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Section 85(2) of the Negotiable Instruments Act, 1881, is a legal provision that protects a paying banker when they make a payment in "due course" on a cheque that was originally issued as a "bearer" cheque.

Explanation of the Provision

The law recognizes that a bearer cheque is intended to be paid to whoever holds it at the time of presentation. Because of this, the bank's primary obligation is to the bearer.

Even if the cheque has been endorsed (signed on the back) by someone else, or if those endorsements attempt to restrict or change the nature of the cheque (e.g., trying to turn it into an "order" cheque), the bank is still legally "discharged" (protected from liability) if it pays the person holding the cheque, provided it does so in "due course" (honestly and without negligence).

Example

Imagine the following scenario:

1. Issuance: A person named Amit draws a cheque for ₹10,000 and makes it a "Bearer" cheque (i.e., he does not cross out the word "bearer" on the cheque).

2. Endorsement: The bearer of the cheque, Rahul, decides to transfer it to Sunita. Rahul signs the back of the cheque (an endorsement in blank) and hands it to Sunita.

3. Restriction: Sunita, wanting to be careful, writes "Pay to order of Ravi" above Rahul's signature on the back, hoping to restrict the cheque so that only Ravi can cash it.

4. Payment: Ravi finds the cheque and presents it to the bank.

The Legal Outcome:

Even though Sunita tried to restrict the negotiation of the cheque by adding "Pay to order of...", the cheque was originally expressed as a bearer cheque. Under Section 85(2), the bank is not required to worry about the chain of endorsements or the restrictive language added by Sunita. As long as the bank pays the person presenting the cheque (Ravi) in good faith and without negligence, the bank is protected and considered to have discharged its duty.

Summary

• Core Principle: Once a cheque is a "bearer" cheque, it stays a bearer cheque for the purpose of the paying banker.

• Protection: The bank is protected even if there are endorsements, or if those endorsements try to restrict the cheque's further negotiation.

• Requirement: The bank must still act in "due course" (i.e., it must be a genuine payment, made at the right time, and without any reason to suspect fraud).