The document discusses the relationship between bankers and customers. It defines a banker as a person who receives money from customers and repays it on demand. A customer is a person who has an account, either deposit or current, with the banker. The relationship is contractual, with the banker as debtor and the customer as creditor. However, the roles can be reversed if the banker lends money to the customer. The relationship also involves aspects of an agency with obligations and rights on both sides. The document outlines circumstances when a banker must or may dishonor a customer's cheque, as well as protections afforded to paying and collecting bankers.

1. Banker & Customer
There is no statutory definition of the
term ‘banker’ and ‘customer’
Banker
The business of a banker in ordinary
consists in receiving money from or an
account of a customer and repaying
the same on demand.

2. The Negotiable Instrument Act defines a
banker as any person acting as a banker.
The Banking Regulation Act, 1949 defines
‘banking company’ as a ‘company which transact
the business of banking in India.
‘The term banking’ has been defined as
‘accepting’ for the purpose of lending or
investment. of deposit of money from the public
repayable on demand or withdrawable by cheque,
draft or order.

3. Customer
A customer is a person who has some sort
of account, either deposit or current
account, with the banker.

4. Legal relationship between
banker and customer
• The relationship between a banker and his
customer is essentially contractual like Debtor
(banker) and creditor (customer).
• This relationship is sometimes reversed. This
happens when the banker lends money to the
customer.
• The relationship also partakes many aspects of
agent and principal.

5. Special features or legal
relationship
• Obligation to honour cheques.
• Obligation to keep proper record of transactions.
• Obligation to abide by the express instruction of
the customer.
• Obligation not to disclose the state of his
customer’s account or affairs.
• Right of general lien.
• Right to charge incidental charges and interest
on money lent.
• Right to set-off.
• Right of appropriation.

6. When may a banker dishonour a
customer’s cheque?
• Where the banker does not have sufficient funds to the credit of the
customer.
• Where the funds to the credit of the customer are not applicable to
the payment of the cheque. (when the money held in trust)
• Where the cheque is ambigious or doubtful.
• Where the cheque is mutilated (imperfect).
• Where the cheque is irregular or materially altered.
• Where the cheque is not duly presented.
• Where the cheque is post dated.
• Where the cheque has become stale. (six months from the date of
issue).
• Where the cheque is presented at a other branch.
• Where an account is in joint names of a few persons, but they have
not all signed the cheque.
• Where the cheque is for an amount in excess of the balance.

7. When must a banker dishonour a
cuctomer’s cheque?
• When the customer become insolvent.
• When the customer countermands payment (order the banker not to
honour the cheque.)
• When the banker receive notice of the customer’s death. But he
pays the cheque before he receive notice, the payment is valid.
• When the banker receive notice of the customer’s insanity
(madness, lunacy).
• When banker receive the legal notice about customer or dealing
with money from some other sources.
• When the customer gives notice to the banker to close the account.
• When the customer gives notice of assignment of the credit balance
of his account.
• When the banker suspects, that the title of the person presenting
the cheque is defective.
• When the holder gives a notice of loss the cheque to the banker

8. Protection of Paying Banker
• Cheques payable to bearer
• Crossed cheques
• Payment of cheque crossed generally.
• Payment of cheque crossed specially.
• Payment of crossed cheque in due
course.
• Payment of crossed cheque out of due
course.

9. Protection of collecting banker
• Collecting banker as an agent.
• Crossed cheques.
• Open cheques.
• Collecting banker as a holder in due
course.