Types of Cheque Crossing - Introduction
A cross cheque is a negotiable instrument that specifies a general instruction for a check that has not yet been deposited into a bank account. The general direction of a cheque is referred to in this manner. The instruction provided above defines the amount claimed in the Cheque would be deposited immediately into the account of the Cheque bearer under Section 123 of the Negotiable Instruments Act, 1881. It will not be provided to the bearer in cash over the bank counter right away. We'll try to cross-check in depth below.
Types of Cheque Crossing - Introduction
A cheque could be an instrument. It will either be open or crossed. An open cheque is that of the bearer cheque. It’s collectible over the counter on a presentation by the receiver to the paying banker. Whereas a crossed cheque isn't collectible over the counter however shall be collected solely through a banker, the quantity collectible for the crossed cheque is transferred to the checking account of the receiver. Varieties of cheque crossing are General Crossing, Special Crossing, and Restrictive Crossing. Allow us to study cheque crossing in additional detail. A crossed cheque could be a cheque that has been marked specifying an instruction on the method it's to be saved.
A standard instruction is for the cheque to be deposited into an account with a bank and to not be like a shot paid by the holder over the bank counter. The format and verbiage vary between countries, however, usually, 2 parallel lines could also be placed either vertically across the cheque or on the highest corner of the cheque. By victimization of crossed cheques, cheque writers will effectively shield the instrument from being taken or paid by unauthorized persons. A crossed cheque could be a cheque that's collectible solely through an assembling banker and indirectly at the counter of the bank. 2 parallel crosswise lines, with or with none word, are usually drawn on the highest left-hand corner of the cheque.
Crossing a Cheque
The crossing of the cheque is an instruction to the paying banker to pay the amount to a specific person. The crossing of the cheque secures the payment by the banker.
It conjointly traces the person, therefore, receiving the quantity of cheque. The addition of the words ‘Not negotiable’ or ‘Account receiver only’ is critical to restrain the negotiability of the cheque.
Types of Cheque Crossing
General Crossing – cheque bears across its face an addition of 2 parallel crosswise lines.
Special Crossing – It bears the crossing across its face in which the banker’s name is included
Restrictive Crossing – It directs the assembling banker that he has to credit the number of cheques solely to the account of the receiver.
Non-Negotiable Crossing – it's once the words ‘Not Negotiable’ are written between the 2 parallel crosswise lines.
General Cheque Crossing
In general crossing, the cheque bears across its face which includes the addition of 2 parallel crossing lines with little spacing between them, within the case of general crossing on the cheque, the paying banker pays cash to any banker. For the aim of general crossing 2 crosswise parallel lines at the corner of the cheque are necessary.
Thus, during this case, the holder of the cheque or the receiver can receive the payment solely through a checking account and not over the counter.
Special Cheque Crossing
In a special crossing, the cheque bears across its face an addition of the banker’s name, with or whiles, not the words ‘not negotiable.
In this case, the paying banker pays the quantity of cheque solely to the banker whose name seems within the crossing or to his assembling agent. The paying banker can honor the cheque only if it's ordered through the bank which is mentioned within the crossing. However, in special crossing 2 parallel crosswise lines don't seem to be essential, however the name of the banker is most significant.
Amount Payee Crossing
This type of cheque crossing indicates that the amount cannot be paid into any bank account other than the one specified on the check. This type of crossing assures that the funds are only moved to a bank account and not supplied in the form of cash.
Restrictive Cheque Crossing
This type of crossing restricts the negotiability of the cheque. It directs the assembling banker to credit the amount of money in a cheque to the account of the receiver. Where the assembling banker credits the return of a cheque bearing such crossing to the other account, he shall be guilty of negligence. Also, he won't be eligible for the protection of the assembling banker below section 131 of the Act. However, such crossings can don't have any impact on the paying banker. This is often therefore as a result of it's not his duty to see that the cheque is collected for the account of the receiver.
Not Negotiable Cheque Crossing
It is once the words ‘Not Negotiable’ are written between the 2 parallel crosswise lines across the face of the cheque within the case of general crossing or the case of special crossing beside the name of a banker.
The Non-Negotiable Crossing doesn't mean that the cheque is non-transferable. As per the Non-Negotiable Act, 1881 section 130
A cheque holder which has crossed any single leaf of cheque either generally or in a special case. In either case, the words “non-negotiable”.
Thus, he becomes the holder in due course and acquires an indisputable title thereto. Also, once the instrument passes through a holder in due course, all the next holders conjointly receive an honest title. But, no Negotiable Crossing takes away this vital feature. During this case, the transferee doesn't get the rights of the holder in due course, as long as the title of the transferor is nice, the title of the transferee is additionally smart. Hence, just in case of any trace within the title of any one of the endorsers, the title of all the next transferees conjointly becomes tainted.
Why Cross Cheque?
Crossing a Cheque offers a financial planning framework with explicit instructions on how to handle monies.
Furthermore, cross cheques are often identified by drawing two parallel intersecting lines. It can be found either vertically across the cheque or in the upper left-hand corner.
Within the lines, two or more statements such as 'and company' or 'not negotiable' may be fixed. Furthermore, just painting the lines without any text would not change the function of the crossing check.
Furthermore, using Cross cheques, the amount transfer may be preserved by the cheque representatives. It might also be as a result of being sketched or photographed by an unauthorized individual.
This cross-cheque composition, as well as its format and observations, may vary by country.
As a result, cross cheques may only be paid through a bank account. The transaction record of the receiver can be found afterward for further questions and clarifications.
Cheque Validity
A cheque's expected validity is three months from the day it is written. The cheque gets stale after three months, and the drawee bank may refuse to pay the amount. The drawer can revalidate the cheque if it becomes obsolete owing to the expiration of the validity term.
FAQs on Types of Cheque Crossing: Meaning and Importance
1. What are the different types of crossing of a cheque?
Cheques can be crossed in several ways to enhance their security and control how they are processed by banks. The main types of cheque crossing aim to prevent misuse and ensure cheques reach only the intended recipient. The common types include:
- General Crossing: Two parallel lines across the cheque, which require the cheque to be deposited in a bank account and not cashed directly.
- Special Crossing: The name of a specific bank is written between the lines, instructing payment only through that bank.
- Restrictive Crossing: Phrases like ‘Account Payee’ or ‘Not Negotiable’ added for extra restriction.
2. What is crossing and what are the types of crossing?
Crossing a cheque means marking it in a certain way to instruct the bank about how it should be paid. This is mainly done to increase safety and reduce the risk of theft or fraud. The key types of cheque crossing are:
- General Crossing: Two parallel lines with or without words such as ‘& Co.’ added. This means the cheque must be deposited into a bank account.
- Special Crossing: Includes the name of a particular bank, restricting payment to that bank only.
- Restrictive Crossing: Uses terms like ‘Account Payee’ or ‘Not Negotiable’ to restrict how the cheque can be handled.
3. What is a restrictive crossing on a cheque?
A restrictive crossing on a cheque adds a written instruction to limit how the funds can be paid or transferred. The most common forms use phrases like ‘Account Payee’ or ‘Not Negotiable’, which impose extra safeguards beyond general or special crossings. When a cheque is restrictively crossed:
- ‘Account Payee’ ensures the cheque can only be credited to the payee’s bank account, not endorsed to someone else.
- ‘Not Negotiable’ stops further transfers of the cheque from granting the new holder better rights than the original holder.
4. What is the difference between not negotiable crossing and account payee crossing?
'Not Negotiable' crossing and 'Account Payee' crossing are two important types of restrictive crossings, but they serve different purposes. A 'Not Negotiable' crossing means that even if the cheque is transferred to another person, the transferee cannot have better rights than the transferor. In contrast, an 'Account Payee' crossing specifies that the cheque amount can only be deposited into the account of the mentioned payee. While both crossings restrict the free transferability of the cheque, only the 'Account Payee' crossing absolutely prevents the cheque from being endorsed or transferred to another person. This distinction provides different levels of protection against fraud and unauthorized endorsement.
5. When should a cheque be crossed?
A cheque should be crossed whenever extra security is needed to ensure safe and direct payment to the intended recipient. Crossing a cheque is especially important in the following situations:
- High-value transactions where safety is a concern
- Payments to unknown or less familiar parties
- Business dealings to ensure audit trails
- When preventing unauthorized cashing is crucial
6. Can you endorse a crossed cheque?
Whether a crossed cheque can be endorsed depends on the type of crossing applied. In the case of a general or special crossing without restrictive words like 'Account Payee', a cheque may be endorsed further to another person. However, if the cheque is marked as 'Account Payee', it cannot be endorsed or transferred to anyone other than the named payee. This means only the payee can deposit the funds into their account, making endorsement invalid after restrictive crossing. This rule enhances cheque security and ensures safe payment to the intended recipient.
7. What are the features of a special crossing?
A special crossing on a cheque adds an extra level of security by naming a specific bank between two parallel lines. This instructs the paying bank to process the cheque only through the mentioned bank or its branch. Key features of special crossing include:
- Bank Name Mentioned: Only the named bank can collect payment.
- Higher Security: Reduces the risk of unauthorized cashing or handling.
- Direct Bank Channel: Payment is routed through a specific banking channel, ensuring traceability.
8. Why is cheque crossing important?
Cheque crossing is important because it increases the security and traceability of cheque payments. By crossing a cheque, the drawer can control how the funds are paid and prevent unauthorized cashing. Key benefits include:
- Reduces Fraud: Only the intended party can receive the funds.
- Increases Accountability: Each payment is officially recorded through bank channels.
- Prevents Unauthorized Transfer: Restrictive crossings block unwanted endorsements.
