A cheque is a negotiable instrument, which can be transferred by one person to another. In this course, the cheque may be lost or stolen. In this case, the holder of cheque will not be true owner and the genuine person will suffer. So, to avoid such possibilities cheques are crossed.
DEFINITION:
According to Sections 126, 127 and 129 of Negotiable Instrument Act 1881, a cheque is said to be crossed when two transverse parallel lines are drawn on its face with or without some words. Crossing prevents the possibilities of fraud and wrong payment of the cheque, because crossed cheques cannot be encashed at the counter. The payment of crossed cheque is made only through the bank.
PARTIES WHO CAN CROSS A CHEQUE
The following persons or parties can cross a cheque:
- Drawer of Cheque:
The drawer can make a cheque generally or specially crossed for making its payment safe.
- Holder of Cheque:
If a cheque is not crossed by the drawer then the holder of cheque can make it generally or specially crossed. If the cheque is generally crossed then the holder can cross it specially.
- Bank:
If the drawer or holder presents an uncrossed or generally crossed cheque to the bank then the bank can convert it into specially crossed cheque to its name.
TYPES OF CROSSING
There are following two types of crossing:
Crossing of Cheque
General crossing Special crossing
- GENERAL CROSSING:
According to sec. 123 of Negotiable Instrument Act, ’’where a cheque bears across its face addition of the words “& Co.”, ”A/c payee only” or “Not negotiable” or without these words between two transverse parallel lines, this cheque shall be deemed to be crossed generally”.
[FEATURES]
Two lines must be drawn on the face of cheque.
These lines should be transverse parallel (i.e.) not like ‘X’.
The words “& Co.”, “A/c Payee only” are not necessary.
They are inserted when the name of payee’s banker is not known.
SPECIMEN OF GENERAL CROSSING
- SPECIAL CROSSING:
According to Sec. 124 of Negotiable instrument Act, “where a cheque bears across its face with addition of the name of banker with or without the word ‘Not Negotiable’, then the cheque shall be deemed crossed specially”.
[FEATURES]
Drawing of two parallel transverse lines is not necessary.
- The name of banker should be specified.
- The words like TQot Negotiable or A/c Payee only are not essential.
TERMS USED IN CROSSING
- Name of Bank:
If the name of any bank is written between two transverse parallel lines on the face of cheque then the payee can receive the amount only by depositing the cheque in the same bank. In case, if the payee has no account in the specified bank then, first, he has to open the account.
- A/c Payee Only:
If the words “A/c Payee Only” are written between two transverse parallel lines on the cheque then the payee can encash the cheque by
depositing it in his account in any bank. If in addition to the words “A/c Payee Only”, the name of bank is also mentioned then the payee can receive the amount of cheque only by depositing it in the same bank. The payee will have to open a new account if he does not have an account in specified bank.
- Not Negotiable:
If the drawer of cheque writes the words “Not Negotiable” while crossing it then the payee cannot transfer his rights of receiving amount to any other person. If the name of bank is written alongwith the words “Not Negotiable” then the payee can encash the cheque only from that specified bank.
- & Company (OR) & Co.:
If the drawer of cheque does not know the name of payee’s bank then he writes the words “& company” OR “& Co” between the two transverse parallel lines. The nature of crossing does not change by writing these words.
TERMINATION OF CROSSING
The drawer can terminate the crossing of a cheque only. It would be called a material change of a cheque. So, the drawer should put his signature with the words “Crossing Terminated”. The main cause of terminating the crossing of a cheque is that the payee does not have any bank account