What is crossing of cheque?

Crossing is a popular device for protecting the drawer and payee of a cheque. Both bearer

and order cheques can be crossed.Crossing of a cheque means "Drawing Two Parallel Lines"

across the face of the cheque. Thus, crossing is necessary in order to have safety.Crossed

cheques must de presented through the bank only because they are not paid at the counter.

crossed cheque

CROSSING OF CHEQUES

Cheques can be of two types:-

1.Open Cheque.2.Crossed Cheque.

• If you cross out “to bearer” and draw two parallel lines across the front of the cheque (usually the top left corner is sufficient) then you are telling the bank that the money has to be paid into an account and cannot be cashed (exchanged for cash). This means that the person who eventually receives the money can be traced because there will be a record of the deposit.

Kinds of CROSSING1. General Crossing2. Special Crossing

Definition of General Crossing

o Sec 123 of the Negotiable Instruments Act 1881 defines general crossing as follows:

o “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 to be a ‘crossing, and the cheque shall be deemed to be crossed generally.”

Essentials of General Crossing

1. Two lines are of paramount importance in crossing.

2. The lines must be drawn parallel and transverse. It means that they should be arranged in a crosswise direction. They should not be straight lines.

3. The lines are generally drawn on the left hand side .

4. The words ‘not negotiable’ may be added to a crossing.

5. The words ‘and Company’ may be written in between the lines.

General crossed cheque

The following do not constitute a crossing within the meaning of Sec 123

Forms of General Crossing

1. & Co.,2. Not negotiable3. Not Negotiable And Company4. Payee’s A/C5. Under Rupees Fifty

Significance of General Crossing1.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.3.If a crossed cheque is paid at the counter in

contravention of the crossing:

a. He has no right to debit his customers account, since , it will constitute a breach of his customer’s mandate,

b. He will be liable to the drawer for any loss, which he may suffer,

c. He will be liable to the true owner of the cheque who may be the third party.

4. The main intention of crossing a cheque is to give protection to it.

SPECIAL CROSSINGo Sec 124 of the Negotiable Instruments Act of

1881 defines o “where a cheque bears across its face, an

addition of the name of a banker, 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”

Essentials of Special Crossing

1. Two parallel transverse lines are 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.

4. The two parallel transverse lines and the words ‘not negotiable be added to a special crossing.

Special Crossed cheque

Forms of Special crossing

a. ICICI Bank ltdb. With the parallel linec. ICICI Bank ltd Not Negotiabled. With Payee’s A/ce. With Not Negotiable a/c payee.

Significance of Special Crossing

1. It is a direction to the paying banker.2. A special crossing gives more protection the

cheque than a general crossing.

o Special crossing can be of two types:1. Account payee crossing2. Not negotiable crossing

What is bouncing of cheque?

A cheque bounces when a bank declines to pay the amount for which the cheque

was written because the drawer's account contains insufficient

or uncleared funds, or for some technical reason, e.g., the amount in

words differs from the amount in figures. The cheque returns, or is 'bounced' back

to the bank which presented it.

When banker may dishonor the cheque

• The cheque may be dishonour in the following way:

1.Post dated cheque2.Insufficient balance3.Not presented properly4.Time of presentment5.Funds6.Written mistake in amount7.Mutilated cheque

Bouncing of Cheques – A Criminal Offence

(Sections 138 to 142)o Section 138 provides punishment for

bouncing of cheques, i.e., dishonour for insufficiency of funds.

o Punishment provided is imprisonment up to 2 years or fine up to double the amount of the cheque or both.

Bouncing of Cheques

Conditions to be satisfied:1. Insufficiency of funds. The expression insufficiency of funds

includes:– stop-payment – closure of account – directing the payee not to present

Bouncing of Cheques – Conditions to be satisfied:

2. Legally enforceable debt or liability. Thus, where a person proposes to make an FDR

or invest in shares and later changes his mind and stop payment of the cheque,he will not be guilty of an offence under Section 138.

3. Presentment within 6 months from the date on which it is drawn or within the period of validity, whichever is earlier. - Post-dated cheques?

Bouncing of Cheques – Conditions to be satisfied:

4. Payee/holder should have given notice demanding payment from the Drawer within 30 days of receipt of information of dishonour of cheque from bank.

5. The drawer must have failed to pay within 15 days of such period of notice.

6. Complaint before Metropolitan Magistrate/ First Class Judicial Magistrate should be made within one month of expiry of aforesaid period of 15 days.