Transactions through Cheques are quite common these days. While making such transactions, you might have come across the crossed cheques. But have you ever thought why the Crossing of Cheques are done or what it means?
Today we’ll try to understand about Crossing of Cheques and what are its types, as this is also one of the important topics of banking awareness for IBPS exams.
Let us quickly revise what cheques are and what are its types.
Table of Contents
What is a Cheque?
Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money. It is a document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued. The amount is transferred only to the person to whom a cheque is addressed.
There are various types of cheques and these are described in the following sections.
- Order Cheque
- Bearer Cheque
- Blank Cheque
- Counter cheque
- Stale Cheque
- Multilated Cheque
- Post Dated Cheque
- Open Cheque
- Crossed Cheque
- Traveller’s Cheque
- Self Cheque, etc…
Know about Cheques: Types of Cheques in detail
Parties Involved in Cheque Transaction
Drawer: The person writing the cheque is known as a drawer.
Drawee: The party on whom the cheque is written, i.e., your Bank.
Payee: The person named in the cheque to whom the money is paid.
Crossing of Cheques
Crossing a cheque refers to drawing two parallel transverse lines on the cheque with or without additional words like “& CO.” or “Account Payee” or “Not Negotiable” between the lines.
By using a crossed cheque, one can make sure that the amount specified cannot be en-cashed but can only be credited to the payee’s bank account.
Crossing of Cheque is recognized under The Negotiable Instruments Act, 1881.
The crossing of cheque had developed gradually as a means of protection against misusing of cheques.
Crossing of cheque provides instruction to the paying banker to pay the amount through banker only, and not directly to the payee or holder presenting it at the counter. This ensures that payment is made to the actual payee.
Types of Crossing of Cheques
Crossing of Cheques can be done in two ways:
- General Crossing
- Special Crossing
Section 123 of The Negotiable Instruments Act, 1881 defines General Crossing as:
“Where a cheque bears 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 to be crossed generally”.
- Two parallel transverse lines are drawn on the face of the cheque, generally, on the top left corner of the cheque
- Holder or payee cannot get the payment at the counter but through the bank only
- Including the name of the banker is not essential, hence, the amount can be encashed by any banker
- The words, “& Company”, “Not Negotiable”, “A/C. Payee” may or may not be written
- It can be converted into Special Crossing
Specimen of General Crossing of Cheques
Section 124 of The Negotiable Instruments Act, 1881 defines Special Crossing as:
“Where a cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable”, that in addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially and to be crossed to that banker.”
- Also known as Restricted Crossing
- Two transverse lines are not necessary to be drawn
- Name of the banker is added across the face of the cheque
- The Name of the Banker may or may not carry the abbreviated word, ‘& Co.’, ‘Account payee’ or ‘Not Negotiable’
- Payment can be made only through the bank mentioned in the Crossing. The Banker, mentioned in the Crossing, may appoint another banker as his agent to collect such cheques. thus, making it safer than ‘generally’ crossed cheques
- Specially Crossed Cheques can never be converted to General Crossing.
A specimen of Special Crossing of Cheques
Here the cheque bears two separate “special” crossing. For eg., a cheque is crossed specially in the name of ‘Canara Bank’, and further in the name of ‘Bank of Baroda’.
As per Section 127 of The Negotiable Instruments Act, 1881:
“Where a cheque is 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.”
Thus, a cheque doubly crossed shall be payed by the banker when the second banker is acting only as the agent of the first collecting banker and this has been made clear on the Cheque, i.e., crossing must specify that the banker to whom it has been specially crossed again shall act as the agent of the first banker for the purpose of collection of the cheque.
It is done in case, the banker, to whom a cheque is specially crossed, does not have a branch at the place of the paying banker, or if he, otherwise, feels the necessity, he may cross the cheque specially to another banker (by clearly specifying).
That is all from us in this blog. Hope you find the information useful.
All the best.