Different Types of Crossing on Cheque in Banking and its effect : Cheque is a negotiable instrument. A person issue the cheque to make the payment to an intended person but cheque may be lost or stolen in between going into wrong hands. So to add some security to restrict the way it can be redeemed, drawer marks some types of crossing on the cheque. Crossing protect the drawer and payee preventing the wrong payments and fraud. In our last article, we read about what is cheque and different types of a cheque like order cheque, bearer cheque, crossed cheque, stale cheque etc. Now here in this article, we will read about different types of crossing on cheques.
Generally, Crossing means making two transverse parallel line across the cheque on top left hand corner or in top middle. In other words, Crossing is an instruction by drawer to the payee bank to pay the amount in payee bank account only and not to encash to person who present it over the counter.
Different Types of Crossing on Cheques and its effects :
In General Crossing, two transverse parallel lines are drawn by the drawer of the Cheque with or without words “NOT NEGOTIABLE” in between parallel lines. Such a crossing is called General Crossing.
Words such as ‘and Company’ or ‘& Co’ may be written between two parallel lines. “Account Payee” or “A/c payee” is written between two parallel lines.
Effect of General Crossing :
Cheques which are generally crossed by the drawer can only be paid into a bank account of the payee whose name written on the cheque.
*They cannot be encashed over the counter by bearer or payee.
Both bearer and order cheques can be crossed. However, drawer can make it bearer cheque by canceling the crossing, writing that CROSSING IS CANCELLED and Putting full signature verifying the crossing cancellation.
When drawer imposes restrictions on collecting or paying banker by writing particular bank’s name between two parallel lines.
Effect of Special Crossing :
The bank makes payment only to banker whose bank name is written in special crossing.
There can be two special crossing. In this collecting banker add an additional crossing and write the name of other bank who act as their agent in collection of cheque. It allow other bank to collect the amount on their behalf.
Restrictive Crossing / Account Payee Crossing
Drawer write the word such as “Account payee only” or “A/c Payee” in between the parallel lines.
Effect of Restrictive crossing :
This crossing restrict the collecting banker to make the payment in account of payee named in Cheque. If collecting banker credit the amount to any third person other than payee, he will be liable for any loss arising to drawer or payee.
Not Negotiable Crossing
Drawer write the word “Not Negotiable” in crossing.
Effect of Not Negotiable Crossing :
The effect of Not Negotiable crossing is that cheque lost its essential feature of “a Negotiable Instrument”. 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.
What if a banker don’t comply with crossing
A banker can’t debit its customer’s account without complying with the crossing on cheque.
If a banker fails to comply with instructions or crossing marked by the drawer of the cheque, it amounts to breach of contract of the bank with its customer.
Banker will be liable to pay any losses arising out to the drawer or payee.