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crossing of cheque notes, Lecture notes of Contract Law

Guru Gobind Singh Indraprastha UniversityContract Law

crossing of cheque and contents in the file

Typology: Lecture notes

2018/2019

Uploaded on 11/11/2019

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Crossing a cheque refers to drawing two parallel transverse lines on the cheque
with or without additional words like “& CO.” or “Account Payee” or “Not
Negotiable” between the lines.
By using a crossed cheque, one can make sure that the amount specified cannot
be en-cashed but can only be credited to the payee’s bank account. Crossing of
Cheque is recognized under The Negotiable Instruments Act, 1881.
The crossing of cheque had developed gradually as a means of protection against
misusing of cheques. Crossing of cheque provides instruction to the paying
banker to pay the amount through banker only and not directly to the payee or
holder presenting it at the counter. This ensures that payment is made to the actual
payee.
Types of Crossing of Cheques Crossing of Cheques can be done in two ways:
1. General Crossing
2. Special Crossing
General Crossing Section 123 of The Negotiable Instruments Act, 1881 defines
General Crossing as: “Where a cheque bears across its face an addition of the
words “and company” or any abbreviation thereof, between two parallel transverse
lines, or of two parallel transverse lines simply, either with or without the words
“not negotiable”, that addition shall be deemed a crossing, and the cheque shall be
deemed to be crossed generally.
•Two parallel transverse lines are drawn on the face of the cheque, generally,
on the top left corner of the cheque
•Holder or payee cannot get the payment at the counter but through the bank
only
•Including the name of the banker is not essential, hence, the amount can be
encashed by any banker. The words, “& Company”, “Not Negotiable”, “A/
C. Payee” may or may not be written It can be converted into Special
Crossing
Special Crossing Section 124 of The Negotiable Instruments Act, 1881 defines
Special Crossing as: “Where a cheque bears across its face an addition of the name
of a banker, either with or without the words “not negotiable”, that in addition shall
be deemed a crossing, and the cheque shall be deemed to be crossed specially and
to be crossed to that banker.”
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Crossing a cheque refers to drawing two parallel transverse lines on the cheque with or without additional words like “& CO.” or “Account Payee” or “Not Negotiable” between the lines. By using a crossed cheque, one can make sure that the amount specified cannot be en-cashed but can only be credited to the payee’s bank account. Crossing of Cheque is recognized under The Negotiable Instruments Act, 1881.

The crossing of cheque had developed gradually as a means of protection against misusing of cheques. Crossing of cheque provides instruction to the paying banker to pay the amount through banker only and not directly to the payee or holder presenting it at the counter. This ensures that payment is made to the actual payee.

Types of Crossing of Cheques Crossing of Cheques can be done in two ways:

  1. General Crossing
  2. Special Crossing

General Crossing Section 123 of The Negotiable Instruments Act, 1881 defines General Crossing as: “Where a cheque bears across its face an addition of the words “and company” or any abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines simply, either with or without the words “not negotiable”, that addition shall be deemed a crossing, and the cheque shall be

deemed to be crossed generally.

  • Two parallel transverse lines are drawn on the face of the cheque, generally, on the top left corner of the cheque
  • Holder or payee cannot get the payment at the counter but through the bank only
  • Including the name of the banker is not essential, hence, the amount can be encashed by any banker. The words, “& Company”, “Not Negotiable”, “A/ C. Payee” may or may not be written It can be converted into Special Crossing

Special Crossing Section 124 of The Negotiable Instruments Act, 1881 defines Special Crossing as: “Where a cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable”, that in addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially and to be crossed to that banker.”

  • Also known as Restricted Crossing
  • Two transverse lines are not necessary to be drawn Name of the banker is added across the face of the cheque
  • The Name of the Banker may or may not carry the abbreviated word, ‘& Co.’, ‘Account payee’ or ‘Not Negotiable’ Payment can be made only through the bank mentioned in the Crossing.
  • The Banker, mentioned in the Crossing, may appoint another banker as his agent to collect such cheques. thus, making it safer than ‘generally’ crossed cheques.
  • Especially Crossed Cheques can never be converted to General Crossing

Double Crossing Here the cheque bears two separate “special” crossing. For eg., a cheque is crossed specially in the name of ‘Canara Bank’, and further in the name of ‘Bank of Baroda’. As per Section 127 of The Negotiable Instruments Act, 1881: “Where a cheque is crossed specially to more than one banker except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.” Thus, a cheque doubly crossed shall be payed by the banker when the second banker is acting only as the agent of the first collecting banker and this has been made clear on the Cheque, i.e., crossing must specify that the banker to whom it has been specially crossed again shall act as the agent of the first banker for the purpose of collection of the cheque. It is done in case, the banker, to whom a cheque is specially crossed, does not have a branch at the place of the paying banker, or if he, otherwise, feels the necessity, he may cross the cheque especially to another banker (by clearly specifying).