Cross Cheque Meaning

Last Updated at: Oct 07, 2020
Cross Cheque

Cheque, a negotiable instrument under The Negotiable Instruments Act 1881, is used to transfer funds. A cheque can be an open cheque or a Cross ChequeThe open cheque or the bearer cheque is used for over the counter instant cash transactions whereas a crossed cheque can not be used over the counter transactions instead it is used to make sure that the amount specified on the cheque cannot be en-cashed and should be deposited directly to the bank account of the payee by the banker. 

What is the crossing of the cheque?

The Crossing of a cheque is the instruction to the paying banker to transfer the specified amount to the payee account from the payer account and not over the counter. The crossing of the cheque is used as a means of protection against misusing cheques. 

In general, the crossing of a cheque is by drawing two parallel lines at the front portion of a cheque. This double-line code on the cheque indicates that it can deposit into a bank account strictly. Once a cheque crosses, it is impossible to uncross it. The phrases that can be mentioned on a cheque are “& Co.” or “Account Payee” or “Not Negotiable”. 

Crossed cheques are non-transferable to a third party and limited to payer and payee only. The only action permitted for the payee is to deposit the cheque in his bank account to receive money. 

There are different ways to cross cheques for different purposes. Likewise, before explaining the types of crossed cheques and how to cross a cheque in different ways, let’s discuss the benefits of using crossed cheques.

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Why Crossed Cheques

  1. Minimize the risk: Crossing is an effective way to minimize the risk of counterfeiting. Because the only thing a payee can do with a crossed cheque is to deposit it into the bank account. 
  2. Direct instructions to the banker: Crossed cheque is the direct instruction to the paying banker to transfer the money to a particular bank account only. 
  3. Traceability of the receiver: Instead of encashing the cheque over the counter, a crossed cheque secures the payment by online transfer. Therefore, the money transfer can easily trace. 

Restricted Crossing

3. Unaffected Negotiability: Negotiable instruments play a major role in the world of trade. The crossing does not eliminate the negotiability of a cheque but limits it. 

Types of Crossing Cheques & Its Effects

Negotiable Instrument Act, Section 123-131A covers the crossed cheques and its payment.

General Crossing Cheque

Section 123 defines it as a crossed cheque with two parallel transverse lines at its top left-hand corner. It can be converted into Special Crossing because the phrases “& Co.”, “Not Negotiable”, “Account Payee” may or may not be mentioned. 

It is not mandatory to write the banker’s name on the cheque, therefore, the money can be encashed by any banker. 

Special Crossing Cheque

General crossed cheque with the banker’s name. Therefore, money can encash by a particular bank. 

Restricted Crossing

The phrase ‘Account Payee’ that mentions on the cheque that makes it a restrictive cheque and a non-negotiable instrument. It is highly secured.

Double Crossing Cheque

A cheque with two special crossings is Double Crossing. Further, if the banker in whose favour the cheque is made does not have a branch where the cheque is. The second bank serves as an agent of the first collecting banker. 

Special Consideration 

Cross the cheque appropriately. Cancel the section “or bearer” on the cheque and mention “A/C Payee Only”. Remember if a payee cheque cross with only two parallel lines without cancelling “or bearer”, the cheque can deposit into anyone’s bank account. 

Before drafting a cheque, make sure you have sufficient balance in your account. If your cheque is dishonoured, legal action can be taken against you. 

Legal Cases Examples

There have been many cases because of omissions/mistakes found in the cheque truncation system. 

  1. One such case is Nabhiraj V. State Bank of India Case where a cheque drawn to pay a loan amount is dishonour due to insufficient balance. The respondent of SBI filed a complaint about dishonour of the cheque of Rs.2,50,00,000. 
  2. As it mentions that cross cheque facilitates traceability of the receiver as it can not encash over the counter. Further, here is an example. Further, it is the Syndicate Bank V. Brij Kapoor case where the cheque in favour of a bank client that credits to a wrong account mistakenly. 

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