The banker who is liable to pay the value of a cheque of a customer as per the contract, when the amount is due from him to the customer is called “Paying Banker” or “Drawee Bank.”
The payment to be made by him has arisen due to the contractual obligation. He is also called drawee bank as the cheque is drawn on him.
The payment has to be made by the banker as per the legal obligation also. Section 31 of Negotiable Instrument Act 1881, says that “the drawee of a cheque, having sufficient funds of the drawer in his hands properly applicable to the payment of such a cheque, must pay the cheque, when duly required to do so, and in default of such payment, must compensate the drawer for any loss or damage caused by such default.” According to this provision, the drawee of a cheque, i.e., paying banker has a legal obligations to honour the demand of the drawer or customer. If he fails to pay the money held, he is liable for damages. Thus paying banker has certain obligations to discharge.
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