Negotiable Instruments Act' 1881 Notes
Business Laws Notes B.Com 1st & 2nd Sem CBCS Pattern
Crossing of a cheque
A cheque is said to be crossed when two parallel transverse line with or without any words are drawn on the left hand corner of the cheque. It is simply a direction to the paying banker that the cheque should be paid only to a banker. Crossing of cheque is very safe because the holder of the cheque is not allowed to encashed it across the counter of the bank. A crossed cheque provides protection not only to the holder of the cheque but also to the receiving and collecting bankers.
Who can cross a cheque?
The
following parties can cross a cheque:
a)
The Drawer: The drawer of a cheque may
cross a cheque before issuing it. He may cross it generally or specially.
b)
The Holder: The holder of a cheque can
cross in the following way:
Ø The
holder may cross an open cheque generally or specially.
Ø The
holder may specially cross a generally crossed cheque.
Ø The
holder may add the words “Not-Negotiable” in a generally or specially crossed
cheque.
c)
The Banker: The banker to whom the
cheque is crossed specially may again cross it especially to another banker's
agent, for collection. This is called double special crossing.
Types of crossing
1. General crossing: A
general crossing is a crossing where a cheque simply bears two parallel lines
with or without any words and without any specification. According to Sec. 123
of the Negotiable Instrument Act, 1881, “When a cheque bears across its face an
addition of the words. “and company” or any abbreviations thereof between two
parallel transverse line or of two parallel transverse lines simply either or
without the words, “Not Negotiable” that addition shall be deemed a general
crossing. Simplify, In case of General crossing words such as “and company”,
“not Negotiable”, “Account payee” etc. may be inserted between the lines.
A general crossing cheque protects the drawer and also the payee
or the holder thereof. Whenever a drawer desires to make payment to an
outstation party, he can cross the cheque so that even if the cheque is lost,
it means only a piece of paper is lost and nothing beyond that. If by any
chance, it is encashed by a third and unauthorized person, it is possible to
find out to whose account the amount is credited and the unauthorized person
can be identifies and suitable action taken against him.
Specimen of General Crossing
2. 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 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.”
Thus, in case of
special crossing, the name of a particular bank is written in between the
parallel lines. The main implication of this type of crossing is that the
amount of the cheque will be paid to the specified banker whose name is written
in between the lines. Special crossing is in a particular bank and
by special crossing, he is assured of double safety, safety to the drawer and
safety to the payee.
Specimen of Special Crossing
3. Account
payee crossing: This type of crossing is done by adding the words ‘Account
Payee’. This can be made both in general crossing and special crossing. The
implication of this type of crossing is that the collecting banker has to collect
the amount of the cheque only for the payee. If he wrongly credits the amount
of the cheque to another account, he will be held responsible for the same.
4. Not
negotiable crossing: When the words ‘not negotiable’ is added in generally
or specially crossed cheques, it is called not negotiable crossing. A cheque
bearing not negotiable crossing cannot be transferred. If a cheque bearing ‘Not
negotiable crossing’ is transferred, care must be taken regarding the ownership
of title of both the transferor and transferee.
Differences between General and Special crossing
The difference between General and Special crossing are:
a)
In case of general crossing drawing
two parallel transverse lines on the face of the cheque is must. But, in case
of special crossing drawing two parallel lines is not necessary.
b)
In case of general crossing writing
the name of a bank across the face of the cheque is not required. But in case
of special crossing the name of a bank must be mentioned across the face of the
cheque.
c)
Generally crossed cheque is payable
through any bank account. But specially crossed cheque is payable only through
the specific bank mentioned in the crossing.
d)
A generally crossed cheque is safer as
compared to open cheque. But a specially crossed cheque is safer than open
cheque as well as generally crossed cheque.
e) General crossing can be easily converted into special crossing by inserting the name of a bank in between the two lines. But special crossing is not convertible into general crossing except by the drawer.