Module: General Practice
Q81: Section 131 of the Negotiable Instruments Act provides statutory protection to a "Collecting Banker." Which of the following is the primary condition that must be satisfied for a banker to claim this protection?
✅ Correct Answer: B
Section 131 protects a collecting banker from liability for "Conversion" (wrongful handling of someone else's property) if the title to the cheque is defective.
The four pillars of this protection are: 1. Good Faith.
2. Without Negligence.
3. Acting for a Customer.
4. Pre-existing Crossing: The cheque must be crossed before it reaches the banker for collection.
If a banker takes an open (uncrossed) cheque and crosses it themselves for clearing, they lose the protection of Section 131 and act as a private agent, fully liable for any defects in title.
The four pillars of this protection are: 1. Good Faith.
2. Without Negligence.
3. Acting for a Customer.
4. Pre-existing Crossing: The cheque must be crossed before it reaches the banker for collection.
If a banker takes an open (uncrossed) cheque and crosses it themselves for clearing, they lose the protection of Section 131 and act as a private agent, fully liable for any defects in title.