is presented, it is called countermanding of payment. It is the responsibility o f the customer to inform the banker before the payment is effected.
 
(2) Death of customer: Notice of death of customer has to be given by the close relative of the deceased. On receipt of the notice, banker will close the account and any cheque received thereafter, payment will be refused.
 
(3) Insolvency of the customer: When the court adjudged the customer of a bank as insolvent, the account of that customer will be taken over by an official assignee appointed by the court. Hence, any cheque received thereafter will be refused payment.
 
(4) Lunacy: When a customer is of unsound mind, hi‘ account cannot be operated. But the lunacy of the customer has to be certified by a doctor and the nature of the lunacy must also be stated. If it is of a temporary nature, the account may be suspended till such time the lunacy is cured. But when the lunacy is of a permanent nature, on the advice of the doctor, the account will lobe closed and cheques received thereafter will be refused payment.
 
(5) Garnishee order: Here, the court gives order to the bank to close the account of the customer partially or completely and according to that order cheques will be refused payment.
 
(6) Closing of account voluntarily: When the customer on his own accord, closes the account b y giving a written declaration, the bank will close the account. But, the customer has to surrender all the unused cheques and the passbook. The banker will close the account after arriving at the balance. The amount will be paid to the customer.
 
(7) Assigning the entire balance to a third party: When a customer gives in writing to the bank to assign his entire credit balance to a third parties‘ account, the bank will close the account automatically.
 
(8) Undesirable customer: When a customer issues cheques frequently with insufficient funds, these are dishonored causing embarrassment, both to the banker and customer. Such a customer will be intimated by the banker to close the account, failing which the banker on his own will close the account and will send the balance, if any, to the customer.
 
(9) Partnership firms, companies and institutions: Their account will be operated according to the bye-law. In the case of death of a partner, winding up of companies or dissolution of institutions, the account will be closed.
 
(10) In public interest: When a banker comes to know that the account holder is building an account by cheating the public, he may close the account by giving notice to the party. The bank does this in the interest of the public and prevents the public from incurring any monetary loss.

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