CROSSING OF CHEQUES Cheques can be of two types:- Open Cheque. Crossed Cheque.

Kinds of CROSSING General Crossing Special Crossing

What is “CROSSING” a Cheque? “Crossing” a cheque is a way of making even more certain that the money is paid to the correct person and not to someone else. By “crossing” the cheque in the ways that follow, you give the bank extra instructions about how it is to be paid. This is called limiting its negotiability. If you draw a line to cross out the words “or bearer”, then you are telling the bank that the money cannot just be paid out to anyone who happens to present the cheque. It must be paid out to the person named on the “Pay” line. It is possible to get around this by “endorsing” the cheque. This means that the person to whom the cheque is made out signs the back thus giving their permission for it to be presented for payment.

If you cross out “to bearer” and draw two parallel lines across the front of the cheque (usually the top left corner is sufficient) then you are telling the bank that the money has to be paid into an account and cannot be cashed (exchanged for cash). This means that the person who eventually receives the money can be traced because there will be a record of the deposit.

Definition of General Crossing Sec 123 of the Negotiable Instruments Act 1881 defines general crossing as follows: “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 to be a ‘crossing, and the cheque shall be deemed to be crossed generally.”

Essentials of General Crossing Two lines are of paramount importance in crossing. The lines must be drawn parallel and transverse. It means that they should be arranged in a crosswise direction. They should not be straight lines. The lines are generally drawn on the left hand side . The words ‘not negotiable’ may be added to a crossing. The words ‘and Company’ may be written in between the lines.

The following do not constitute a crossing within the meaning of Sec 123

Forms of General Crossing 1.And Company 2. & Co., 3. Not Negotiable 4. Payee’s A/C 5. Under Rupees Fifty

Significance of General Crossing The effect of general crossing is that it gives a direction to the paying banker. The direction is that the paying banker should not pay the cheque at the counter. If a crossed cheque is paid at the counter in contravention of the crossing:

He has no right to debit his customers account, since , it will constitute a breach of his customer’s mandate, He will be liable to the drawer for any loss, which he may suffer, He will be liable to the true owner of the cheque who may be the third party. 4. The main intention of crossing a cheque is to give protection to it.

SPECIAL CROSSING Sec 124 of the Negotiable Instruments Act of 1881 defines “where a cheque bears across its face, an addition of the name of a banker, with or without the words ‘Not Negotiable’, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that banker”

Essentials of Special Crossing Two parallel transverse lines are not at all essential for a special crossing. The name of a banker must be necessarily specified across the face of the cheque. The name of the banker itself constitutes special crossing. It must appear on the left hand side, preferably on the corner. The two parallel transverse lines and the words ‘not negotiable be adedd to a special crossing.

Forms of Special crossing ICICI Bank ltd With the parallel line Not Negotiable d. With Payee’s A/c e. With Not Negotiable a/c payee.

Significance of Special Crossing It is a direction to the paying banker. A special crossing gives more protection the cheque than a general crossing. Not Negotiable Crossing A/c Payee Crossing

Not Negotiable crossing is a warning to the Paying banker Collecting banker Holder A and B together.

2. A Not Negotiable crossing restricts _________ of the cheque. Transferability Negotiability Neither transferability nor negotiability. Both transferability and negotiability.

3. The following one is absolutely essential for a special crossing. Two parallel transverse line, Words ‘And Company’ Words ‘Not Negotiable’ Name of a banker.

4. The safest form of crossing is General crossing Special crossing Double crossing A/c Payee crossing

True or False Any holder can cross a cheque A general crossing cannot be converted into a special crossing. Two parallel transverse lines are not essential for a special crossing.

A cheque drawn in favour of ‘A’ and crossed ‘Not Negotiable’ is presented by ‘b’. Can you pay the cheque?