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Crossing Cheques (2)

Crossing Cheques (2)

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Published by Vivek Kumar Jain

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Published by: Vivek Kumar Jain on Jul 24, 2011
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Crossing of Cheques

‡ A cheque is an unconditional order drawn on a specified banker and is always payable on demand. The drawer of a cheque cannot attach any condition thereto. He may, however, give specific instruction to the paying banker regarding the mode of payment of the cheque. ‡ Ordinarily, the payee of a cheque is entitled to encash the cheque at the counter of the paying banker by presenting it within the specified banking hours. ‡There is risk in paying a cheque across the counter

Crossing is an instruction given to the paying bank to pay the amount of the cheque through a banker or through an account in the same branch. others without such crossing are Open cheques . the drawer may give a direction to the paying banker through certain words marked on the cheque itself. ‡ A cheque bearing such instruction is called a Crossed cheque . which constitute crossing .Crossing of Cheques ‡ To avoid such risks or to detect payment made to wrong persons.

Thus Drafts may also be crossed . According to section 131-A.Crossing of Cheques ‡ Section 123 to 131 of Negotiable Instruments act contain provisions relating to crossing. these Sections are also applicable in case of Drafts.

.Crossing of Cheques ‡ TYPES OF CROSSING ‡ There are two types of crossing General Crossing and Special Crossing ‡ General Crossing ‡ According to Section 123 where a cheque bears across its face an addition of the words and company or any abbreviation thereof. or two parallel transverse lines simply. and the cheque shall be deemed to be crossed generally. either with or without the words not negotiable that addition shall be deemed a crossing. between two parallel lines.

either 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 ‡ ‡ ‡ ‡ .Crossing of Cheques The lines must be on the face of the cheque Parallel to each other In cross direction Inclusion of the words and company is immaterial and of no special consequence ‡ SPECIAL CROSSING ‡ According to section 124 where a cheque bears across its face an addition of the name of a banker.

‡ In addition the words and company or Account Payee only or Not negotiable may also be written .Crossing of Cheques ‡ Special crossing on the cheque is a direction to the paying banker to honour the cheque only when it is presented through the bank mentioned in the crossing and no other bank.

The specific lines or words which constitute general or special crossings respectively are spelt out very categorically. This means the two parallel are essential to constitute crossing .Crossing of Cheques ‡ What does not constitute crossing ‡ Sections 123 and 124 define the two types of crossing in very clear terms. without the essential ingredients of crossing on the face of a cheque does not constitute crossing. The inclusion of any other word/words.

Crossing of Cheques ‡ SPECIMEN OF CROSSING ‡ General Crossing .__________________ _____________________________ ______________________________ and company ______________________________ _______________________________ & Co _________________________________ .

Crossing of Cheques ‡ General Crossing ‡ __________________ Not Negotiable ___________________ ___________________ Account Payee only ___________________ .

Crossing of Cheques ‡ SPECIAL CROSSING ‡ Punjab National Bank ___________________ ‡ Punjab National Bank ___________________ ___________________ Account Payee only Punjab National Bank ___________________ ___________________ Not Negotiable Punjab National Bank ___________________ .

Section 126 lays down this duty of the paying bank as follows: . his agent for collection ‡ Liability of the Paying Banker on Crossed Cheque ‡ The paying bank on whom a crossed cheque is drawn must make payment there of in accordance with the crossing.Crossing of Cheques ‡ Persons who can cross a Cheque ‡ The holder of cheque ‡ The Bank to whom the cheque is crossed specially may again cross it specially to another bank.

‡ As per section 129 any bank paying a cheque crossed generally. the bank on whom it is drawn shall not pay it otherwise than to the bank to whom it is crossed or his agent for collection. shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid. the banker on whom it is drawn shall not pay it otherwise than to a banker and where a cheque is crossed specially. or his agent for collection being a bank. otherwise than to the bank to whom the same is crossed.Crossing of Cheques Where a cheque is crossed generally. otherwise than to a bank or a cheque crossed specially. ‡ .

bearing in either case the words not negotiable shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had .Crossing of Cheques ‡ The Paying bank shall be liable to the true owner of the cheque and to the drawer as follows: ‡ Liability to the true owner ‡ Liability to drawer ‡ Not Negotiable Crossing A person taking a cheque crossed generally or specially.

it would do so at its own risk and would responsible for the unauthorized payment.Crossing of Cheques ‡ Account Payee Crossing . to credit the amount to the account of the payee only and no body else. If any bank credits the account of a constituent who is not the payee named in the cheque without proper mandate of the drawer.. .e. ‡ RESERVE BANK S DIRECTIVE ON ACCOUNT PAYEE CHEQUE ‡ 1.These words constitute an instruction to the collecting bank that he should collect the amount of the cheque for the benefit of the payee s account only i. Crediting of proceeds of account payee cheques to parties other than that clearly delineated in the instructions of the issuers of the cheques is unauthorized and should not be done in any circumstances ‡ 2.

the cheque should be returned to the drawer. shall discharge such banker from all liability thereon and such payment shall not be questioned by reason of the cheque having been crossed.Crossing of Cheques ‡ 3. . If there are no such instructions. ‡ Obliterating a crossing Section 89 provides protection to paying bank where a cheque is presented for payment which does not at the time of presentation appear to be crossed or to have had a crossing which has been obliterated. payment thereof by a bank liable to pay and paying the same according to the apparent tenor thereof at the time of payment and otherwise in due course. the payee bank should always ensure that there are clear instructions for disposal of proceeds of the cheques from the drawer of the cheque. In case of an account payee cheque where a bank is a payee.

The paying Banker is discharged from his liability if such cheque is paid at the counter on presentation. He can debit the amount the cheque to the drawer s account. The cheque does not appear to be a crossed one at the time of presentation or the obliteration or erasing of the crossing is not apparent.Crossing of Cheques ‡ This section provides statutory protection to the paying banker. and ‡ B. . provided the following conditions are fulfilled ‡ A. The payment is made according to the apparent tenor of the cheque and in due course (under section 10).

Only the drawer of the cheque is entitled to open the crossing of the cheque by writing the words pay cash and cancelling the crossing along with his full signature. it is called opening of the crossing. .Crossing of Cheques ‡ Opening of Crossing ‡ If the crossing on a cheque is cancelled. The cheque thereafter becomes an open cheque.

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