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      Question

      Under Section 85, where a cheque payable to order

      purports to be indorsed by or on behalf of the payee, the drawee banker is:
      A Liable to the true owner notwithstanding payment Correct Answer Incorrect Answer
      B Liable to compensate the drawer Correct Answer Incorrect Answer
      C Required to verify the genuineness of the indorsement Correct Answer Incorrect Answer
      D Required to refer the cheque back to the drawer Correct Answer Incorrect Answer
      E Discharged by payment in due course Correct Answer Incorrect Answer

      Solution

      Section 85(1) provides that where a cheque payable to order purports to be indorsed by or on behalf of the payee, the drawee is discharged by payment in due course. Sub-section (2) extends similar protection where a cheque is originally payable to bearer; the drawee is discharged by payment in due course to the bearer, notwithstanding any indorsement. This protects the paying banker who pays in good faith and without negligence.

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