Cancellation of Demand Draft Guide: A person may buy a draft by paying the amount in advance to the bank. The bank then issues the draft. The purchaser of the draft then sends the draft to the payee’s place by simple or registered post. The bank issuing such draft charges a commission for rendering this service.
Cancellation of Demand Draft
i) Draft not Sent to the Payee : Sometimes it happens that a draft purchased from the bank is not sent to the payee by the purchaser due to some reasons. In such cases the purchaser has a right to get back the amount of draft. He can ask the bank to cancel the draft and refund his amount to him.
ii) Banker’s Duty : The banker has to refund the amount of draft to the purchaser of a draft. But before giving such amount to the purchaser the bank is to be satisfied that the draft has not been delivered to the payee. It is because the contract between the bank and the payee of the draft is incomplete. It is revocable until and unless it is delivered to the payee.
iii) Provisions of the Law : According to Section 46 of the Negotiable Instrument Act “the making, accepting or endorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive”. In case of an order instrument mere endorsement without delivery does not pass on the title to the endorsee. Delivery of the instrument from one person to another is essential. So unless and until the draft is delivered to the payee, he does not get any right in the draft and the purchaser of the draft can ask to cancel the draft and refund him the amount of the draft.
iv) Bank’s Right to Refuse Cancellation of Draft : If the banker doubts that the draft has been delivered to the payee, the bank may refuse to cancel the draft. It is because the contract between the banker and the payee becomes complete with the delivery of the draft. The banker becomes liable to pay the amount of draft to the payee. He cannot cancel the draft without the confirmation of the payee.