CROSSING OF CHEQUES

BYABDUL QADIR

BHAMANI

Types of Cheques

1. Bearer Cheque2. Ordered Cheque3. Uncrossed/Open Cheque4. Crossed Cheque5. Anti-Dated Cheque6. Post Dated Cheque7. Stale Cheque

Other types of Cheques

Dividend Warrant Interest Warrant Bank Draft Travellers’ Cheque

Specimen of cheque

Parties of cheque

1) Drawer: Maker or writer of a bill of exchange

(cheque)

2) Drawee: the party that has been directed by the depositor to pay a certain

sum of money to the person

3)Payee: a person to whom money is paid or is to

be paid,

Bearer cheque

When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to the bank for payment. However, such cheques are risky, this is because if such cheques are lost, the finder of the cheque can collect payment from the bank.

Ordered Cheque

When the word "bearer" appearing on the face of a cheque is cancelled and when in its place the word "or order" is written on the face of the cheque, the cheque is called an order cheque. Such a cheque is payable to the person specified therein as the payee, or to any one else to whom it is endorsed (transferred).

Uncrossed or Open ChequeWhen a cheque is not crossed, it is known as an "Open

Cheque" or an "Uncrossed Cheque". The payment of such a cheque can be obtained at the counter of the bank. An open cheque may be a bearer cheque or an order one

Anti-Dated Cheque

If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as "anti-dated cheque". Such a cheque is valid upto six months from the date of the cheque.

Post-Dated ChequeIf a cheque bears a date which is yet to come

(future date) then it is known as post-dated cheque. A post dated cheque cannot be honoured earlier than the date on the cheque.

Stale ChequeIf a cheque is presented for payment after six

months from the date of the cheque it is called stale cheque. A stale cheque is not honoured by the bank.

Dividend WarrantA dividend warrant is a cheque drawn by a

company upon its banker in payment of dividends to its shareholders. They are quasi-negotiable instruments.

Crossed cheque

Type of crossing

Types of crossing.

1) General crossing

2) Special crossing

What is “CROSSING” a Cheque?

“Crossing” a cheque is a way of making even more certain that the money is paid to the correct person and not to someone else. By “crossing” the cheque in the ways that follow, you give the bank extra instructions about how it is to be paid. This is called limiting its negotiability.

If you draw a line to cross out the words “or bearer”, then you are telling the bank that the money cannot just be paid out to anyone who happens to present the cheque. It must be paid out to the person named on the “Pay” line. It is possible to get around this by “endorsing” the cheque. This means that the person to whom the cheque is made out signs the back thus giving their permission for it to be presented for payment.

Definition of General Crossing Sec 123 of the Negotiable Instruments Act 1881 defines

general crossing as follows:

“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.”

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.

Specimen of general crossing

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.

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

Significance of General Crossing

The effect of general crossing is that it gives a direction to the paying banker.

The direction is that the paying banker should not pay the cheque at the counter.

If a crossed cheque is paid at the counter in contravention of the crossing:

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

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

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

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

Special crossing

A cheque is deemed to be crossed especially when it bears across its face the name of the banker either with or without the words ‘Not Negotiable’.

In case of special crossing the payment can only be made to the bank named therein the cheque.

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DEFINATION OF SPECIAL CROSSING

Sec 124 of the Negotiable Instruments Act of 1881 defines

“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 Crossing1. 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.

DIFFRENCE BETWEEN GEN CROSSING AND SPECIAL CROSSING

GENERAL CROSSING In this type of crossing the

two parallel transverse lines are there.

Money can be encashed by any banker.

Less safe. General crossing can be

converted into special crossing.

SPECIAL CROSSING

In this type of crossing there is no necessity of drawing two parallel transverse lines.

Money can be encashed only by the bank shown under crossing.

More safe. It can’t be converted.

NOT NEGOTIABLE

NOT NEGOTIABLE

Transferee can’tget better title than transferor – Normal principle is that a person cannot transfer better title to property that he himself has.

For example, if a person steals a car and sells the same, the buyer does not get any legal title to the car as the transferor himself had no title to the car. The real owner of car can anytime obtain possession from the buyer, even if the buyer had purchased the car in good faith and even if he had no idea that the seller had no title to the car.

Material Alteration Any alteration made in the cheque is Material

Alteration. These cheque are not honored by Banks, for

making This as a valid cheque then the drawer has to sign at every correction made.

Alterations' Like: Date, Amount, Payee Name, Converting order into bearer cheque, etc.

ALTERED CHEQUE

Who can do alteration on a Cheque

An alteration can be made by drawer. But an alteration on a material part of a negotiable instrument which is not signed makes it invalid.

A banker however, is protected under Sec.84 if he pays a cheque with alterations and the alteration is not apparent.

Endorsement Signature included on the front or back of a check acknowledging that both

parties have agreed to exchange the specified amount on the document. The signature or account information included on the back of a check

acknowledges that the intended recipient received the document and deposited it. To cash a cheque, the issuer and the recipient must endorse the document. Negotiation of an instrument is the process by which the ownership is transferred

from 1 person to another person. There are 2 parties in Endorsement Endorser Endorsee

Endorser The Person who signs the instrument with an instrument of

transferring his ownership. Endorsee The person in who’s favor the instrument is transferred.

THANK YOU