Under section 31 of the Negotiable Instruments Act, 1881, a drawee bank with sufficient properly applicable funds defaults in duly paying a cheque when required. To whom must it compensate the loss…
Question and options
Under section 31 of the Negotiable Instruments Act, 1881, a drawee bank with sufficient properly applicable funds defaults in duly paying a cheque when required. To whom must it compensate the loss or damage caused by that default?
Drawer
Holder
Holder in due course
Payee
Answer and explanation
Correct answer: A - Drawer
Section 31 requires a drawee bank with sufficient funds properly applicable to payment to pay the cheque when duly required. On default it must compensate the drawer for the resulting loss or damage; this specific duty is not a general liability to the holder or payee.
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