Home  /  Negotiable Instruments Act  /  Section 85

Section 85: Cheque payable to order

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1881
Section 84 All 148 Sections of Negotiable Instruments Act Section 86

Legal Commentary & Landmark Judgments: Section 85

Section 85 confers statutory protection on paying bankers, enacting that where a cheque payable to order purports to be indorsed by or on behalf of the payee, the drawee banker is discharged by payment in due course.

  • Protection on Order Cheques: The bank is not bound to verify the genuineness of each indorsement on an order cheque; payment in good faith discharges the bank.
  • Bearer Cheques Protection: Where a cheque was originally expressed to be payable to bearer, the bank is discharged by payment to bearer, regardless of any subsequent special indorsement.
  • Exception of Forged Drawer Signature: Section 85 protects the bank ONLY against forged indorsements, NEVER against a forged drawer's signature.
Key Landmark Precedents:
  • Canara Bank v. Canara Sales Corporation (1987) 2 SCC 666: The landmark ruling: the Supreme Court held that Section 85 protection applies to indorsements; if the customer's (drawer's) signature itself is forged, the bank is strictly liable and cannot debit the account.
  • Bihta Cooperative Development Union v. Bank of Bihar (AIR 1967 SC 389): Affirmed that a bank paying a cheque with a forged drawer signature acts without mandate and must credit the funds back to the customer.
Courtroom Practice & Strategic Litigation Guidance:

In banking litigation regarding unauthorized debits, determine where the forgery occurred. If the payee's indorsement on the back was forged, the bank is protected under Section 85. If the drawer's signature on the face was forged, the bank is 100% liable under Canara Bank.

Section 84 All 148 Sections of Negotiable Instruments Act Section 86