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RESPONSIBILITY OF COLLECTING BANK
What is the primary legal basis for a collecting bank's protection under the Negotiable Instruments Act?
Section 131 of the Negotiable Instruments Act, 1881 provides statutory protection to a collecting bank that acts in good faith and without negligence while collecting a crossed cheque for a customer.
Under which section of the NI Act does a collecting bank receive statutory protection?
Section 131 of the Negotiable Instruments Act.
What does 'good faith' mean in the context of a collecting bank's responsibility?
Good faith means the bank acts honestly and without any fraudulent intent; it does not require the bank to be free from negligence, but negligence may defeat the statutory protection under Section 131.
What is the primary duty of a collecting bank toward its customer?
Collect cheques diligently and credit proceeds promptly.
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