NEGOTIABLE INSTRUMENTS –

BASIC CONCEPTS
NI Act 1881 – Enactment, Amendments and Applicability
The Negotiable Instruments Act, 1881, was enacted on 09th December 1881 and came in to effect from 1st
March 1882.The Act was amended in the year 1988, to add 5 sections, sections 138 to 142 to the act, to
make bouncing of cheques as cognizable criminal offence. The act was further amended in the year 2002,
to include 5 sections 143 to 147 to the act
The act contains 147 sections in 17 chapters. It extends to whole of India, including Jammu and Kashmir.

NEGOTIATION: MEANING
The act does not contain the definition of the term “Negotiation”. However the definitions of the terms
“Holder” and “Holder in due course” makes us understand that transfer means physical movement of a
negotiable instrument from one person to another, where as negotiation means transfer with title.
According to Section 13 of the Act, “A Negotiable Instrument means a promissory Note, Bill of
Exchange or Cheque payable either to order or to bearer”. According to section 14 of the Act, when a
Promissory Note, Bill of Exchange or Cheque is transferred to any person, so as to constitute that person
the holder thereof, the instrument is said to be negotiated. (Section.14 of the Act).
A Negotiable Instrument is payable to a specific person or a person ordered by him or to the bearer of the
instrument.
 A cheque payable to ‘A’ or bearer, is payable to ‘A’ or any person holding the cheque.
 A cheque payable to ‘A’ or order is payable either to ‘A’ or a person ordered by ‘A’. A
Negotiable Instrument is negotiable by mere delivery when payable to bearer; by endorsement
and delivery when payable order.
 Delivery means mere handing over the instrument. Endorsement is a direction given on the back
of a negotiable instrument either by the payee or any other subsequent transferor of the negotiable
instrument, to the drawee.
As per section 31 of Reserve Bank of India Act 1934, no person other than RBI or Central Government is
empowered to draw, accept, make or issue any Bill of Exchange or Promissory Note payable to bearer on
demand. Currency Notes have all the features of promissory notes. But they are not called promissory
notes, because promissory notes promise to pay money, where as currency notes themselves represent
money.

NEGOTIABILITY VS TRANSFERABILITY
Transfer denotes movement of a financial instrument from one person to another. If the transferor has
title to the instrument, the transferee gets title otherwise won’t. Negotiation is transfer with title. In case
of negotiable instruments, the transferee gets absolute title even though the transferor has defective title
provided the transferee is ‘holder in due course’

NEGOTIABLE INSTRUMENTS - SPECIAL FEATURES

1) Negotiable instruments are three. They
2) are Promissory note, Bills of exchange and Cheque.
3) They are payable to either bearer or order.
4) They are freely transferable, unless their transferability is expressly prohibited.
5) Bearer instruments are transferable by mere delivery.
6) Order instruments are transferable by endorsement and delivery
7) Negotiable instruments have a specific feature called ‘Negotiability’. Negotiation means transfer
with title. Even though the transferor of a negotiable instrument has a defective title, transferee
gets absolute title, provided the transferee is a holder in due course.
 8) In case of negotiable instruments, the rights of holder are protected, as against the rights of the
owner.
9) The Negotiable instruments act as substitutes for money, and facilitate cashless personal and
business transactions.
10) Every holder of a negotiable instrument is deemed as a holder in due course, until they are proved
otherwise.

PROMISSORY NOTE:
Promissory Note: Definition. (Section 4 of NI Act 1881)
A "promissory note" is an instrument in writing (not being a bank-note or a currency-note) containing an
unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of,
a certain person, or to the bearer of the instrument.
FIGURE. 1 PROMISSORY NOTE FORMAT
Rs 45000/-

On Demand, I / We, Mr. Ram S/o Shyam, aged about 35 years, R/o R.K.Puram, Hyderabad,
and Mr. Bheem S/o Som, aged about 53 years, R/o K.R.Puram, Hyderabad, do here by
promise to pay an amount of Rupees Forty Five thousand only, to M/S Model Bank, Road
No 3, Clean Street, Hyderabad, or order, at a rate of Interest of 12% per annum for value
received

Signature of the
Borrower on the
Hyderabad Revenue Stamp
20.06.2018

PARTIES TO A PROMISSORY NOTE:

There are two parties to a promissory Note. They are
1) Promiser ( The Party Promising to Pay)
2) Promisee ( The Party who is promised to be paid)
In the Figure 1, Mr. Ram and Mr.Bheem are the promisers, and M/s Model Bank is the promise.

PROMISSORY NOTES: SALIENT FEATURES

 It is an instrument in writing
 It contains an unconditional undertaking to pay by the promiser
 It is signed by maker, across revenue stamp of adequate value
 The amount undertaken to be paid shall be certain.
 The amount is payable to a specific person or to his order or the bearer of the instrument
The following are not promissory notes for the reasons mentioned there against
(a) "Mr. B, I O U (I owe you) Rs.1, 000." (There is no undertaking to Pay)
(b) "I promise to pay B, Rs. 500 and all other sums which shall be due to him." ( Amount undertaken
to pay is not certain)
(c) "I promise to pay B Rs. 500 first deducting there out any money which he may owe me."(
Amount undertaken to pay is conditional and is not certain)
(f) “I promise to pay B Rs. 500 seven days after my marriage with C”.( It is a conditional
undertaking. If marriage does not take place, there would be no payment obligation)
(g) “I promise to pay B Rs. 500 on D's death, provided D leaves me enough to pay that
sum”.(Payment obligation is conditional and contingent)
(h) “I promise to pay B Rs. 500 and to deliver to him my black horse on lst
January next”. (Promissory note is an undertaking to pay certain sum of money only and not for
delivery of animals or any other objects)
BILL OF EXCHANGE (B/E)
A Bill of exchange is drawn, when the goods are sold on credit. It is one of the methods of
Settlement of trade transactions. The seller draws a Bill on the buyer and advices him to make the
payment to his Banker or his Agent. These Bills are of two types. Demand Bill and Usance Bill. Demand
bills are payable immediately and Usance bills are payable after a specified time. The period of payment
depends on the demand and supply of goods.
In case of Demand bill, the purchaser requisitions the supply of goods at the agreed price and the seller
dispatches the goods to the buyer’s address. But the buyer would get the goods subject to payment of the
bill amount. In case of Usance bill, the buyer gets the goods after accepting the Bill. The actual payment
has to be made on or before the due date.

BILL OF EXCHANGE: DEFINITION. (SECTION 5 OF NI ACT. 1881)

A "bill of exchange" is, an instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to
the bearer of the instrument.
FIGURE. 2. BILL OF EXCHANGE FORMAT
Rs. 45000/- (Stamp Duty) Hyderabad,
. 20.06.2018

Pay, after 45 days sight, an amount of Rupees. Forty Five Thousand only, to M/S Model
Bank, Road No 3, Clean Street, Hyderabad, or order for value received

Karta Raj
Business Chowk, Hyderabad
Drawn on:
Karma Dev.
Govind Gunj, Karimnagar

PARTIES TO A BILL OF EXCHANGE

There are three parties to a Bill of Exchange; Drawer, Drawee and Payee. Drawer of the bill is the seller
of goods on credit; Drawee is the buyer and the payee is the agent of the seller to whom the buyer has to
make the payment of the Bill
As shown in Figure 10.2, Mr. Karta Raj is the drawer of the Bill. Mr. Karma Dev is the drawee and M/s
Model Bank is the payee.

BILL OF EXCHANGE (B/E): SALIENT FEATURES

 It is an instrument in writing
 It contains an unconditional order by the drawer to the drawee of the bill
 It is signed by the maker i.e. drawer of the bill
 It contains a direction by the drawer of the B/E, i.e. seller to the drawee i.e. buyer
 The drawer directs the drawee to pay a certain sum of money.
 The Bill of exchange contains a direction by the drawer to the drawee, as to whom the payment of
the bill has to be made. If no such direction is there, the bill is payable to the bearer of the
instrument.

CHEQUE:
Cheque is a mandate, a direction, an order made by the account holder to the banker with whom he is
maintaining an account to pay a specific sum either to him or to a third party.
Cheques are not only used for withdrawing cash from a bank account, but also used as a means to settle
personal and business transactions either for lending or borrowing of money. They are used as substitutes
of money for cashless transactions.

A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise
than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic
form.
Figure No. 3 FORMAT OF A CHEQUE
1 5 0 3 2 0 1 8
HDFC BANK Banjara Hills, Hyderabad
D D M M Y Y Y Y
IFSC /RTGS/NEFT: 0000521
Valid for 3 months only

Pay Mr. P.Rama Shastry OR Bearer

Rupees One Lakh Twenty Five Thousand only

Rs 125000/-

A/c No 14141414141414
Payable at par at all branches of HDFC Bank

D.Sreenivasa Chary
(D.SREENIVASA CHARY)
Signature of Account Holder
786786 500240002 442218 31

PARTIES TO A CHEQUE
There are three parties to a cheque.
1) Drawer of the Cheque ( Account Holder)
2) Drawee, i.e. The party on whom the cheque is drawn (Bank)
3) Payee. The party to whom the payment is to be made.The parties to the Cheque format given in
Figure 10.3are, Mr. D.Sreenivasa Chary –the drawer of the cheque Mr. P.Rama Shastry –the
payee and M/s HDFC Bank –the drawee bank.

CHEQUES: SALIENT FEATURES

Cheques contain the same features of Bill of exchange, but for two important differences. Cheques are
always drawn on a banker and they are not paid unless they are presented for payment to the concerned
bank. The salient features of a cheque can be summarized as follows.
 Cheque is an instrument in writing
 It contains an unconditional order by the drawer ( Account holder) to the drawee ( Banker)
 It is signed by the maker i.e. Account Holder.
 It contains a direction by the drawer i.e. account holder to the drawee i.e. the bank maintaining the
account.
 The drawer (Account Holder) directs the drawee bank to pay a certain sum of money.
 The Cheque contains a direction by the drawer (Account holder) to the drawee (Bank), as to whom
the payment of the bill has to be made. If no such direction is there, the cheque is payable to the
bearer.
 The Negotiable Instruments act recognizes, the electronic image of a Truncated Cheque” and “a
cheque in electronic form” as cheques."A cheque in the electronic form" is the mirror image of a
paper cheque, generated, written and signed in a secure system using digital signature etc.Cheque
truncation is the conversion of a physical cheque into electronic form, for its faster collection
through Banker’s clearing house.
 The bottom part of the cheque is called MICR band.There are four fields in the MICR band. The
first one contains 6 digits. It is cheque number. The second field contains 9 digits. The first three
 digits represent city, next three Bank’s name and the last three the branch name. The third field
contains6 digits. It indicates the account number. The fourth field contains 2 digits. It indicates the
type of cheque. Example: Saving Bank account 10, Current account 11, Banker’s cheque 12, Cash
credit account 13, Savings bank cheque payable at par 31 etc. The MICR band is useful for sorting
the cheques in the banker’s clearing house. Some cheques may contain one more field of 13 digits
representing the amount.

Table:2 Differentiating features of Negotiable Instruments

Sl.No DIFFERENTIATING PROMISSORY BILL OF
CHEQUE
FEATURES NOTE EXCHANGE
01 Need for the Loan Credit sales Self and
instrument transactions third party
payments
02 Defined in…..NI Act Section.4 Section.5 Section.6
1881
03 Number of Parties (2) (3) (3)
04 Name of the parties Promiser and Drawer, Drawer,
Promisee Drawee and Drawee
Payee and Payee
05 Instrument is drawn Borrower Seller of the Bank
by ( Promiser) goods on account
credit(Drawer) holder
( Drawer)
06 The instrument is Lender Buyer of the Bank
drawn on (Promisee) goods (Drawee)
(Drawee)
07 Validity period As per trade As per trade 3 months
practice practice
08 Whether Bearer NO NO YES
instrument be issued
09 Whether Crossing is NO NO YES
applicable?
10 Whether Stamping is YES YES NO
applicable
11 Whether Acceptance is NO YES NO
required? ( For Usance
Bills)
12 Applicability of 3 days NA YES NO
grace period ( For Usance
Bills)
13 Liability of the parties
Primary liability Promiser Acceptor Drawer
(Drawee)
Secondary Liability Endorsers (If Drawer Endorsers
any) (If any)
14 Whether ‘Noting and
Protesting’ provisions YES YES NO
applicable?
HOLDER AND HOLDER IN DUE COURSE
Holder: Definition (section 8)
The “Holder” of a promissory note, bill of exchange or cheque means any person entitled in his
own name to the possession thereof and to receive or recover the amount due thereon from the
parties thereto.

HOLDER: SALIENT FEATURES.

A person becomes ‘holder’ subject to the following conditions:
 The instrument (Cheque / Bill of Exchange / Promissory note) is in the name of the person
holding it.
 The person holding the instrument is entitled to receive/collect the amount from the parties on
whom the instrument is drawn
 The instrument should have been obtained either for consideration or as a gift
 The instrument shall not contain forgery of signature of the drawer or any prior endorser.

HOLDER: RIGHTS AND LIABILITIES

 A Holder of a negotiable instrument has every right to claim the amount from the parties liable to
pay .If they fail to pay the holder can take legal action against such persons

HOLDER IN DUE COURSE: DEFINITION.(SECTION 9)

“Holder in due course” means any person who for consideration became the possessor of a promissory
note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to order,
before the amount mentioned in it became payable, and without having sufficient cause to believe that
any defect existed in the title of the person from whom he derived his title

HOLDER IN DUE COURSE: SALIENT FEATURES

The distinguishing feature of negotiable instruments is their negotiability, i.e. transfer with title. The
transferee gets absolute title even though the transferor has a defective title, provided he is a holder in due
course.
A person becomes ‘holder in due course’ subject to compliance of the following conditions:
 The person received the instrument for ‘consideration’. When a person receives the instrument as
a gift or charity cannot become a holder in due course.
 The person did not have any doubt about the ‘title’ of the transferor at the time of taking the
instrument. If the transferee is aware that the transferor has a defective title to the cheque, he
cannot become a holder in due course
 There is no ‘Not negotiable crossing’ on the face of the cheque. The not negotiable crossing on a
cheque indicates that the transferee cannot get a better than that of the transferor. Thus the not
negotiable crossing protects the interests of the owner and not that of holder. Hence no one can
become a holder in due course, when a cheque is crossed “Not negotiable”.
 There is no forgery of endorsement. Cheque is a mandate given by the account holder to banker to
pay a specific amount either to him or to a third person. If the signature of the account holder /
payee / endorser is forged, it cannot become a valid mandate to the banker by the bonafide
customer/ party. Hence no one can become a holder in due course of a negotiable instrument,
where the signature of the drawer/ payee / endorser is forged.
 The transferee acted in ‘good faith & without negligence. The transferee should be honest and
diligent.
  The person should have received the instrument before its due date /expiry date. A negotiable
instrument after its expiry date / validity period ceases to be functional. Hence no one can become
a holder in due course for such invalid instrument.

HOLDER IN DUE COURSE: RIGHTS AND LIABILITIES

A holder in due course, on dishonor of a negotiable instrument, can recover the amount of instrument
from all or any of the prior parties. As regards the mutual rights and liabilities between the parties of a
negotiable instrument is concerned, the drawer is deemed as the principal borrower, the holder is deemed
as the lender, and all the parties in between them i.e. all the prior endorsers are deemed as guarantors.
Thus the drawer of a cheque, drawer / drawee of an accepted usance bill of exchange and promiser of a
promissory note are primarily liable to compensate the holder. The liability of endorsers / transferors is
secondary.
ENDORSEMENTS
Endorsement is signing back of a negotiable instrument, for the purpose of transferring the instrument to
another party. Just like the account holder’s signature, the endorsement is also a direction by the endorser
to the paying bank.
ENDORSEMENT: DEFINITION. (SECTION 15)
When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for
the purpose of negotiation on the back or face thereof or on a slip of paper annexed thereto, or so signs
for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to
endorse the same, and is called the "endorser".
PARTIES TO AN ENDORSEMENT.
There are two parties to an endorsement
1) Endorser. The person making an endorsement, or the transferor of the instrument.
2) Endorsee: The person in whose name the instrument is being transferred.
Example: Mr. Harish issued a cheque in the name of Mr. Irfan. Mr. Irfan transferred the cheque in the
name of Mr. Jacob, by making an endorsement on the back of the cheque reading “Pay to Jacob or
Order”, and signed there under. There after Mr. Jocob transferred the cheque in the name of Mr.Khaleel
Pasha, by making an endorsement on the back of the cheque.
In the above example, Mr. Harish is the drawer of the cheque. Mr. Irfan is the payee and endorser. Mr.
Jacob is the endorsee. In the second endorsement, Mr. Jacob is the endorser and Mr.Khaleel pasha is the
endorsee.

SALIENT FEATURES OF ENDORSEMENTS

 An endorsement is a direction by the endorser to the paying bank. The endorser indicates the
name of the person to whom the payment is to be made.
 Endorsement can also be done on the face of the instrument, but as per the practice it is done on
the back of the instrument
 An endorsement has two parties, endorser and endorsee.
 Endorser will have the same rights as that of the drawer
 If the drawer’s signature forged, it is not a valid negotiable instrument. Similarly if the endorser’s
signature is forged, the subsequent parties cannot get better title.
 Partial endorsements are not permitted. The endorsement shall be for the full value due under the
negotiable instrument.
 There are no restrictions on the number of endorsements on a cheque. If space is not sufficient on
the back of a cheque for making endorsement, a white paper can be attached to the cheque for
further endorsement. Such white paper attached to a cheque for the purpose of endorsements is
called “Allonge”
 A minor can endorse a cheque, but he is not liable if the cheque is bounced.
TYPES OF ENDORSEMENTS.
Endorsements are of two types.
1) General Endorsements,
2) Special Endorsements.

GENERAL ENDORSEMENTS
General Endorsements are basically of two types.
1) Endorsement in blank, and
2) Endorsement in full
1) ENDORSEMENT IN BLANK:
On the back of the negotiable instrument, if the endorser signs his name only, the endorsement is said to
be "in blank".
Example: 1: Mr. Kiran gave cheque to Mr. Lalu. Mr.Lalu wanted to transfer the cheque to Mr. Mohan. If
Mr.Lalu, simply signs on the back of the cheque and hands it over to Mr. Mohan it is called as the
endorsement in blank
2) ENDORSEMENT IN FULL:
On the back of the negotiable instrument, if the endorser signs his name and adds a direction to pay the
amount mentioned in the instrument to, or to the order of, a specified person, the endorsement is said to
be "in full", and the person so specified is called the "endorsee" of the instrument.
Example: 2: In the above example.1, if Mr. Lalu writes Pay to “Mr. Mohan or order”, and signs there
under the endorsement is called as endorsement in full. In such a case, Mr. Lalu is called as endorser and
Mr. Mohan is called as the endorsee. Such an endorsement acts as a direction by Mr. Lalu to the Bank to
make payment to Mr. Mohan

SPECIAL TYPE OF ENDORSEMENTS

The business practices gave birth to several types of endorsements. Some of them are furnished here
below.
01. RESTRICTIVE ENDORSEMENT:
In this type of endorsement, the further negotiation of the cheque is restricted.
Example: Ms.Neha gave a cheque to Ms.Olive. Ms Olive endorsed the cheque in the name of Ms.
Parimala stating “Pay to Ms. Parimala only”. Now Ms. Parimala cannot endorse the cheque to anybody
else. The mobility of the cheque is restricted. Hence this type of endorsement is called restrictive
endorsement.
02. PER PRO ENDORSEMENT:
Per pro means on behalf of. In this case the endorsement is made by the agent of the person who is
actually required to make an endorsement
Example: Ms. Quoba issued a cheque payable to Ms. Rita. Now Ms. Rita wants to endorse the cheque in
the name of Ms.Sita. However the endorsement of the cheque in the name of Ms. Sita is done by
Ms.Teja, the duly constituted agent of Ms. Sita. This type of endorsement is called Per Pro endorsement.
03. SANS RECOURSE ENDORSEMENT:
Sans recourse means without recourse. In this type of endorsement, the endorser tries to avoid his
responsibity, in the event of bouncing of the cheque.
Example: Ms Urvashi gave a cheque in the name of Ms. Vasavi. MsVasavi endorsed the cheque in the
name of Ms.Wesley. Ms.Wesley endorsed the cheque in the name of Ms. Xavier.Ms.Xavier presented the
cheque on the drawee bank, and the cheque is bounced for want of funds. Now Ms.Xavier as the holder
in due course, can file suit against all the prior endorsers. Suppose that Ms Wesley made a sans recourse
endorsement while transferring the instrument to Ms.Xavier. On bouncing of the instrument, Ms.Xavier
can file suit on all prior endorsers except Ms.Wesley.
04. FACULTATIVE ENDORSEMENT.
In this type of endorsement, the endorser foregoes his right and there by increases his responsibility. In
case of a cheque having one or more endorsements is bounced, the last holder is required to give notice of
dishonor to all the prior endorsers. Otherwise all the prior endorsers get exempted from liability.
However, when any of the endorsers makes a facultative endorsement, even if a notice of dishonor is not
served by the holder, such endorser would become liable on the cheque. Thus by making the facultative
endorsement, the endorser is waiving or foregoing his right of receiving the notice of dishonor and
becoming liable on a bounced cheque.
EXAMPLE: Ms Urvashi gave a cheque in the name of Ms. Vasavi. MsVasavi endorsed the cheque in
the name of Ms.Wesley. Ms.Wesley endorsed the cheque in the name of Ms. Xavier.Suppose that Ms
Wesley while endorsing the cheque in the name of Ms. Xavier made a facultative endorsement, i.e. wrote
above her signature the words, “Notice of dishonor is waived”. If the cheque bounces on presentation,
even if Ms. Xavier does not serve the notice of dishonor on Ms Wesley, still Ms.Xavier can file suit
onMs.Wesley for recovery of the cheque amount.
05. NEE ENDORSEMENT:
“Nee” means ‘formerly known as’. It is not uncommon that people change their names. When the name
of a person is changed, and a cheque is received in the earlier name, the nee endorsement is used.
Example: Ms. RadhaSricharan got married to Mr. Krishna and changed her name to Ms. Radha Krishna.
Afterwards she received a cheque in her maiden name MsRadhaSricharan. The cheque has to be endorsed
by her stating “Radha Krishna ‘nee’ RadhaSricharan “
The details of the above (5) types of endorsements are furnished in Table 10.1. below.

Table No 10.2 TYPES OF ENDORSEMENTS

NO TYPE OF ENDORSEMENTS EXAMPLE REMARKS

1. RESTRICTIVE Pay to ‘P’ only ‘P’ cannot further endorse the cheque
ENDORSEMENT ‘O’ to anybody
2. PER PRO ENDORSEMENT Pay to ‘S’ or order The endorser “T” is the agent of ‘R’
(per procuration i.e. on behalf “T” Per Pro. ‘R’
of)
3. SANS RECOURSE Pay to ‘X’ or order ‘W’ is not liable in the event of
ENDORSEMENT Sans Recourse ‘W’ bouncing of the cheque
(Without recourse
to the endorser )
4. FACULTATIVE Pay to ‘X’ or order On bouncing of the cheque, even if a
ENDORSEMENT Notice of dishonor waived. notice of dishonor is not served
‘W’ by”X” on “W”, still “W” becomes
liable on the cheque.
5. NEE ENDORSEMENT Pay to ‘C’ or order The endorsement is used for the
(Formerly known as) ‘RK’(Nee ‘RS’) people who have changed their
names. In the present example, the
maiden name of a woman is ‘RS’,
after marriage it is changed as ‘RK’

.
CROSSING
 Crossings are applicable to cheques only.
 They are not applicable to Promissory notes and Bills of Exchange.
 Drawing two transverse parallel lines across the face of cheque is called ‘crossing’.
 Crossing implies that the cheque shall not be paid across the counter and it shall be paid only
when presented through a banker.
  A cheque which is not crossed is called an open cheque.
 Open cheques can be paid across the counter, if they are otherwise in order.
 All crossings are deemed as instructions to paying banker.
 Crossing of a cheque can be done either by the drawer or any subsequent holder of the cheque.
 But cancellation of the crossing is to be done by the drawer of the cheque only.
TYPES OF CROSSING.
Crossings are of two types. 1). General Crossing and 2) Special Crossing

1) GENERAL CROSSING
Two transverse parallel lines across the face of a cheque are compulsory to constitute a general crossing.
In between these two line if there are any word and, if such words have some meaning and if such
meaning implies as ‘instruction to banker’ such words are to be taken note of, otherwise they are to be
ignored. The different types of general crossings are furnished in Figure. No.10.4.
Figure. No.4 GENERAL CROSSINGs

TYPES OF ORDINARY (GENERAL) CROSSINGS:

It is an instruction to paying bank not to pay cash across the counter, but should be paid through a bank.
& CO CROSSING:
There is no difference between the ordinary general crossing and & co crossing
ACCOUNT PAYEE CROSSING:
This crossing is not recognized by NI Act. The crossing implies that the proceeds of the cheque should be
credited to the account of the payee.
NOT NEGOTIABLE CROSSING:
As usual the cheque amount shall not be paid across the counter. The words ‘Not Negotiable’ acts as a
caution to the intending taker of the cheque to verify whether the transferor is having title to the
instrument or not. The words not negotiable implies that the transferee cannot get a better title than that
of the transferor

2) SPECIAL CROSSING
Special crossing gives a specific direction to the paying bank stating that the cheque shall not be
honoured unless presented by a specific bank. In between the two transverse parallel lines, if the name of
a bank is mentioned it is called special crossing. In fact two transverse parallel lines across the face of the
cheque are not compulsory to constitute a special crossing. The impression of a rubber stamp showing the
bank and branch name over the cheque is also called special crossing. The round stamp, clearing stamp
showing the name of the Bank and branch constitute a special crossing. The different types of special
crossings are furnished in Figure No.10.5.
 Figure. No.5 SPECIAL CROSSINGs

HDFC BANK

Dilshuknagar.
Branch

HYDERABAD

CROSSING & CANCELLATION OF CROSSING:

1. Crossing of a cheque can be done either by the issuer or any other subsequent holder of the
cheque.
2. Cancellation of crossing requires the authentication of the drawer of the cheque. However as per
the guidelines of RBI, banks do not accept a cheques any authentication of alterations in a cheque,
except the extension of the validity period of a cheque.
3. When general crossing is converted in to special crossing it is not deemed as a material alteration.
However converting the special crossing in to general crossing is deemed as a material alteration.