Cheques are of two types, open cheques and crossed cheques. Open cheques are those which are paid over the counter of the bank. In other words, they need not be put through a bank account. Open cheques are liable to great risk in the course of circulation.
They may be either lost or stolen and the finder or thief can get it encased at the bank unless the drawer has in the meantime countermanded payment. With a view to avoiding such risks, and protect the owner of cheque, a system of crossing was introduced.
Crossing is a direction to the banker not to pay the cheque across the counter but to pay to a bank only or to particular bank in an account with the bank. Thus crossing provides a protection and safeguard to the owner of the cheque as by securing payment through a banker; it can easily be detected to whose use the money is received. Crossing does not, however, affect the negotiability or transferability of a cheque. But where the words ‘not negotiable’ are added, the cheque is not negotiable. The practice of crossing is confined to cheques only and cannot be extended to any other instrument.
Modes of crossing :
There are two modes of crossing provided by the Negotiable Instruments Act, namely, general crossing and special crossing.
1. General crossing (Sec. 123) : A cheque is said to be crossed generally when it bears across its face an addition of:
(a) The words ‘and company’ or any abbreviation thereof, between two parallel transverse lines, either with or without the words ‘not negotiable’, or
(b) Two parallel transverse lines simply either with or without the words ‘not negotiable’, [Section 123]
2. Special Crossing :
It requires the name of the banker to be added across the face of the cheque either with or without the words “not negotiable.” Transverse lines are not necessary for a special crossing. A special crossing makes the cheque more safer than a general crossing because the payee or holder cannot receive payment except through the banker named on the cheque. When a cheque is crossed specially, it is the duty of the bank on whom it is drawn to pay it only through the banker mentioned or through another banker to whom it is sent for collection (sec 126).