General and special crossing of cheques

Crossing a cheque gives financial institution-specific instructions on how to handle cash. Since Crossed Cheques can only be paid through a bank account.

When simply two parallel transverse lines either with or without any words appearing on the face of a cheque, that cheque is called a crossed cheque. Normally cheques are crossed on the left top corner of a cheque because such crossing is prominently visible to whosoever handles it. The crossing of cheques can be classified as 1. General crossing, 2.Special crossing.

Section 123 of N.I.act 1881 defines the meaning of general crossing;

“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”.

Unlike open cheque (uncrossed cheque), the proceeds of generally crossed cheque shall be credited only to the bank account of the payee or the holder in due course of the cheque i.e. open cheque cash payment of a crossed cheque cannot be paid across the counter of the bank.

Section 124 of N.I.act 1881 defines the meaning of special crossing;

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.

The Special or Restrictive Crossing on a cheque makes it payable only to the banker whose name is written in the crossing. Where a cheque is crossed specially, the banker to whom it is crossed may again cross it, especially to another banker, his agent, for collection.

 Cheque marked ‘Account Payee’

There is no mention of “Account Payee” in the Negotiable Instruments Act, but courts have upheld that “Account Payee” is a clear instruction to the paying banker to credit the proceeds to the payee’s account only. The payment received by the collecting bank is based on an assurance to the paying bank that the proceeds collected by it would be credited to the payee’s account only.

Crossed with ‘Not Negotiable’ mark

The crossed cheque marked with ‘not negotiable’ does not bar it from being transferred in the name of another person. However, a person who takes a cheque marked ‘not negotiable’ does not acquire a better title than the person from whom he acquired the cheque. For example, if a person takes a stolen cheque marked with ‘Not Negotiable’ from another person and encashes it, then he is liable to refund encashed money to the true owner.

Who can cross the cheque?

The drawer of the cheque can cross the cheque with or without the words “& Co.”, “Not Negotiable”, or “A/c. Payee”.  The holder of the cheque can also cross the cheque and add the words ‘not negotiable’, and ‘Account Payee’. Where a cheque is crossed specially, the banker to whom it is crossed may again cross it, especially to another banker, his agent, for collection.

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CLICK here to know ‘10 parties’ to a negotiable instrument viz. maker/drawer, drawee, payee, holder, holder in due course, endorser, endorsee, endorsement, drawee in the case of need, Acceptor for honour.