5Intro
A cheque is a document you can issue to your bank, directing it to pay the specified sum mentioned in digits
as well as words to the person whose name is borne on the cheque.
Cheques are also called negotiable instruments. In banking terms, a negotiable instrument is a document that
promises its bearer a payment of the specified amount either on furnishing the document to the banker or by
a given date.
Meaning and Definition of Cheque -
The definition of cheque is an instrument, most commonly used means of making payments in the commercial
and business world. It is defined under Section 6 of Negotiable Instruments Act as a bill of exchange, issued by
the drawer to the banker. Cheque is issued with the purpose of guiding the banker to pay a certain sum of
money when demanded by the specific person. A cheque is a tripartite transaction involving at least 3 parties
one of them always being a bank.
A cheque can be crossed, open, post-dated, anti-dated, bearer or order cheque. A cheque needs to be duly
signed by the drawer and the drawee must be certain to prevent misuse of such cheque
Crossing of Cheque
Definition: Crossing of a cheque is nothing but instructing the banker to pay the
specified sum through the banker only, i.e. the amount on the cheque has to be
deposited directly to the bank account of the payee. Hence, it is not instantly encashed
by the holder presenting the cheque at the bank counter. If any cheque contains such
an instruction, it is called a crossed cheque.The crossing of a cheque is done by
making two transverse parallel lines at the top left corner across the face of the cheque.
Types of Crossing
General Crossing: When across the face of a cheque two transverse parallel
lines are drawn at the top left corner, along with the words & Co., between the
two lines, with or without using the words not negotiable. When a cheque is
crossed in this way, it is called a general crossing. Thus, during this case, the
holder of the cheque or the receiver can receive the payment solely through a
checking account and not over the counter.
Effect of Special Crossing :
The bank makes payment only to banker whose bank name is written in special
crossing.There can be two special crossing. In this collecting banker add an
additional crossing and write the name of other bank who act as their agent in
collection of cheque. It allow other bank to collect the amount on their behalf.
Special Crossing: A cheque in which the name of the banker is written, across the
face of the cheque in between the two transverse parallel lines, with or without using
the word ‘not negotiable’. This type of crossing is called a special crossing. In a special
crossing, the paying banker will pay the sum only to the banker whose name is stated
in the cheque or to his agent. Hence, the cheque will be honoured only when the bank
mentioned in the crossing orders the same.
Effect of Special Crossing :
The bank makes payment only to banker whose bank name is written in special crossing.
There can be two special crossing. In this collecting banker add an additional crossing
and write the name of other bank who act as their agent in collection of cheque. It allow
other bank to collect the amount on their behalf.
Restrictive Crossing: When in between the two transverse parallel lines, the words
‘A/c payee’ is written across the face of the cheque, then such a crossing is called
restrictive crossing or account payee crossing. In this case, the cheque can be credited
to the account of the stated person only, making it a non-negotiable instrument.
Effect of Restrictive crossing :
This crossing restrict the collecting banker to make the payment in account of payee
named in Cheque. 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.
Not Negotiable Crossing: When the words not negotiable is mentioned in between the
two transverse parallel lines, indicating that the cheque can be transferred but the
transferee will not be able to have a better title to the cheque.
Effect of Not Negotiable Crossing :
The effect of Not Negotiable crossing is that cheque lost its essential feature of “a
Negotiable Instrument”. The Transferee of such crossed cheque can not get a better title
than that of the transferor (cannot become holder in due course) amd cannot convey a
better title to his own transferee but the instrument remains transferable.
Double Crossing: Double crossing is when a bank to whom the cheque crossed
specially, further submits the same to another bank, for the purpose of collection as its
agent, in this situation the second crossing should indicate that it is serving as an agent
of the prior banker, to whom the cheque was specially crossed.
