CROSSING OF CHEQUESCROSSING OF CHEQUES

Cheques can be of two types:-Cheques can be of two types:-

1.1. Open Cheque.Open Cheque.

2.2. Crossed Cheque.Crossed Cheque.

Kinds of CROSSINGKinds of CROSSING

1.1. General CrossingGeneral Crossing

2.2. Special CrossingSpecial Crossing

What is “CROSSING” a Cheque?What is “CROSSING” a Cheque?

• ““CrossingCrossing” a ” a chequecheque is a way of is a way of makingmaking even more even more certain that the certain that the moneymoney is paid to the correct is paid to the correct personperson and not to someone else. By “and not to someone else. By “crossingcrossing” the ” the chequecheque in the ways that follow, you give the in the ways that follow, you give the bankbank extra extra instructions about how it is to be paid. This is called instructions about how it is to be paid. This is called limiting its negotiability. limiting its negotiability.

• If you draw a If you draw a lineline to cross out the words “or bearer”, to cross out the words “or bearer”, then you are then you are telling the banktelling the bank that the that the moneymoney cannot cannot just be paid out to anyone who happens to present just be paid out to anyone who happens to present the the chequecheque. It must be paid out to the . It must be paid out to the personperson named named on the “Pay” on the “Pay” lineline. It is possible to get around this by . It is possible to get around this by “endorsing” the “endorsing” the chequecheque. This . This meansmeans that the that the personperson to whom the to whom the chequecheque is made out signs the back thus is made out signs the back thus giving their permission for it to be presented for giving their permission for it to be presented for payment. payment.

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

Definition of General Definition of General CrossingCrossing• Sec 123 of the Negotiable Instruments Act Sec 123 of the Negotiable Instruments Act

1881 defines general crossing as follows:1881 defines general crossing as follows:

““Where a cheque bears across its face, an Where a cheque bears across its face, an addition of the words; addition of the words; ‘and company’ ‘and company’ or or any abbreviation thereof. Between two any abbreviation thereof. Between two parallel transverse lines or of two parallel parallel transverse lines or of two parallel transverse lines simply, either with or transverse lines simply, either with or without the words ‘not negotiable’, that without the words ‘not negotiable’, that addition shall be deemed to be a ‘crossing, addition shall be deemed to be a ‘crossing, and the cheque shall be deemed to be and the cheque shall be deemed to be crossed generally.”crossed generally.”

Essentials of General Essentials of General CrossingCrossing1.1. Two lines are of paramount importance Two lines are of paramount importance

in crossing.in crossing.2.2. The lines must be drawn parallel and The lines must be drawn parallel and

transverse. It means that they should be transverse. It means that they should be arranged in a crosswise direction. They arranged in a crosswise direction. They should not be straight lines.should not be straight lines.

3.3. The lines are generally drawn on the left The lines are generally drawn on the left hand side .hand side .

4.4. The words ‘not negotiable’ may be added The words ‘not negotiable’ may be added to a crossing.to a crossing.

5.5. The words ‘and Company’ may be The words ‘and Company’ may be written in between the lines.written in between the lines.

The following do not constitute a The following do not constitute a crossing within the meaning of Sec crossing within the meaning of Sec 123123

Forms of General CrossingForms of General Crossing

11.And Company.And Company2. & Co.,2. & Co.,3. Not Negotiable3. Not Negotiable4. Payee’s A/C4. Payee’s A/C5. Under Rupees Fifty5. Under Rupees Fifty

Significance of General Significance of General CrossingCrossing1.1. The effect of general crossing is The effect of general crossing is

that it gives a direction to the that it gives a direction to the paying banker.paying banker.

2.2. The direction is that the paying The direction is that the paying banker should not pay the cheque banker should not pay the cheque at the counter.at the counter.

3.3. If a crossed cheque is paid at the If a crossed cheque is paid at the counter in contravention of the counter in contravention of the crossing:crossing:

a.a. He has no right to debit his customers He has no right to debit his customers account, since , it will constitute a account, since , it will constitute a breach of his customer’s mandate,breach of his customer’s mandate,

b.b. He will be liable to the drawer for any He will be liable to the drawer for any loss, which he may suffer,loss, which he may suffer,

c.c. He will be liable to the true owner of He will be liable to the true owner of the cheque who may be the third the cheque who may be the third party.party.

4. The main intention of crossing a 4. The main intention of crossing a cheque is to give protection to it.cheque is to give protection to it.

SPECIAL CROSSINGSPECIAL CROSSING

Sec 124 of the Negotiable Instruments Act of Sec 124 of the Negotiable Instruments Act of 1881 defines 1881 defines

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

Essentials of Special Essentials of Special CrossingCrossing1.1. Two parallel transverse lines are not at Two parallel transverse lines are not at

all essential for a special crossing.all essential for a special crossing.2.2. The name of a banker must be The name of a banker must be

necessarily specified across the face of necessarily specified across the face of the cheque. The name of the banker the cheque. The name of the banker itself constitutes special crossing.itself constitutes special crossing.

3.3. It must appear on the left hand side, It must appear on the left hand side, preferably on the corner.preferably on the corner.

4.4. The two parallel transverse lines and the The two parallel transverse lines and the words ‘not negotiable be adedd to a words ‘not negotiable be adedd to a special crossing.special crossing.

Forms of Special crossingForms of Special crossing

a.a. ICICI Bank ltdICICI Bank ltdb.b. With the parallel lineWith the parallel linec.c. ICICI Bank ltd ICICI Bank ltd Not NegotiableNot Negotiabled. With Payee’s A/cd. With Payee’s A/ce. With Not Negotiable a/c payee.e. With Not Negotiable a/c payee.

Significance of Special Significance of Special CrossingCrossing1.1. It is a direction to the paying banker.It is a direction to the paying banker.

2.2. A special crossing gives more A special crossing gives more protection the cheque than a general protection the cheque than a general crossing.crossing.

Not Negotiable CrossingNot Negotiable Crossing

A/c Payee CrossingA/c Payee Crossing

1.1. Not Negotiable crossing is a Not Negotiable crossing is a warning to the warning to the

a.a. Paying bankerPaying banker

b.b. Collecting bankerCollecting banker

c.c. HolderHolder

d.d. A and B together.A and B together.

22. A Not Negotiable crossing restricts . A Not Negotiable crossing restricts

_________ of the cheque._________ of the cheque.

a.a. TransferabilityTransferability

b.b. NegotiabilityNegotiability

c.c. Neither transferability nor Neither transferability nor negotiability.negotiability.

d.d. Both transferability and Both transferability and negotiability.negotiability.

3. The following one is absolutely 3. The following one is absolutely essential for a special crossing.essential for a special crossing.

a.a. Two parallel transverse line,Two parallel transverse line,

b.b. Words ‘And Company’Words ‘And Company’

c.c. Words ‘Not Negotiable’Words ‘Not Negotiable’

d.d. Name of a banker.Name of a banker.

4. The safest form of crossing is4. The safest form of crossing is

a.a. General crossingGeneral crossing

b.b. Special crossingSpecial crossing

c.c. Double crossingDouble crossing

d.d. A/c Payee crossingA/c Payee crossing

True or FalseTrue or False

a.a. Any holder can cross a chequeAny holder can cross a cheque

b.b. A general crossing cannot be A general crossing cannot be converted into a special crossing.converted into a special crossing.

c.c. Two parallel transverse lines are not Two parallel transverse lines are not essential for a special crossing.essential for a special crossing.

A cheque drawn in favour of ‘A’ and A cheque drawn in favour of ‘A’ and crossed ‘Not Negotiable’ is presented crossed ‘Not Negotiable’ is presented by ‘b’.by ‘b’.

Can you pay the cheque?Can you pay the cheque?