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collects a cheque as holder for value. In Great Western Railway Vs London and
Country Bank it was held that the bank is entitled for protection as it received
collection for an employee of the customer and not for the customer.
3. Acts as an Agent:
A collecting banker must act as an agent of the customer in order to get
protection. He must receive the payment as an agent of the customer and not as a
holder under independent title. The banker as a holder for value is not competent
to claim protection from liability in conversion. In case of forgery, the holder for
value is liable to the true owner of the cheque.
4. Crossed Cheques:
Statutory protection is available only in case of crossed cheques. It is not available
in case uncrossed or open cheques because there is no need to collect them
through a banker. Cheques, therefore, must be crossed prior to their presentment
to the collecting banker for clearance. In other words, the crossing must have
been made before it reached the hands of the banker for collection. If the cheque
is crossed after it is received by the banker, protection is not available. Even drafts
are covered by this protection.
To conclude, it is necessary that the collecting banker should have acted without
negligence if he wants to claim statutory protection under Section 131 of the said
Act. The statutory protection is available to the banker if he collects a cheque
marked Not Negotiable for a customer, whose name is not used as the payee
there-in, provided the requirements of the said sections are duly complied with.