Payment in due Course is defined in Section 10 of Negotiable Instruments Act 1991. Any person legally responsible to make payment under negotiable instrument must make the payment of the amount due under in due course with the purpose of obtaining a valid discharge against the holder.
Payment in due course refers to a payment in keeping with the evident tenor of the instrument, in good faith & without negligence to any person in possession thereof.
A payment will be regarded as a payment in due course if:
(a) It is in agreement with the apparent tenor of instrument, that is, according to what comes into view on the face of instrument to be the intention of the parties;
(b) It is made in good faith & without negligence, & under conditions which do not meet the expense of a ground for believing that the person to whom it is made is not allowed to receive the amount;
(c) It is made to the person who possesses the instrument who is entitled as holder to obtain payment;
(d) Payment is made under conditions which do not pay for a rational ground believing that he is not entitled to obtain payment of the amount stated in the instrument; and
(e) Payment is made in money & money only.
As per Sections 10 & 128, a paying banker making payment in due course is protected.
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