Cheque of a deceased depositor cannot be paid
A cheque, which has been issued by a person but presented by the drawee after his death, cannot be paid by the bank. On the death of the drawer of a cheque, the cheque issued by him ceases to be a valid cheque.
The reason is that on the moment of the death of the drawer of the cheque the balance amount available on his bank account will vests in his nominee or legal heir. A deceased person cannot hold any property in his own name.
Cheque of the deceased account holder is invalid
The order of the deceased person to the bank is not legally valid. Therefore, the recipient of the cheque cannot use it to withdraw the amount from the money he left in his bank which is no longer his property. That means on death of a bank customer, the order of the customer to the bank comes to an end.
As per law, the death terminates all contract. Therefore, when the banker comes to know about the death of the drawer, he has no mandate to debit any amount from the account of the drawer. However, if the banker pays the cheque before it receives the notice of his death, it is a valid transaction.
In short, a cheque presented by the drawee after the death of the drawer cannot be treated as a valid cheque.
Pipeline flows to the account of the deceased
However, in regard to the pipeline flows – such as, interest or dividend warrants, that may continue to be received for credit to the deceased depositors’ accounts – the Reserve Bank (RBI) suggests some courses of action which banks may consider taking in consultation with the legal heirs and after being authorised by them.
The RBI says that the banks may open an account styled as ‘Estate of Shri _________, the Deceased’ in which all such payments could be credited provided no withdrawals are made from such accounts.
Alternatively, the banks could return such payment advices to the remitter with the remark ‘account holder deceased’ and intimate the survivor/nominee/legal heir of such return so that the survivor/nominee/legal heir could take the necessary action to get the payment made to the appropriate beneficiary.
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