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Vasu Singh   08 June 2021

Honour of cheque

I with my 3 friends Akash, Sunil, and Karan own and a firm, and its accounts are signed and managed by me and Akash, and the same is informed to the bank.  If we give a cheque signed by me and Sunil, will it be legal? Can the bank honor such a cheque?  



Learning

 5 Replies

T. Kalaiselvan, Advocate (Advocate)     08 June 2021

If it is a partnership firm then a resolution to be passed to this effect authorising you both to sign the cheques either together or individually and along with your specimen signature, you may have to submit it to the bank while opening a current account in respect of your firm with the bank 

You cannot sign the cheques on behalf of the company/firm without an authorisation of the company/firm to do so in writing.

 

Sankaranarayanan (Advocate)     09 June 2021

Based on the clause of partnership if you both are signatory then it is permissible. without knowing the clause , not easy to answer your query.

G.L.N. Prasad (Retired employee.)     09 June 2021

 There are two things involved in the issue.  The partnership deed must state your name as an authorized signatory.  The second one the prescribed application which was signed by all the partners must state your name and powers granted to you to operate the account, together with your specimen signature card duly enclosed.  Without any of this neither you nor any partner can sign the cheque and even if it is signed, the cheque has to be dishonored for such reason.

There is an implied authority of partners.  An outsider maybe knowing that you are a partner of your firm and he may not be aware of your authority in drawing cheques in the name of the forum.  If he/they accept the cheque signed by you, in good faith believing that you have such authority to sign cheques, innocently accepts a cheque for payments due by the firm, he/they can accept the forum and in case of dishonor can sue the firm and all partners.

(I am aware of such incident.  One of the partners who is authorized to sign the cheques went to Chennai and there was a lockdown and he could not move.  Then there was no lockdown in the state where their factory was operating.  The weekly wages to labour has to be paid every TUESDAY.  Two partners are available locally, and like in your case, the other partner is not having such power to operate bank account.   Wages can not be stopped infinitely..  The bank manager has got the signatures of two partners, got an authority letter through what's App from the third partner, honoured the cheque for Rs.10lakhs, sent his own employee to the factory and under the bank employee supervision, wages were disbursed.   The partner after returning back has signed the paid cheque.  One of the employee got such paid cheque xeroxed and made a complaint to RBI that manager has taken law into his hands and violating operational instructions and for taking action against him. The local vigilance dept has come to the bank, confiscated the cheque. That is another story.)

SIVARAMAPRASAD KAPPAGANTU (Retired Manager)     09 June 2021

Bank shall follow the operational  instructions given at the time of account opening.In case the original arrangement is changed and communicated to bank in writing in the form of a resolution signed by all Partners, the modified operational instructions shall be followed by bank.

 

In the absence of any further instructions, subsequent to the ones given at the time of account opening, banks shall follow those original instructions only.

Dr J C Vashista (Advocate)     10 June 2021

As stated by you the company resolution "you" and "Akash" are the authorised signatory, accordingly anyone other than both of you signing cheque on behalf of company (partnership) is invalid and shall not be honoured. 


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