Negotiable Instrument Act-1881:

Relevant Provisions and Application

Compiled by:
Sk. Nazibul Islam
Former Faculty Member, BIBM
Introduction:

The Negotiable Instrument Act derived from The

English Common Law in the Year 1881 and came
into effect from March 01, 1882. It contains 17
Chapters and 141 Sections. This Act has been
enacted in our country vide P.O. No. 127 of 1972.
Since its inception several amendments have been
made to this Act. The Negotiable Instruments Act,
1881 governs all transactions in relation to the
negotiable instruments drawn, endorsed, transferred
and realized in Bangladesh.
• The Negotiable Instrument Act-1881 is the legislative enactment
of the law relating to the negotiable instruments which are in
common use in monetary transactions.
• The act regulates the issue and negotiation of the various
classes of negotiable Instruments which the bankers commonly
deal.
• In fact, it is the legal operational framework of banking.
Negotiable Instruments:
• According to sec-13 of Negotiable Instrument Act 1881,
“Negotiable Instrument” means a promissory note, bill of
exchange or cheque payable either to order or to bearer.
• So, it may be said that, documents of a certain type, used in
commercial transactions and monetary dealings, are called
Negotiable Instruments.
• A negotiable instrument is a piece of paper which entitles a
person to a sum of money and which is transferable from
person to person by mere delivery or by endorsement and
delivery. The person to whom it is so transferred becomes
entitled to the money and also to the right to further transfer it.
• ‘Negotiable’ means transferable by delivery and ‘Instrument’
means a written document by which a right is created in favor of
some person. The term Negotiable Instrument literally means
document transferable by delivery’.
Example:
1. Pay to X
2. Pay to X or order
3. Pay to X or bearer / order
4. Pay to X only
5. An Instrument Crossed, 'Account Payee Only'.
Since the Instrument 4 and 5 are not transferable i.e. the
word prohibits further transfer and A/C payee crossing
indicates the intention that it shall not be transferable,
these are excluded from negotiable instruments.
 Therefore to identify negotiable instruments the characteristics of
negotiable instruments under N.I. Act, 1881 are clarified as follows:
• The instruments like money are transferable from hand to hand by
way of negotiation.
• The instruments like money are transferable from hand to hand for
value and are used for settlement of debt.
• The transferee's title is not affected due to transferor's defective title
if the transferee can prove himself as holder in due course.
• The title of the Holder in due course does not affect for defective title
of his prior holders due to fraud, forgery etc.
• The Holder in due course is entitled to sue in his own name against
all the prior parties to realize proceeds of the instruments.
Sec.1- Application of the Act:
All the negotiable instruments are guided by this Act. Any other
Acts which are contradictory to this Act will not be applicable to
negotiable instruments.
Sec.3B- Banker:
'Banker' means a person transacting the business of accepting
for the purposes of lending or investment of deposits of money
from the public, repayable on demand or otherwise and
withdrawable by cheque, draft, order or otherwise, and includes
any post office savings Bank.
Sec.3C-Bearer:
Bearer means a person who by negotiation comes into
possession of a negotiable instrument, which is payable to
bearer.
Sec.3F-Material alteration:
It means the alteration of important parts of negotiable
instruments i.e. Promissory note, Bill of Exchange and Cheque.
The material parts which include date, the sum payable, the
time of payment, and the place of payment etc.
Sec.4-Promissory Note:
A 'Promissory Note' is an instrument in writing (not being a bank
note or a currency note) containing an unconditional
undertaking, signed by the maker, to pay on demand or at a
fixed or determinable future time a certain sum of money only
to, or to the order of, a certain person, or to the bearer of the
instrument.
The person who makes the promise to pay is called the maker.
He is the debtor and must sign the instrument. The person who
gets the money (the creditor) is called Payee.
Sec.5- Bill of Exchange:
• A 'bill of exchange' is an instrument in writing containing an unconditional
order, signed by the maker, directing a certain person to pay on demand or
at a fixed determinable future time a certain sum of money only to, or to
the order of a certain person or to the bearer of the instrument”.
• It is observed from the above definition that a bill of exchange contains an
order from the creditor to the debtor, to pay a certain sum, to a certain
person, either on demand or after a certain period. The person who draws
the bill is called the ‘drawer’ and the person on whom it is drawn, is called
the ‘drawee’ or ‘acceptor’ and the person to whom the amount is payable
is called the ‘payee’.
Sec.6-Cheque:
• A 'Cheque' is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.
• A cheque is a document of great importance in the business
world. It can pass from one hand to another easily and so it has
become a popular mode of payment. A cheque is the most
commercial and safe method of money transaction because the
transfer cost is very low and also the possibility of loss is
minimum.
 Sec.8- Holder:
• The holder of a promissory note, bill of exchange or cheque means the
payee or endorsee who is in possession of it or the bearer thereof but
does not include a beneficial owner claiming through a benamdar.
• The person legally entitled to receive the money due on the instrument is
called the holder.
Essential requisites of a Holder:
Payee or endorsee of the instrument, and
1. in possession of it,
2. or a person who is bearer thereof.
Sec.9- Holder in due course:
• 'Holder in due course' means any person who for consideration
becomes the possessor of a promissory note, bill of exchange
or cheque if payable to bearer or the payee or endorsee
thereof, if payable to order, before it became overdue, without
notice that the title of the person from whom he derived his own
title was defective.
Essential conditions to constitute a 'Holder in due course’:
• Who receives an instrument innocently i.e. in good faith and without
negligence.
• Who has paid value for the same.
• Who has received the instrument before its maturity.
• Who is in possession of the instrument as a bearer or payee or
endorsee.
• For all legal purposes, the title of the holder in due course is
superior to that of the true owner.
Rights and privileges of a holder in due course:

1.He obtains a better title to the instrument than that of a true owner.
2.The defective title of the previous endorsers (if any) will not
adversely affect his rights.
3.He can pass on a better title to others, since, once the instrument
passes through his hands, it is purged of all defects.
4. Until the instrument is finally discharged, every party to that
instrument is liable to him.
5. Even the drawer of a negotiable instrument cannot claim invalidity
of the instrument against him.
6. His claim cannot be denied on the ground that the payee has no
capacity to endorse.
 Sec.10- Payment in due course:
Payment in due course means payment in accordance with the apparent
tenor of the instrument in good faith and without negligence to any person
in possession thereof under circumstances, which do not afford a
reasonable ground for believing that he is not entitled to receive payment
of the amount therein mentioned.
Requirements of payment in due course:
▪ Payment must be in accordance with apparent tenor
▪ Payment must be made to the right holder of the instrument (Sec.78)
▪ Endorsement must be regular
▪ Payment must be in banking hour (Sec. 65)
▪ Circumstances to be considered as per instruction of BB or bank circulars
and common practices
Sec.13-Negotiable instrument:
A negotiable instrument means a promissory note, bill of
exchange or cheque payable either to order or to bearer.
Sec.14-Negotiation:
When a promissory note, Bill of Exchange or cheque is
transferred to any person, so as to constitute that person the
holder thereof, the instrument is said to be negotiated.
Sec.15-Endorsement:
When the maker or holder of a negotiable instrument signs the
same, otherwise than as such maker, for the purpose of
negotiation, on the back or face on a slip of paper annexed
thereto, or so signs for the same purpose a stamped paper
intended to be completed as a negotiable instrument, he is said
to endorse the same, and is called the” Endorser”.
• The person who signs the instrument for the purpose of
negotiation s/he is called Endorser & whose favour the
instrument is transferred he is called endorsee.
• A cheque may be either a bearer cheque or an order cheque. A
bearer cheque can be transferred by mere delivery (Section
47); whereas an order cheque requires endorsement before
delivery (Section 48).
• Endorsement is nothing but the process of signing one’s name or
affixing an accepted rubber stamp impression on a cheque, for the
purpose of transfer.
• Allonge: If the space available on the back has been completely
covered, a piece of paper may safely be attached to the instrument
and subsequent endorsements may be made on that paper. The
paper so attached in known as “Allonge.”
• In the process of collection banker is liable only for whether
endorsement is regular or not, however he will not be liable to verify
the genuinely of the signature.
Negotiation by indorsement
48. Subject to the provisions of section 58, a promissory note, bill of
exchange or cheque payable to order is negotiable by the holder by
endorsement and delivery thereof.
Conversion of indorsement in blank into indorsement in full.
49. When a negotiable instrument has been endorsed in blank, any holder
may, without signing his own name, convert the blank endorsement into an
endorsement in full by writing above the endorser's signature a direction to
pay the amount to or to the order of himself or some other person; and the
holder does not thereby incur the responsibility of an endorser.
Effect of indorsement
50.(1) Subject to the provisions of this Act relating to restrictive, conditional and qualified
endorsement, the endorsement of a negotiable instrument followed by delivery transfers to
the endorsee the property therein with the right of further negotiation.
(2) An indorsement is restrictive which either-

(a) restricts or excludes the right to further negotiate the instrument; or

(b) constitutes the endorsee an agent of the endorser to endorse the instrument or to
receive its contents for the endorser or for some other specified person:
Provided that the mere absence of words implying right to negotiate does not make the
endorsement restrictive.
Significance of Endorsement:
An endorsement consists of two contracts, namely
▪ Contract of transfer of the property in the instrument, and
▪ Contract of a contingent assumption of liability on the part of the
endorser. The endorser of a negotiable instrument, by his act of
endorsing, signifies the following to his endorsee and to any
subsequent holder, that, when the instrument left his hands –
(i) He had a good title to it.
(ii) It was genuine all its particulars at the time of his endorsement.
(iii) All the previous endorsements were genuine. Sec. 122 of the N.I Act
provides that “no endorser of a negotiable instrument shall, in a suit thereon
by a subsequent holder, be permitted to deny signature or capacity to
contract of any prior party to instrument.”
(iv) Further the endorser; by his act of endorsing, promises to indemnify the
endorsee or any subsequent holder for any loss suffered by them on the
dishonor of the instrument, provided, the procedure necessary on dishonor
has been duly followed.
(v) An endorsement carries with a right of further negotiation to the
endorsee, along with the right of ownership’.
Assignment vs. Endorsement:
(a) An assignment means the transfer of legal title to a property.
Endorsement not only means the transfer of legal title, but also, it
includes the assumption of liability till the instrument is finally
discharged.
(b) In the case of Assignment, the assignee’s title is subject to the
title of the assignor. But in the case of endorsement, good title
can be passed on to the endorse, even when, there is a defective
title.
 Kinds of endorsement:
(a) Blank endorsement: (sec. 16(1) of N. I Act)
• If the endorser signs his name only, the endorsement is said to be “Blank’. Cheques endorsed in
blank can be negotiated by mere delivery. Thus, a cheque, originally payable to order, becomes
payable to bearer by an endorsement in blank.
• Example: A cheque is payable to X or order. If it is simply signed by X on the back, it constitutes a
blank endorsement.

Pay to Mr. Anwar Hossain or order (Without signing to whom)

(Only Sign)
Anwar Hossain
(b) Special/Full endorsement (Sec. 16(1) of N.I Act):
• If the endorser adds a direction to pay the amount to the order of a certain person, then,
the endorsement is said to be full.
• An instrument, with a blank instrument can be converted into a special instrument by any
holder by specifying the name of an endorsee and putting his signature. A cheque,
originally a bearer cheque, can be converted into an order cheque, by means of a full
endorsement. Example: A cheque is payable to 'X’ or order. He adds a direction to pay
the amount to Mr. ‘Y’ or order and puts his signature below.

Pay to Mr. Anwar Hossain or Order Pay to Mr. Monir Hossain or Order
(Stating Name)
(Signature Only)
(Anwar Hossain)
© Conditional Endorsement (Sec. 52)

• If the endorser of a Negotiable instrument expresses any words which is the liability of
the endorsee to receive amount therein & depends on any events that type of
endorsement is conditional endorsement.
Pay to Mr. Anwar Hossain or Order Pay to Mr. Ahsan only after his marriage with Sabiha.
(Signature Only)
(Anwar Hossain)
(d)Restrictive Endorsement (Sec. 50/51)
• The endorsement may express the words which restricts or excludes the right to
negotiate or nearly constitute the endorsee as an agent to receive its contents for the
specified person.
Pay to Mr. Anwar Hossain or Order Pay to Engr. Hasan only
(Signature Only)
(Anwar Hossain)
(d) Sans recourse Endorsement (Sec.52)
• An endorser for Negotiable instrument may express words in the endorsement and exclude his
liability thereon.
Pay to Mr. Anwar Hossain or Order Pay to Mr. Wazed or order without recourse
to me
(Signature Only)
(Anwar Hossain)
(d) Facultative Endorsement
• Here in this case the endorsee must give notice of dishonor of the instrument to the endorser.

Pay to Mr. Anwar Hossain or Order Pay to Mr. Wazed or order ( Notice of dishonour
withdrawn)
Signature Only)
(Anwar Hossain)
Requisites of valid endorsements
An endorsement in order to operate as elements of negotiation must comply with the following conditions:
• Endorsement must be written on the Negotiable instrument & signed (simple) by the endorser generally back of
the instrument.
• Instrument must be endorsed for the entire bill amount. Endorsement of partial amount of bills or two or more
endorsees severally do not operate as negotiation.
• Where a bill is payable to the order of two or more person, all must endorse.
• Where payee or endorsee’s name is wrongly written or misspells, endorsement to be done as therein
described. If it needs to be corrected it can be properly spell out only by his signature.
• Where there is two or more endorsement on a bill, each endorsement is deemed to have been made in order,
until the contrary is proved.
• An endorsement may be made in blank or full or special. Endorsement may also contain terms making it
restrictive.
• Endorsement shall not be in block letters.
• Endorsement shall not be allowed in printed character.
• The prefixes or suffixes to the name of payee or endorsee need not be included in endorsement.
• In the subsequent endorsement, endorser can clarify his present and previous position.
• An illiterate person can endorse the Negotiable instrument by affixing his thumb impression & duly
witnessed or attested by somebody who gives his full address.
• In case of partnership firm endorser (partner/manager) must sign on behalf of firm by affixing firm’s
seal.
• If the name of payee(s) or endorsee is designated with official post, such as Companies,
Institution, Club, Society, Associations etc. then endorsement must be stating official designation
by affixing official seal.
• Banker can endorse an instrument on behalf of his customer(s) or on his own behalf by stating
capacity & affixing proper seal.
• Endorsement of an instrument after expiry or stale is invalid.
• Examples of Regular endorsement. In the process of collection Banker is liable only for whether
endorsement is regular or not, he is not however, liable to verify the genuinely of endorsement.

Payee Regular Endorsement Irregular Endorsement Remarks

Ezaz Ahmed Ezaz Ahmed Izaz Ahmad Misspell

Dr. M A Hakim M A Hakim(Doctor) Dr.M A Hakim Prefix exclude

Babu A K Saha A K Saha Babu A K Saha Prefix exclude

Janab Taleb Ali Master Suffix & Prefix

Taleb Ali Taleb Ali Master exclude
Afroza Hossain
Ms Afroza Ali (Wife of Abul Hossain now married) Ms. Afroza Ali Married woman

A Hanif, A Latif A Hanif Serially

A Hanif & A Latif (Abu Hanif) (Abdul Latif) A Latif
 Payee Regular endorsement Irregular endorsement
For M/S. Rahmania Store A Rahman
M/S. Rahmania store A Rahman M/S. Rahmania Store, Proprietor
For M/s. Gomes & others O Gomes
M/s. Gomes & others O Gomes Partner
Partner M/s. Gomes & others
M/s. Sheltech Ltd. For M/s. Sheltech Ltd. A Gani
A Gani Senior Manager
Senior Manager For M/s. Sheltech Ltd.

Secretary, Dhaka Club For Dhaka Club A Razzak

A Razzak Secretary
Secretary For Dhaka Club
Mayor, DNCC Anisul Hoque Mayor
Mayor Anisul Hoque
DNCC DNCC
Ahsania Trust For Ahsania Trust A Hanif, A Latif
A Hanif, A Latif Ahsania Trust
(Trustee) (Trustee)
Ahsania Trust For Ahsania Trust A Hanif, A Latif
A Hanif, A Latif Ahsania Trust
(Trustee) (Trustee)

Modern Bank Ltd. For Modern Bank Ltd. Abu Sayeed

Abu Sayeed SVP
SVP Modern Bank Ltd.
Gulshan Branch Gulshan Branch
Sec.18
Where amount is stated differently in figure and words, the
amounts stated in words shall be the amount ordered to be
paid.
Sec.29B-Forged or unauthorized signature:
An instrument having forged signature of the drawer or the
persons required for it not treated as instrument under this Act
and will remain inoperative, since nobody is entitled to have title
of those instruments.
Sec.30-Liability of Drawer:
The drawer of the negotiable instrument will remain responsible
to the payee till it is paid off.
Sec.31-Liability of the Drawee of cheque:
The drawee of a cheque having sufficient funds of the drawer in
his hands properly applicable to the payment of such cheque
must pay the cheque when duly required so to do, and in
default of such payment, must compensate the drawer for any
loss or damage caused by such default.
Sec.36-Liability of prior parties to holder in due course:
Every prior party to a negotiable instrument is liable thereon to a holder in
due course until the instrument is duly satisfied.
Sec.50-Effect of Endorsement:
The endorsement of a negotiable instrument followed by delivery transfers
to the endorsee the property therein with the right of further negotiation;
but the endorsement may, by express words, restrict or exclude such right,
or may merely constitute the endorsee an agent to endorse the instrument,
or to receive its contents for the endorser or for some other specified
person.
Sec.51-Who may negotiate:
Every sole maker, drawer, payee or endorsee, or all of several joint
makers, drawers, payee or endorsees, of a negotiable instrument may, if
the negotiability of such instrument has not been restricted or excluded as
mentioned in section 50, endorse and negotiate the same.
Sec.58-Defective title:
A person who receives an instrument which has been lost or by means of
fraud or any other unlawful means is not entitled to receive the amount due
thereon unless he claims as holder in due course.
Sec.85-Cheque payable to order:
1.Where a cheque payable to order purports to be endorsed by
or on behalf of the payee, the drawee is discharged by payment
in due course;
2.Where a cheque is originally expressed to be payable to
bearer, the drawee is discharged by payment in due course to
the bearer thereof, notwithstanding any endorsement whether in
full or in blank appearing thereon and notwithstanding that any
such endorsement purports to restrict or exclude further
negotiation.
Sec.85A-Drafts drawn by one branch of a bank on another
payable to order:
Where any draft, that is, an order to pay money, drawn by one
office of a bank upon another office of the same bank for a sum
of money payable to order on demand, purports to be endorsed
by or on behalf of the payee, the bank is discharged by
payment in due course.
Sec.87-Effect of material alteration:
Any material alteration of a negotiable instrument renders the
same void as against any one who is a party thereto at the time
of making such alteration and does not consent thereto, unless
it was made in order to carry out the common intension of the
original parties; and any such alteration if made by an
endorsee, discharges his endorser from all liabilities to him in
respect of the consideration thereof.
Sec.89-Payment of instrument on which alteration is not
apparent:
Payment of any negotiable instrument which has been
materially altered but not apparent to identify the alteration or
any crossed cheque where crossing is not apparent and if
otherwise in due course, the paying banker shall be discharged
from all liabilities there on and such payment shall not be
questioned for alteration.
 Sec.122A-Revocation of banker's authority:
The banker can legally return a valid cheque without payment
under the following conditions:
1.Countermand of payment
2.Notice of Customer's death
3.Notice of adjudication of customer as an insolvent
Sec.123-Cheque crossed generally:
Where a cheque bearers 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 be crossed generally.
Sec.123A-Cheque crossed A/C payee:
When a cheque is crossed 'Account payee' -
1.it shall cease to be negotiable and
2.it shall be the duty of the banker collecting payment of the
cheque to credit the proceeds thereof only to the account of the
payee named in the cheque.
Sec.124-Cheque crossed specially:
Where a cheque bears across its face an addition of the name
of a banker, 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.
Sec.126-Payment of cheque crossed generally:
Where a cheque is crossed generally, the banker on whom it is
drawn shall not pay it otherwise than to banker.
Payment of cheque crossed specially:
Where a cheque crossed specially, the banker on whom it is
drawn shall not pay it otherwise than to the banker to whom it is
crossed or his agent for collection.
Sec.127-Payment of cheque crossed specially more than
once:
Where a cheque crossed specially to more than one banker,
except when crossed to an agent for the purpose of collection,
the banker on whom it is drawn shall refuse payment thereof.
Sec.128-Payment in due course of crossed cheque:
Where the banker on whom a crossed cheque is drawn has
paid the same in due course, the banker paying the cheque and
(in case such cheque has come to the hands of the payee) the
drawer thereof, shall respectively be entitled to the same rights,
and be placed in the same position in all respects as they would
respectively be entitled to and placed in if the amount of the
cheque had been paid to and received by the true owner
thereof.
Sec.129-Payment of crossed cheque out of the course:
Any banker paying a cheque crossed generally otherwise than
to a banker or a cheque crossed specially otherwise than to the
banker to whom the same is crossed, or his agent for collection,
being a banker shall be liable to the true owner of the cheque
for any loss he may sustain owing to the cheque having been
so paid.
Sec.130-Cheque bearing 'Not negotiable':
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.
Sec.131-Non-liability of banker receiving payment of cheque:
A banker who had in good faith and without negligence received
payment for a customer of a cheque crossed generally or
specially to himself shall not in case the title to the cheque
proved defective incur any liability to the true owner of the
cheque by reason only of having received such payment.
Sec131A:
The above provisions shall apply to any draft, as defined in
sec.85A as if the draft were cheque.
Sec.131 B- Protection to banker crediting cheque crossed
“Account Payee”:
Where a cheque is delivered for collection to a banker which does not at
the time of such delivery appear to be crossed “Account Payee” or to have
had a crossing “Account payee” which has been obliterated or altered, the
banker, in good faith and without negligence collecting payment of the
cheque and crediting the proceeds thereof to a customer, shall not incur
any liability by reason of the cheque having being crossed “Account
Payee”, or such crossing having been altered or obliterated, and of the
proceeds of the cheque having credited to a person who is not the payee
thereof.
Sec.138- Dishonor of cheque:
According to amendment in 1994 and 2000 penalties in case of
dishonor of certain cheque for insufficiency of funds in the
account of drawer of the cheque is that such person shall be
deemed to have committed an offence and shall be punished
with imprisonment for a term which may extend to one year, or
with fine which may extend thrice the amount of the cheque, or
with both;
• Provided that-
a.The cheque has been presented to the bank within a period of validity.
b.The payee or holder in due course of the cheque makes a demand for the
payment of the said amount of money by giving a notice, in writing to the
drawer of the cheque within thirty days of the receipt of information by him
from the bank regarding the return of the cheque as unpaid and
c.The drawer of such cheque fails to make the payment of the said amount
of money to the payee or, as the case may be, to the holder in due course
of the cheque, within thirty days of the receipt of the said notice.
Crossing:

• A cheque without crossing is called an open cheque. It is open

to many risks. In order to protect it from risks, crossing has
been introduced.
Therefore a cheque may be classified as:
a) an open cheque which is payable over the counter
b) a crossed cheque which is payable only through a collecting
banker.
• Crossing is of two types:
1.General Crossing
2.Special Crossing.
 A cheque (also a banker’s draft) can be crossed generally or specially to a
banker by the drawer, or the holder thereof. The addition of a crossing on a
cheque provides security and protection for the drawer (or holder) since the
drawee bank (i.e. the paying bank) cannot pay out cash against a crossed cheque.
As payment of a crossed cheque is required to be made through a banker it can,
therefore, be easily detected to whose use the money has been received.
Essentials of General Crossing (sec. 123 of N.I Act):

1. Two lines are of paramount importance in crossing.

2. The lines must be drawn parallel and transverse.
3. The lines are generally drawn on the left hand side so as not to
obliterate or alter the printed number of the cheque.
4. The words ‘and company or its abbreviation i.e. & co., may be written in
between the lines. They themselves are not essential and so, they do not
constitute crossing, without two parallel transverse lines.
5. So also, the words ‘Not Negotiable’ may be added to a crossing. But,
they themselves do not constitute a crossing.
Significance of General Crossing

1. The effect of general crossing is that it gives a direction to the paying

banker.
2. The direction is that, the paying banker should not pay the cheque at
the counter. It should be paid only to a fellow banker.
3. If a crossed cheque is paid at the counter in contravention of the
crossing:
a) The payment does not amount to payment in due course. So the paying
banker will lose his statutory protection.
b) He has no right to debit his customer’s account, since; it will constitute a
breach of his customer’s mandate.
c) He will be liable to the drawer for any loss, which he may
suffer.
d) He will be liable to the true owner of the cheque who may be
a third party, irrespective of the fact, that, there is no contract
between the banker and the third party. As a general rule a
banker is answerable only to his customer and this liability to a
third party here is an exception.
Essentials of special crossing (sec. 124 of the N.I. Act):

1. Drawing of two transverse and parallel lines is not at all essential for a
special crossing.
2. The name of a banker must be necessarily specified across the face of
the cheque. The name of the banker itself constitutes special crossing.
3. It must appear on the left hand side, preferably on the corner so as not
to obliterate the printed number of the cheque.
4. The two parallel transverse lines and the words ‘Not Negotiable may be
added to a special crossing.
Significance of Special Crossing:

1. It is also a direction to the paying banker. The Direction is

that, the paying banker should pay the cheque only to the
banker whose name appears in the crossing or to his agent.
(Sec. 126 of N.I Act)
2. If a cheque specially crossed to a bank is presented by
another bank, not in the capacity of its agent, the paying banker
is justified in returning the cheque.
A special crossing gives more protection to the cheque than a
general crossing. It makes a cheque still safer because, a
person, who does not have a real claim for it, would find it
difficult to obtain payment. In special crossing, the cheque is
specially crossed to the payee’s banker. Hence, the banker, in
whose favour the cheque has been crossed, knows the payee
and his specimen signature well. So, he will not collect it for any
person other than the payee.
If there is any forgery, it can be easily detected by the banker.
But, we cannot say that it gives full protection in the sense, that
an unscrupulous person, who has an account in the same bank
but at a different branch, can encash it by forging the signature
of the payee. It can also be detected. However, there is some
danger in special crossing also. To overcome this danger, ‘Not
Negotiable’ and ‘A/C Payee’ crossings have been introduced.
Significance of Not Negotiable Crossing:
‘Not negotiable’ does not mean not transferable. Not Negotiable
crossing does not affect the transferability, but it kills only the
‘Negotiability’. Negotiability is something different from
transferability. Negotiability is a broader term, which includes
transferability. As per law, Negotiability means transferability by
mere delivery or endorsement and delivery plus transferability
free from defect. But transferability does not possess the
second quality namely transfer free from defect.
So, if a document is a negotiable one, a bonafide transferee
who receives it in good faith and for value paid, can obtain a
good title, despite the fact that, the document has prior defects.
But, in case a document is a not negotiable instrument, the
transferee cannot obtain a good title, when there is a prior bad
title.
Thus, a cheque crossed ‘Not Negotiable’ can be transferred like
any other cheque. But the transferee cannot obtain a better title
than that of the transferor.
Significance of A/C Payee Crossing:

‘A/C payee’ crossing does not restrict the transferability of

cheques. A/C payee’ crossed cheque can be negotiated. But, if
the words ‘or order’, which appear immediately after the
payee’s name, are struck through and if the cheque is crossed
‘A/C payee’ that cheque will be considered to be not
transferable.
Double Crossing:

Sec. 125 of the N.I Act. Provides that “where a cheque is

crossed specially, the banker to whom it is crossed, may again
cross it specially to another banker, his agent for collection”.
Who can cross a cheque:

(1) The drawer of a cheque can cross it at the time of issuing it.
(2) Any holder can cross an uncrossed cheque. He can convert
general crossing into special crossing, and he can even add the
words ‘Not Negotiable’ or ‘A/C payee’ to a crossing.
(3)The banker in whose favour a cheque has been crossed can
again cross it in favour of another banker, for the purpose of
collection, as an agent.
Opening of Crossing:
The cancellation of crossing is usually termed as ‘opening of
crossing. When a drawer wants to cancel the crossing, he is to
write the words ‘pay cash’ upon the cheque, followed by his full
signature.
Dishonor of cheque for insufficiency, etc. of funds in the
account

138. (1)] Where any cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account is returned by the bank
unpaid, either because of the amount of money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be paid from that account by an
agreement made with that bank, such person shall be deemed to have committed an offence and
shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term
which may extend to one year, or with fine which may extend to [thrice] the amount of the cheque, or
with both:
• Provided that nothing contained in this section shall apply unless-
(a) the cheque has been presented to the bank within a period of six months from the date on which it
is drawn or within the period of its validity, whichever is earlier;
(a) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of
the said amount of money by giving a notice, in writing, to the drawer of the cheque, within [thirty days] of the
receipt of information by him from the bank regarding the return of the cheque as unpaid, and
(b) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case
may be, to the holder in due course of the cheque, within [thirty days] of the receipt of the said notice.
The notice required to be served under clause (b) of sub-section (1) shall be served in the following manner-
(a) by delivering it to the person on whom it is to be served; or
(b) by sending it by registered post with acknowledgement due to that person at his usual or last known
place of abode or business in Bangladesh; or
(c) by publication in a daily Bangla national newspaper having wide circulation.
(2) Where any fine is realized under sub-section (1), any amount up to the face value of the cheque as far as is
covered by the fine realized shall be paid to the holder.
(3) Notwithstanding anything contained in sub- section (1) and (2), the holder of the cheque shall retain his right
to establish his claim through civil Court if whole or any part of the value of the cheque remains unrealized.
Restriction in respect of appeal

138A. Notwithstanding anything contained in the Code of Criminal

Procedure, 1898, no appeal against any order of sentence under sub-
section (1) of section 138 shall lie, unless an amount of not less than fifty per
cent of the amount of the dishonored cheque is deposited before filing the
appeal in the court which awarded the sentence.
Offences of Companies

140. (1) If the person committing an offence under section 138 is a company, every person who, at
the time the offence was committed, was in charge of, and was responsible to, the company for the
conduct of the business of the company, as well as the company, shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished accordingly:
• Provided that nothing contained in this sub-section shall render any person liable to punishment if
he proves that the offence was committed without his knowledge, or that he had exercised all due
diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has
been committed by a company and it is proved that the offence has been committed with the
consent or connivance of, or is attributable to, any neglect on the part of any director, manager,
secretary or other officer of the company, such director, manager, secretary or other officer shall
also be deemed to be guilty of the offence.
Thank You.