Crossing of a Cheque, Types of Crossing

Cheque is a negotiable instrument that is regulated by the Negotiable Instruments Act, 1881. The law governs the issuance, negotiation, and enforcement of cheques in India.

Under the law, a cheque is defined as a bill of exchange that is drawn on a specified bank and is payable on demand. The cheque must be in writing, signed by the drawer, and contain an unconditional order to pay a specified sum of money to the payee or to the bearer of the cheque.

The drawer of the cheque is the person who issues the cheque, while the payee is the person who is entitled to receive the payment. A bearer cheque is one that is payable to the bearer and can be transferred by delivery.

The law also provides for various rules and procedures related to the dishonour of cheques, including the time limits within which a cheque must be presented for payment, the grounds on which a cheque can be dishonoured, and the consequences of dishonouring a cheque.

If a cheque is dishonoured due to insufficient funds or other reasons, the holder of the cheque can initiate legal proceedings against the drawer. The law also provides for penalties and punishments for the dishonour of cheques, including imprisonment and fines.

Crossing of a cheque:

Crossing of a cheque is a process in which the drawer of the cheque places two parallel lines on the face of the cheque. This is done to specify that the payment should only be made through a bank and not in cash. Crossing of a cheque is an important security feature that helps prevent fraud and ensures that the payment is made only to the intended beneficiary.

In India, the crossing of a cheque is governed by the Negotiable Instruments Act, 1881. The Act defines crossing as the addition of two parallel lines, either with or without the words “account payee” or “not negotiable,” on the face of the cheque. The crossing of a cheque can be general or special, depending on the specific requirements of the drawer.

A general crossing means that the cheque can only be paid through a bank and cannot be paid in cash. A special crossing, on the other hand, specifies that the cheque can only be credited to the account of the payee with a particular bank. In this case, the name of the bank is mentioned between the two parallel lines.

Benefits of Crossing a Cheque:

• Prevention of Fraud: Crossing a cheque ensures that the payment is made only to the intended beneficiary and not to any other person. This helps prevent fraud and ensures that the payment is made securely.
• Protection of Funds: Crossing of a cheque ensures that the payment is made through a bank, which provides a level of protection against the loss of funds. Banks are required to follow strict procedures when processing cheques, which helps prevent unauthorized access to the funds.
• Better Record-keeping: Crossing of a cheque helps in maintaining better records of transactions. Since the payment is made through a bank, there is a record of the payment that can be accessed later if needed.

Types of Crossing:

there are two types of crossing of a cheque: General Crossing and Special Crossing.

• General Crossing:

In the case of a general crossing, the drawer of the cheque puts two parallel transverse lines across the face of the cheque. The transverse lines indicate that the payment can only be made through a bank account and not in cash. This ensures that the cheque is paid through the banking channel and thus it provides an added layer of security. The words “& Co.” or “Not Negotiable” may also be added to the general crossing. This type of crossing is also known as “ordinary crossing.”

• Special Crossing:

A special crossing is when the drawer of the cheque adds the name of a specific bank between the two parallel lines in the crossing. The bank mentioned in the special crossing is known as the “collecting bank.” The payment will only be made through that specific bank and the cheque can be credited only to the account of the payee. The words “Account Payee” or “Account Payee Only” are also commonly added to the special crossing. This type of crossing is used when the drawer wants to ensure that the payment is made only to the payee and not to any other party.

A special crossing can be further classified into two types:

• Restrictive Special Crossing:

In the case of a restrictive special crossing, the name of a specific bank is mentioned between the two parallel lines and the words “Account Payee” or “Account Payee Only” are also added. The payment can only be credited to the account of the payee with the mentioned bank. This type of crossing provides the highest level of security for the cheque.

• Not-negotiable Special Crossing:

In the case of a not-negotiable special crossing, the name of the bank is mentioned between the two parallel lines, along with the words “Not Negotiable.” This type of crossing ensures that the cheque can only be credited to the account of the payee and cannot be transferred or endorsed to any other party.