"PDeu

of' ing
specmen
crosscd. A
he YBank, Id
200
DAte or Bearcr
No
T'Ay ' ' '
Rupces.
Rs
of thc cheque. t d il.
thhe lell-hand top corner
y he
The lines are
usually drawn on
Crossing
drawn affects the mode of paynient of the cheque, The chequc is no mor
anywhere. payable
counter of the
bank. The payiment of a crossed
cque Can he
holder at the
to the payec or assuring that only the righ
mode of ass.
crossing is a mnode
obtained only through
a banker. Thus,
wrongful person secures payment it can be t
right
traced
payment. Even if some
ful holder gets He has lirst to open an account (and if
through a banker. not
because he has to operate with some banker and then pay the cheau
a current account) to
the payee of the cheque, its payment on his behalf and credit it int his
the banker to receive
his account to enable the moncy if it subsequently turn out
trace the recipient of
account. This makes it casy to
the cheque.
not entitled to
that he was
Kinds of Crossing
kinds, namely:
Crossing is basically of
two
and
(1) General crossing,
(2) Special crossing.
several forms.
But either kind may take
General Crossing [S. 123]
there are no words between the lines
A cheque is said to be crossed generally when
words but not the ofa bank. The lines may be
name
of crossing or when there are some
That makes no
abbreviation thereof.
contain the words "and company" or any
blank or
difference.
Special Crossing [S. 124] addl
banker either with or without any
Where the lines ofcrossing bear the name of a
crossed specially and to be crossed to that banker
tional words, the cheque is said to be whose
the particular banker
The effect is that its payment can be obtained only through
name appears between the lines.
Account Payee Only
Sometimes the lines of crossing contain the words "account payee only. This is a
be two-fold. It mayain
version of general crossing. The effect of such a crossing may
of the collectingbanke
firstly, the negotiability of the cheque, and, secondly, the duty able
remains transicia
to first, it has been decided that a cheque crossed "account payee"
(1891) 1 QB 435; Inspectors' Cov Westminster Bank, (1927) 2 KB
Z
37. National Bank v Silke,
CHAP. 16] Ss. 125, 130
CROS CHEQUES 1
This is so by virtue ot the general
that is, payable to order or
principle that "If the
cheque be negotiable in its origil
bearer, words prohibiting transfer, or indicating an intention
that the cheque shall not be transferred, are ineffectual
to restrain either its
or negotiability." transferability
Hence, the payee is entitled to transfer the
difficulty in getting the cheque collected for cheque
to anyone. But the
transferee will find
him. For the
direction to the collecting banker that the contents of the words "account payee only" is a
the payee and credited to hiS cheque shall be received only for
account, If the banker receives
behalf of any person other than the payee, the banker will be payment of such a cheque on
not be entitled to the protection of guilty of negligence and will
Section 131. Hence, "account payee only" crossing does
in practice hinder the negotiability of the
cheque because no bank would like to collect it
on behalf of any other person. But the
transferee can recover the amount from the trans-
feror and, if there is
nothing wrong in the title of the previous parties, from them also as
an assignee of an actionable claim.
"Not Negotiable" Crossing [S. 130]
When the lines of crossing carry the words ""not
negotiable", the crossing is said to
be "not negotiable" crossing. Section 123 permits the use of such words and Section 130
states their effect upon the negotiable character of the cheque.
A person taking a cheque crossed generally or 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.
Thus, such crossing materially diminishes the negotiable value of the cheque, in the
sense that the person taking it shall get only the rights of the transferor, but no better rights
He cannot become the holder in due course. If there is nothing wrong with the title of the
prior parties, he may recover. But if something is wrong anywhere, he will be affected by
marked 'not
it. Thus the cheque remains transferable, but "everyone who takes a cheque
marked "not negotiable"
negotiable' takes it at his own risk3 Thus, where a blank cheque
was fraudulently cömpleted by an agent
and transferred to a person to whom the agent was
the fraud.° Similarly, in Great
indebted, it was held that the transferee was affected by
Co Ltd:40 a person obtained a cheque
Western Railway Co v London and County Banking obtained
He
was marked "& Co" and "not negotiable".
by false pretences. The cheque was affeçted by the fraud
and
It was held that the banker's title
payment from the banker. of the cheque.
for the amount
he was accountable to the
true owner
na
Who May Cross [S. 125]
the following parties:
A cheque may be crossed by
cross it generally
or specially.
drawer of a cheque may
1. By drawer -The it generally or
may cross
2. The
cheque is uncrossed the holder
holder.-Where the If the cheque
holder cross it specially.
is crossed generally, the may
specially. If the cheque holder may add the
words "not negotiable".
is crossed generally or specially the it is crossed
the banker to whom
3. The
banker.-Where a cheque is crossed specially,
for colection.
to another banker, or his agent
may again cross it specially
414 (HL).
Co Ltd, 1901 AC
Co v London and County Banking
38. Great Western Railway 1 KB 422.
Meeson (A Firm) v Pickering, (1946)
39. Wilson and
40. 1901 AC 414 (HL).
 ACT, INNI Ns 126,
lo NIOANINSTRUMUNIN 1 |Pan iv
Payment of Crossed Cheques |S. 1261
The banker whw a k e s the paye n t ol a crONNCl cheqque in called the "paying banker
I is the duty ot the paying banker to pay n crowsed cheque only to another banket and
ay a cheque eossed specally only to (he banke to wlom il is crossed. On such paymen
he paying banker is diseharged Iron hiN liubility to the saec cxlent as if the paynent h
been made to the tuce ownçr. Thin will be so even if the contents ofthe cheque do not rea
the tue owner S. 128| ThisIN the special protection of the paying banker
Whee, however, the paynent is ol ade in the iabove-statcd manner, the banker
becomes liable to the tue owner loN any losS Sustancd by hiinn owing to the irregular
pavment.""
Another protection of the paying banker is containcd in Section 89, Where a cheaue
does not at the time of presentment appear to be crossed or where the crossing is oblit
erated, the banker. paying the eheque in good faith and without negligence, will be disy
charged from his liability on the cheque.
Another duty of the paying banker is stated in Section 127. Where a chequc is crossed
specialy to more than one banker, except when necessary for collection, the banker on
whom it is drawn should refuse payment.
Protection of Collecting Banker [S. 131]
The bank which receives the payment of a crossed cheque on behalf of its customer is
known as the collecting banker. Great risks are involved in recciving payment of erossed
cheques. The customer on whose behalf a cheque is collected may turn out to be not enti-
tled to the cheque. The banker may thus become liable to the true owner of the cheque
for conversion in having helped a person to receive money to which he was not entitled.
Doubtless. therefore, bankers deserve to be protected against such liability. Section 131
precisely does that. The section "protects bankers who, in good faith and without negli-
gence, collect crossed cheques for a customer who had no title to them"2 The section says
A banker who has in good faith and without negligence received payment for a customer of a
cheque generally crossed or specially to himself shall not, in case the title to the cheque proves
defective, incur any liability to the true owner ofthe cheque by reason only of having received such
payment.
The requirements of this protection are as follows:"
1. For customer. Payment should be received on behalf of and for a "customer". A
banker who allows the facility of collection to a stranger does so at his own risk." A "eus
tomer means a person who keeps an account with the bank. It may be a current account
or a deposit account. Banks are today rendering various kinds of service and the person
for whom business is done in the usual course is a customer. It is not necessary that n
account should be of hich
long standing. "The word 'customer' signifies a relationship inw
5 Mad
41. S. 129, see, Madras Provincial Cooperative Bank Lid v South Indian Match Factory Ltd,
Alk iabletto
30, the banker who paid a crossed cheque over the counter to the company's liquidator, was
the company, the liquidator having
misappropriated the amount.
42. A.L. Underwood Lid v Bank of
Liverpool, (1924) 1 KB 775. trial
43. These requirements have been recounted by the Supreme Court in Indian Overseas Bank v
den
Chain Concern, (1990)1 SCC 484: (1990) 67 Comp Cas 255, where it is further pointed out that tnc
of proving that the requirements were satisfied is on the
collecting bank.
44. Great Western Railway Co v London and County Banking Co Ltd, 1901 AC 414 (HL).