Page 167 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes Who can cross a cheque?

(a) A cheque may be crossed generally or specially by the drawer.
(b) Holder may also cross it.
(c) Holder may turn a general crossing into special crossing.
(d) A banker may cross an uncrossed cheque & he may cross it especially to himself or to
another banker for purpose of collection through him.
The above content is confirmed by section 125 of Negotiable Instruments Act, 1881.
Opening of crossing/cancellation of crossing: A crossed cheque becomes an open cheque if the
crossing on it is cancelled and this is known as “opening of crossing”. Only the drawer of the
cheque has the right to open the crossing of the cheque by writing the words “Pay Cash” and
cancelling the crossing along with his full signature. His initials are not enough for this purpose.
The paying banker must be very careful in ascertaining the validity or genuineness of the
drawer’s signature opening the crossing. If drawer’s signature (already on the cheque) is forged
by the holder in order to open the crossing and the payment is obtained at the counter, the
banker will remain liable to the true owner of the cheque. The banker is under an obligation to
pay the cheque according to the directions conveyed through the crossing on the cheque.

10.1.7 Endorsement of Cheques

The act of signing a cheque for the purpose of transferring it to somebody else is known as
“Endorsement”. Under Negotiable Instruments Act this means writing of one’s name on the
back of the instrument or any paper attached to it with the purpose of transferring the rights
therein. Endorsements are usually made on the back of the cheque, though they can be made on
its face as well. If, however, no space is left on the instrument, it may be made on a separate
paper attached to it.
A bearer cheque can be transferred by mere delivery but an order cheque is transferred by
endorsement and delivery.
Endorsement on the cheque must be made in proper manner, or the bank will not pay it. The
endorser must sign his name exactly as it is written on the cheque. He must sign his name with
the same spellings as it appears on the cheque. He may also put down the correct spellings after
he has signed in the manner already appearing on the cheque. Where a cheque is endorsed on
behalf of a company, a firm or some other institution, the person signing the endorsement must
sign so as to make it clear that he is doing it on behalf of the company or the firm and not in his
personal capacity.

Types of Endorsement

According to the N.I. Act, 1881 endorsement can be done in any of the following forms:
1. Endorsement in blank or general endorsement.
2. Endorsement in full or special endorsement.

3. Restrictive endorsement.
4. Partial endorsement.
5. Conditional endorsement.

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