Liabilities of the Drawer and Drawee of Cheques A drawer is a person or company who writes a cheque , instructing another party, the drawee , to pa...
A drawer is a person or company who writes a cheque, instructing another party, the drawee, to pay a specific amount of money on a specific date. The drawer is typically a bank or another financial institution, while the drawee is the party who ultimately receives the payment.
The drawee's liability is defined by the ** Negotiable Instruments Act (NIA)** of 1911. According to the NIA, the drawee is obligated to pay the drawer the amount of money specified in the cheque, minus any charges or fees that have been incurred.
The drawee's responsibility extends beyond merely paying the principal amount. They also take responsibility for any losses that occur as a result of their negligence or negligence of the drawer. This includes losses resulting from fraud, forgery, or other dishonest activities.
The drawer's liability can also extend to cover the costs of defending any legal action brought against the drawee. The drawee may also be held liable for any losses incurred by the drawer due to their negligence.
In addition to the above, the NIA also imposes certain limits on the liability of the drawee. These limits ensure that the drawee is not held liable for losses that are beyond their control, such as the losses suffered by the drawer's own creditors.
For example, the drawee cannot be held liable if the drawer proves that they had reasonable care and that they were not negligent in issuing the cheque. Similarly, the drawee cannot be held liable if the drawer proves that they had lost control of the drawer and that they exercised due diligence in preventing the cheque's loss