Crossed Cheque

The use of a cheque, which is classified as a negotiable instrument under the Negotiable Instruments Act 1881, is used to transfer funds. There are two different sorts of checks: an open cheque and a cross cheque. In contrast to the crossed cheque, which is intended to ensure that the amount listed on the cheque cannot be encashed and should instead be deposited directly into the payee’s bank account by the banker, the open cheque, also known as a bearer cheque, is used for over-the-counter instant cash transactions.

Crossing of the Cheque

Crossing a cheque is the instruction given to the paying banker to transfer the specified amount from the payer account to the payee account rather than paying it over the counter at the time of payment. The act of crossing a cheque serves as a protection against the misuse of cheques in financial transactions.

In most cases, a cheque is crossed by drawing two parallel lines on the front portion of the document, as shown in the illustration. According to the double-line code on the check, the check can only be cashed or placed into a bank account. After a cheque has been crossed, it is impossible to reverse the action. Any number of words can be printed on a check, including “& Company,” “Account Payee,” and “Not Negotiable.”

Crossed cheques cannot be transferred to a third party and are only available to the payer and the payee who have both signed the cheque. The only way for the payee to receive money is for him to deposit the check into his bank account, which is not always possible.

Benefits of Using Crossed Cheque

1. Traceability of the receiver: In order to avoid cashing a check at the bank, a crossed cheque must be used. Consequently, the transfer of funds is easy to follow.
2. Minimize the risk: Crossing is an effective strategy for reducing the likelihood of counterfeiting. In order for a crossed cheque to be accepted, it must be deposited into a bank account by the payee.

3. Direct instructions to the banker: A crossed cheque is a written direction to the paying banker to transfer funds to a certain bank account only, and it is used to convey this instruction.
4. Unaffected Negotiability: The mechanics of negotiation in international trade are highly complex. Checks aren’t non-negotiable because of the crossing, but they are constrained by it.

Types of Cheque Crossing

General Cheque Crossing

As a general rule, a check is crossed when two parallel transverse lines are drawn across its face and/or the words “and Company” or “not negotiable” are written between them. If the cheque contains a general crossing, the paying banker will pay money to any bank that accepts the cheque. General crossing of the cheque requires the use of two transverse parallel lines at the corner of the cheque. This means that the cheque bearer or payee will only be able to collect payment through their bank account, rather than over the counter, in this case. As a standalone phrase, the words ‘and Company’ have no significance. The terms ‘not negotiable’, on the other hand, are vital because they limit the negotiability and, as a result, in case of the transfer, the transferee will not be able to grant a title that is better than the title of the transferor, which is important.

Restrictive Cheque Crossing or Account Payee’s Crossing

The negotiability of the check is severely restricted by this form of crossing. When the cheque is collected, it tells the collecting banks to credit the amount of the cheque only to the accounts of the payee, the identified parties, or his agent. If the collecting banker credits the funds of a cheque with such a crossing to any other account, he is committing the act of negligence described above. In addition, he will be ineligible for the protections afforded to collect bankers under Section 131 of the Act. However, a payment banker will be unaffected by such a crossover in the opposite direction. That’s because it isn’t his job to see that the cheque is collected and deposited into the account of the payee’s account.

Special Cheque Crossing

It is customary to add the banker’s name across the face of the cheque in a distinctive crossing, either with or without the phrase “not negotiable.” In this circumstance, the paying banker will only pay the amount of the check to the banker whose name appears on the crossing or to his collection agent, not to any other banks. A consequence of this is that the paying banker will only honour a cheque if it has been ordered through the crossing bank or its representative bank. Even though crossing two parallel transverse lines is not required in this scenario, knowing who the banker is essential.

Not Negotiable Cheque Crossing

It occurs when the words ‘Not Negotiable’ are written between two parallel transverse lines across the face of cheque in the case of the general crossing, or when the name of a banker is written between two parallel transverse lines across the face of the cheque in the case of special crossing. Because of the Not Negotiable Crossing, the check is not non-transferable in any way. According to Section 130 of the Negotiable Instruments Act, 1881, a person who accepts a cheque that bears a general or specific crossing with the words ‘not negotiable’ will not have and will not be able to provide a larger title than the person from whom the cheque was accepted.

Undoubtedly, one of the most important aspects of a negotiable instrument is that it conveys a good title to a person who acquires it in good faith and without carelessness while paying fair market value, before the maturity, and without the knowledge of the transferor’s title defect. As a result, he becomes the legal owner of the property in due course and has an uncontested claim to it. Whenever an instrument passes through the holder in a timely manner, all subsequent holders benefit from the good title that the instrument has earned. Not Negotiable Crossing, on the other hand, eliminates this critical attribute. As a result, the transferred rights are never received by the transferee within the specified time frame.

Conclusion

Cheques are negotiable instruments that can be exchanged in a variety of ways, depending on the situation. When it comes to security and protection, both the transferor and recipient profit from the crossing of checks. It also aids in the identification of the beneficiary by the drawer and the bank.