Page 105 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes
Figure 4.2: Special Crossing

Not Negotiable Crossing

We have mentioned above that crossing whether ‘general’ or ‘special’ may be accompanied by
words ‘not negotiable’. The effect of inclusion of such words will not be to render the cheques
‘non-transferable’. Such cheques can very well be transferred by endorsement and delivery. But
as per s.130, a person who takes such a cheque shall not have and shall not be capable of giving
a better title to the cheque than that which the person, from whom he took it in the first instance
had. Thus, by including the words ‘not negotiable’, the cheque is deprived of its special feature
of negotiability. Such a cheque is like any other goods where the title of the transferee is always
subject to the title of the transferor. A bank, therefore, should be extra careful in paying such
cheques. The payment should be made only after he is satisfied that the person demanding
payment is the person entitled to receive it.

Account Payee Crossing (A/c Payee Crossing)

An A/c payee crossing signifies that the drawer intends the payment to be credited only to the
payee’s account and in none else. The addition of ‘A/c payee’ to a crossing has no legal sanctity
and the paying banker may ignore such a direction without being liable for any damages. In
practice, however, the collecting banker sees to it that such instruction is carried out.

Not Negotiable (A/c Payee Crossing)

The combination of ‘not negotiable’ and ‘A/c payee,’ crossing is the safest form of crossing. It
has double advantage. The instrument is rendered not negotiable (making the ‘paying banker’
responsible to see that payment is made to the person who is entitled to receive it) plus A/c
payee crossing directs the collecting banker to collect it for the payee only and warns that if the
amount is collected for someone else, he may be held liable for damages.

4.8.3 Who can Cross a Cheque?

As noted above, crossing is an instruction to the banker not to pay across the counter. Thus, it
lends security to the cheque and ensures payment to the payee or his order. A cheque may be
crossed by any of the following: (i) The drawer of a cheque (ii) The holder of a cheque. When a
cheque is issued uncrossed, it may be crossed generally or specially by its holder. If the cheque
is already crossed generally, he may convert it into special crossing by adding the name of a
particular bank. Further, a holder may add the words ‘not negotiable’ in case of both the types
of crossing. However, a holder cannot convert special crossing into general, as it amounts to

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