A demand draft is an order from one bank to another branch of the same bank to pay a specified sum of moneybags to a person named there in or to his order. A draft is always unpaid on demand. Banks issue demand drafts on their branch at the place of destination for remitting moneybags from one place to another. According to Section 85-A of the Negotiable Instrument Act, “ A demand draft is an order to pay moneybags, drawn by one office of the bank upon another office of the same bank for a sum of moneybags unpaid to order on demand.”

A person may buy a draft by paying the quantum in advance to the bank. The bank either issues the draft, The purchaser of the draft either sends the draft to the payee’s place by simple or unregistered post. The bank issuing matching draft charges a commission for rendering this service.

Meaning of DD

The Demand Draft is an instrument used to transfer payments from one bank account to another. Demand Draft also is like cash, but much more secured thancash. Some secured features are

Stopping Payments of Bank Draft

Though a bank draft is recognised as equal to a cheque for certain purpose it’s different from cheque as far as the issuing bank’s position concerned. A cheque is drawn by the cube on his banker. The cube possesses the right to stop its payment before it’s actually made. But, the purchaser of a bank draft doesn’t stand at part with the cube of a cheque. In fact, the cube of a draft isn’t thought to be a party to the instrument.

The parties to the draft are the issuing branch, the paying branch and the payee. By issuing a bank draft, the banker takes upon himself a commitment in favour of the payee who’s a third party to a draft, to pay a certain volume of plutocrat. It’s an assurance of the bank to pay the volume to the payee as the consideration is paid by the purchaser of a draft.

So, the purchaser of a draft don’t have any right to stop payment of a draft. The banker shouldn’t misconduct with stop payment instruction given by the purchaser of a draft. When the bank draft is passed on to the payee, he acquires a right in the instrument. Similar right can not be set aside by the stop payment order issued by thepurchaser. However, he acquires rights enforceable against the banker, If the payee has backed the draft in good faith and for value to a third party. This right won’t be affected if the draft is delivered to him and thereafter a debate arises between the purchaser of a draft and the payee.