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 main types of cheque crossing?
Cheque crossing is primarily divided into two main types, which tell the bank how to process the payment:
- General Crossing: This is when two parallel transverse lines are drawn on the top-left corner of the cheque, sometimes with words like '& Co.' or 'Not Negotiable'. It means the cheque cannot be paid in cash at the counter but must be deposited into a bank account.
- Special Crossing: This is when the name of a specific bank is written between the two parallel lines. This makes the payment even more secure, as the cheque can only be deposited with the bank whose name is mentioned.
2. Why is it important to cross a cheque?
The primary importance of crossing a cheque is security. When a cheque is crossed, it serves as a direction to the paying bank to not pay the amount over the counter. The payment must be made to another banker, which means the money has to be deposited into the payee's bank account. This creates a clear trail and ensures that the money reaches the intended person, significantly reducing the risk of fraud if the cheque is lost or stolen.
3. What is the difference between a general crossing and a special crossing?
The key difference lies in who can process the cheque. A general crossing (marked with two parallel lines) allows the cheque to be deposited in any bank. In contrast, a special crossing includes a specific bank's name, meaning the cheque can only be deposited and processed through that particular bank, adding an extra layer of security.
4. Who has the authority to cross a cheque?
Several individuals can cross a cheque to ensure its safety. These include:
- The Drawer: The person who writes the cheque can cross it before giving it to the payee.
- The Holder: If an uncrossed cheque is received, the person holding it (the payee) can cross it generally or specially.
- The Banker: The collecting bank can cross an uncrossed cheque on behalf of its customer before sending it for payment.
5. How does a crossed cheque differ from an open or bearer cheque?
An open or bearer cheque is like cash. Anyone who possesses it can go to the bank counter and get it encashed. This is very risky. A crossed cheque, however, cannot be encashed at the counter. It must be paid into a bank account, making it a much safer method of payment because the transaction is recorded and traceable to a specific account holder.
6. What does an 'Account Payee' or restrictive crossing on a cheque mean?
An 'Account Payee' crossing is a specific instruction that makes the cheque non-transferable. When these words are added between the parallel lines, it directs the collecting bank to credit the amount only to the account of the payee named on the cheque. This is the most secure form of crossing as it ensures the money cannot be paid into anyone else's account, even by mistake.
7. Can a cheque be crossed more than once?
Yes, but only in a specific situation. This is known as double crossing. It happens when a bank, to which a cheque is specially crossed, needs to use another bank as its agent to collect the payment. In this case, the first bank will cross the cheque again, mentioning the name of the agent bank. A cheque cannot have two special crossings for different banks otherwise.
8. What happens if a bank pays a crossed cheque over the counter by mistake?
If a bank ignores the crossing and pays the amount over the counter, it is considered a breach of its duty. The bank will be held liable to the true owner of the cheque for any loss they might suffer due to this wrongful payment. The bank loses the legal protection it would otherwise have under the Negotiable Instruments Act, 1881.
