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Section 77: Liability of banker for negligently dealing with bill presented for payment

Negotiable Instruments Act • Official Statutory Text & Practice Guide

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Act 1881
Section 76 All 148 Sections of Negotiable Instruments Act Section 78

Legal Commentary & Landmark Judgments: Section 77

Section 77 establishes the statutory liability of a banker for negligently dealing with a bill of exchange presented for payment, holding the bank liable for any resulting loss.

  • Banker's Duty of Care: A banker to whom an instrument is delivered for payment must act promptly and strictly in accordance with banking customs.
  • Negligent Delay / Loss of Instrument: The bank is liable if it negligently delays presentment, misplaces the paper, or fails to return a dishonoured bill promptly.
  • Statutory Compensation: The banker must compensate the holder for any damages sustained through its negligence.
Key Landmark Precedents:
  • Bank of Maharashtra v. Automotive Engineering Co. (1993) 2 SCC 97: The Supreme Court held that collecting and paying banks are liable in damages under Section 77 for breach of statutory duties and negligence in processing commercial paper.
  • Central Bank of India v. Gopinathan Nair (AIR 1970 Ker 74): Affirmed that a bank losing a cheque in transit is liable under Section 77 to compensate the customer for the full recovery loss.
Courtroom Practice & Strategic Litigation Guidance:

If a bank loses a client's physical cheque in clearing, causing limitation under Section 138 to expire, immediately file a consumer complaint or commercial suit invoking Section 77. The bank will be ordered to pay the face value of the cheque plus interest.

Section 76 All 148 Sections of Negotiable Instruments Act Section 78