Managing Director, Secretary or General Manager. The crossing of a cheque is intended to ensure that its payment is made to the right payee. If an instrument payable to order is transferred without endorsement, it is merely assigned and the holder thereof is not entitled to the rights of a holder in due course. Article shared by The important usefulness of a crossing cheque is that it cannot be encased at the counter but can be collected only by a bank from the drawee bank. W drew a cheque crossed 'not negotiable' in blank and handed it to his clerk to fill in the amount and the name of the payee.
Which means anyone having open cheque can get the payment from the bank counter. A crossed cheque is a that has been marked specifying an instruction on the way it is to be redeemed. The effect of general crossing is that the payment of the cheque will not be made at the counter, it can be collected only through a banker. Sign the cheque at the bottom right hand corner with the exact signature that is registered with the bank records. The cheque was crossed 'not negotiable'; one of the partners, A in fraud of his Co-partner B, endorsed the cheque to P who encashed it.
So these types of crossing of cheques direct the banker to be credited the specific amount into the account of the payee whose name is mentioned on the cheque or between the equivalent lines. However, with the networking of branches of most banks, it is possible to get the cheque cleared without sending it to the issuing branch. But, it gives only a limited protection, in the sense, that if the thief is not the customer of the paying banker, he can encash that cheque through his banker, by forging the signature of the payee. Types of Crossing: Crossing are of the following types: 1 General crossing; 2 Special crossing; 3 However, there is yet another type of crossing which is recognized by usage and custom, called restrictive crossing: 4 Not negotiable crossing. For an instance: If you lost your cheque in the market then in that case finder of the cheque can present that cheque to get the payment from bank unless drawer intimates the bank and initiates stop payment.
In other words we can say that transferee of such a cross cheque would not get a title better than that of transfer. The addition of the words 'not negotiable' does not restrict the further transferability of the cheque. Different Types of Crossing on Cheque in Banking and its effect : Cheque is a negotiable instrument. In other words, cr … ossing has been introduced to prevent wrongful person from obtaining payment of a cheque. A negotiable instrument payable otherwise than to a bearer can be negotiated only by endorsement and delivery.
General Crossing can be converted into a Special Crossing. To do this you must go to your bank and sign a stop-payment order. This is called general crossing. As such, bank should not collect a not negotiable cross cheques in the account of a person other than person even if it is endorsed in a regular manner unless he is completely satisfied regarding integrity of the endorsement. Open cheques are liable to great risk in the course of circulation. If there is even a slight mismatch between the signature in the bank records and that in the cheque the bank will not release the payment.
Under these circumstances the cheque may go into wrong hands. According to Section 131-A, these sections are also applicable in case of drafts. Thank you website owner for this article! Spelling: The endorser should spell his name exactly in the same way as his name appears on the cheque or the bill as its payee or endorsee. If a banker fails to comply with instructions or crossing marked by the drawer of the cheque, it amounts to breach of contract of the bank with its customer. Endorsement by Deceased Person: A cheque in the name of deceased person must be endorsed by his legal representative. Section 123 to 131 of the Negotiable Instrument Act contain provisions relating to crossing. As a rule, it is the drawer who can cross a cheque.
Such an endorser gets the following rights: He may make his liability on the instrument conditional on the happening of a particular event. In case of a bearer cheque, the paying banker does not need to go into an elaborate exercise with regard to the identity of the holder of the cheque. But leaving the original payee out of the loop helps him fudge his tax returns, and therefore not desirable What is a Cheque? Inclusion of the name of a banker is essential. The bearer of the cheque presenting it to the bank should have an account in the branch to which the written sum is deposited. Crossing of cheques gradually reduced the number of payment to the wrongful holders of the cheque. Ordinarily, the payee of a cheque is entitled to encash at the counter of the paying banker by presenting it within the specified banking hours. When a cheque is crossed it in effects means, an instruction by the client not to pay the cheque directly over the counter but to a banker only for crediting the payees account with the bank.
When a cheque is crossed specially, it is the duty of the bank on whom it is drawn to pay it only through the banker mentioned or through another banker to whom it is sent for collection sec 126. The direction is that the paying banker should not pay the cheque at the counter. But if the transferor has a defective title his transfer is affected by such defects and the transfer cannot claim rights of a holder in due course as proving that he purchases the instrument in good faith and for value. If collecting banker credit the amount to any third person other than payee, he will be liable for any loss arising to drawer or payee. Such a cheque is crossed generally. Special Crossing : It is a cheque in which the name of the bank is written between the two parallel lines and hence it can be paid to that specific banker only. My bank would take money from me in Rupees Indian Currency and issue me Travelers Cheques of equivalent value.
In other words, Crossing is an instruction by drawer to the payee bank to pay the amount in payee bank account only and not to encash to person who present it over the counter. They may accept such requests, only when the customer is ready to indemnify the banker for any loss which he may suffer in such cases. In order to avoid the losses incurred by open cheques getting into the hands of wrong parties the custom of crossing was introduced. Fortunately, today with the advancement in technology, now person can design their own cheque book with the help of sites like and promote their identity everywhere. The lines must be drawn parallel and transverse.
The endorsement must be of the entire instrument. The cheque thereafter becomes an open cheque. Sometimes, name of a specific bank and branch is written between the lines. When a cheque has been specially crossed, the banker upon whom it has been drawn will make the payment only to that banker in whose favour it has been crossed. With a view to avoiding such risks, and protect the owner of cheque, a system of crossing was introduced. For ex: if I give you a cheque from my bank account in Chennai, India, and you want to deposit it in your account in Delhi, India, it is an outstation cheque and your bank will charge you a fee for cashing that cheque.