liability in case of payment of chque against mandate

Bhaskar Lawyer (Querist) 14 July 2008 This query is : Resolved
Inspite of stop payment instructions of the customer, his banker paid the amount covered by cheque to payee.

Can the instrument(cheque) is invalid for unauthorised payment ?

can the bank can recover the amount from the payee for the payment paid by mistake inspite of stop payment instructions ?

What is the liability of the bank towards its customer for payment of cheque in spite of specific mandate of the drawer of the cheque ?

What is the best recourse for the bank if the drawer is insisting for restoration of amount paid under the cheque ?

Please answer the queries with case laws, if possible.

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Guest (Expert) 14 July 2008
When the Stop Cheque order issued to the bank and when did it make the payment. Was reasonable time allowed to the bank to make arrangements for stop cheque or was it a last minute atempt.

arunprakaash.m. (Expert) 14 July 2008
On the date of the cheque if the drawer of the cheque has adequate fund to honour the cheque then he can issue stop payment notice to the bank. Inspite of this notice if the bank pass the cheque then bank is liabe for the transfer of the funds. On the contrary if the drawer of teh cheque does not have adequate funds on his accout for honour the cheque the it amount to dishounour of the cheque. In this can even if you give stop payment notice the concerned bank can not hold the cheque it has to dishonour the cheque. Then bank is not liable.

Manish Singh (Expert) 15 July 2008
Bank is liable to restoration of the amount so paid. It is evident in the Negotiable Instrument Act itself.
Ask their manager and lodge a formal compalint. Otherwise move the banking Ombudsman.

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