Hello guys, can someone help with the explaination of Section 42 of Negotiable instrument Act and this question as it seems I am not able to understand this.
The drawer, ‘D’ is induced by ‘A’ to draw a cheque in favour of P, who is an existing person. ‘A’ instead of sending the cheque to ‘P’, forgoes his name and pays the cheque into his own bank. Whether ‘D’ can recover the amount of the cheque from ‘A’s banker. Decide.
The problem is based upon the privileges of a ‘holder in due course’. Section 42 of the Negotiable Instrument Act, 1881, states that an acceptor of a bill of exchange drawn in a The Negotiable Instruments Act, 1881 2.3 fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relieved from liability to any holder in due cause claiming under an endorsement by the same hand as the drawer’s signature, and purporting to be made by the drawer. In this problem, P is not a fictitious payee and D, the drawer can recover the amount of the cheque from A’s bankers.
Please also illustrate this section by breaking into parts because I find it pretty difficult to understand. Thank you.
Thank you.
CAclubindia
