Nearly everyone banks, but not many people use cheques. Among them, many don’t know about the different types of cheques.
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One such cheque is the Cross Cheque, where two lines are drawn on the top left corner. Do you know why these lines are drawn? Let’s explore the details of cross cheques as per the Negotiable Instruments Act 1881.
Nobody can withdraw cash from this
As per Section 123 of the Negotiable Instruments Act 1881, the drawer signals to the bank with two lines on the left corner that it’s a crossed cheque. With this type of cheque, you can’t walk into any bank and withdraw cash.
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Payment is only made into the account
Crossing a cheque ensures that payment will only be made into a bank account. It’s either to the named payee or if endorsed, to someone else, requiring their signature at the back.
General crossing
There are many types of cross cheques. The first is general crossing, where two lines are drawn on the edge of the cheque. Everything discussed so far about cross cheques falls under general crossing.
Special crossing?
According to Section 124 of the Negotiable Instruments Act 1881, special crossing occurs when the drawer wants the cheque to go into a specific bank account of the payee. For instance, if the payee has multiple bank accounts, the drawer can specify the bank by writing its name between the lines at the bottom of the cheque.
Account payee crossing
If “Account Payee” is written between the crossing lines on the cheque, it means only the named payee can withdraw money from it. However, if a specific bank is mentioned with special crossing, the money will go to that bank only. Notably, this isn’t explicitly mentioned in the Negotiable Instruments Act 1881 but is followed by many banks, including HDFC Bank as mentioned on their website.
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Why issue crossed cheques?
The purpose of issuing a crossed cheque is to ensure the intended recipient receives the amount. Even if the cheque lands in the wrong hands, they can’t withdraw money from it. In essence, crossing a cheque enhances its security.
