Sat. May 8th, 2021

Section 78 of The Negotiable Instruments Act, 1881

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78.  To whom payment should be made. —Subject to the provisions of section 82, clause (c),  payment of the amount due on a promissory note, bill of exchange or cheque must, in order to discharge the maker or acceptor, be made to the holder of the instrument.

                                                                     Comments

i.            Section 78 of the Act is subject to section 82 (c) which provides that the maker, acceptor or endorser respectively of a negotiable instrument is discharged from liability thereon by payment to all parties thereto if the instrument is payable to bearers or has been endorsed in blank and such maker, acceptor or endorser makes payment in due course of the amount due thereon; Tolani Shipping Co. Ltd. v. Saw Pipes Ltd., (1999) 97 Comp Cas 394.

Where the cheque was drawn to be paid to payee’s account but the bank paid it to the bearer and the cheque on the face of it appeared to be tempered with and converted by erasures into a cheque payable to bearer, the bank is negligent in making payment to bearer instead of payee and is abound to reimburse the amount to the customer; J. Ladies Beauty v. State Bank of India, AIR 1984 Guj 33

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