Crossing of cheques
A crossed cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed. A common instruction is to specify that it must be deposited directly into an account with a bank and not immediately cashed by a bank over the counter. The format and wording varies between countries, but generally two parallel lines and/or the words 'Account Payee' or similar may be placed either vertically across the cheque or in the top left hand corner. By using crossed cheques, cheque writers can effectively protect the cheques they write from being stolen and cashed.[1]
Cheques can be open (uncrossed) or crossed.
Open cheque
An open cheque is a cheque that is not crossed on the left corner and payable at the counter of the drawee bank on presentation of the cheque.
Crossed cheque
A crossed cheque is a cheque that is payable only through a collecting banker and not directly at the counter of the bank. Crossing ensures security to the holder of the cheque as only the collecting banker credits the proceeds to the account of the payee of the cheque.
When two parallel transverse lines, with or without any words, are drawn generally, on the left hand top corner of the cheque. A crossed cheque does not affect the negotiability of the instrument.
Types of crossing
Cheque crossed generally
A cheque crossed generally is a cheque that bears two parallel transverse lines across its face, optionally with the words 'and company' (or any abbreviation thereof) or 'not negotiable' between the lines. Such a cheque can be credited to any account without endorsement but through a banking account, so that the beneficiary can be traced.
Account-payee or restrictive crossing
This crossing can be made in both general and special crossing by adding the words 'account payee' or 'A/C payee only'. In this type of crossing, the collecting banker is supposed to credit the amount of the cheque to the account of the payee the name mentioned only The cheque remains transferable but the collecting banker has more liability if he credits the cheque proceeds to someone other than the payee and the endorsement in favour of the last payee is proved forged. Thus, the collecting banker must first investigate the title of the last endorsee from the original payee named in the cheque, before collecting
Not-negotiable crossing
The words 'not negotiable' can be added to general-crossing as well as special-crossing and a crossing with these words is known as not negotiable crossing. The effect of such a crossing is that it removes the most important characteristic of a negotiable instrument: the transferee of such a crossed cheque cannot get a better title than that of the transferor (cannot become a holder in due course) and cannot convey a better title to his own transferee, but the instrument remains transferable.
Consequence of a bank not complying with the crossing
A bank's failure to comply with the crossings amounts to a breach of contract with its customer. The bank may not be able to debit the drawer's account and may be liable to the true owner for his loss.