In case of any fraud or wrong payment , it is easy to detect the person or party receiving the wrong payment just by checking the record of the bank, because the said cheque is deposited , collected and posted in bank ledger though a bank account of the person concerned. The clerk inserted a sum in excess of her authority and delivered the cheque to P in payment of a debt of her own. The crossing is made to warn the banker but not to stop negotiability of the cheque. It includes the electronic image of a truncated cheque and a cheque in the electronic form. There can be two special crossing. For an instance: If you lost your cheque in the market then in that case finder of the cheque can present that cheque to get the payment from bank unless drawer intimates the bank and initiates stop payment. The effect of this crossing is that the cheque nevertheless remains negotiable transferrable and the title of the transferre shall not be better than title of transferor.
Section 123 to 131 of the Negotiable Instrument Act contain provisions relating to the crossing. General Rules Regarding Endorsement: i. Object: Crossing provides a protection and safeguard to the owner of the cheque as by securing payment through a banker; it can easily be detected to whose use the money is received. The effect of such crossing is that the cheque loses the characteristic of negotiability. Thus not only cheques but bank drafts also may be crossed. Drawing of two parallel transverse lines is not essential. He is not liable, in case the collecting banker collects the cheque for any other person than the account payee.
In Special Crossing paying banker to honor the cheque only when it is presented through the bank mentioned in the crossing and no other bank. There are variety of cheques available that include Order Cheque, Bearer Cheque, Crossed Cheque, Anti-Dated Cheque, Post-Dated Cheque, Uncrossed Cheque etc. Here we are broadly classifying the types of cheques as open cheques or uncrossed cheques and crossed cheques. This is called limiting its negotiability. In our last article, we read about like order cheque, bearer cheque, crossed cheque, stale cheque etc. Ordinarily, the payee of a cheque is entitled to encash at the counter of the paying banker by presenting it within the specified banking hours.
However, it can be detected. It should be noted that the duty of the paying banker is only to ensure that the payment is made through the named bank, if there is any. The collecting banker is duly bound to collect the proceeds of the cheque in the account of the Payee only. From the above discussion, it should be clear that a cheque can be made safe by crossing it. Such a cheque is crossed generally. The effect of a not negotiable crossing is that the cheque can be transferred but the transferee will not acquire a better title to the cheque. Which means anyone having open cheque can get the payment from the bank counter.
A crossed cheque can be 'opened' and cashed over the counter when the authorised signatories right mandate signs against the crossing. To cross a cheque, two transverse parallel lines are drawn on the left hand corner of the cheque. Special Crossing : A special crossing is used in order to further restrict the negotiability of the cheque. The main intention of crossing a cheque is to give protection to it. An endorsement which purports to transfer to the endorsee only a part of the amount payable, or which purports to transfer the instrument to two or more endorsees severally, is not valid.
Section 123 to 131 of the Negotiable Instrument Act contain provisions relating to crossing. Managing Director, Secretary or General Manager. If he credits the proceeds to a different account, he is guilty of negligence and will be liable to the true owner for the amount of the cheque. Banker will be liable to pay any losses arising out to the drawer or payee. The effect of restrictive crossing is that the payment of the cheque will be made by the bank to the collecting banker only for the account payee named.
With the passage of time, crossing of cheques came to have legal recognition. In case of a bearer cheque, the paying banker does not need to go into an elaborate exercise with regard to the identity of the holder of the cheque. An order instrument means instrument payable to a specified person or to the order of that specified person. The lines should be conspicuous. Special Crossing : It is a cheque in which the name of the bank is written between the two parallel lines and hence it can be paid to that specific banker only. In Special Crossing paying banker to honor the cheque only when it is presented through the bank mentioned in the crossing and no other bank.
Illiterate Person: An illiterate man can make pa valid endorsement by putting his left hand thumb impression thereon. The Transferee of such crossed cheque can not get a better title than that of the transferor cannot become holder in due course amd cannot convey a better title to his own transferee but the instrument remains transferable. This does not restrict further negotiability of the cheque, but is intended to further protect the drawer against theft or loss. The only disadvantages of crossing is that sometimes it becomes inconvenient for the holder of a cross cheque to get the cash at once if he is urgency. According to section 131-A, these sections are also applicable in case of drafts. The effect of general crossing is that the payment of the cheque will not be made at the counter, it can be collected only through a banker. If the crossing on a cheque is cancelled, it is called opening of the crossing.