The cheque system has now become one of the wheels in the machinery of business. But, at times an open cheque payable across a bank's counter lends itself to fraud and forgery by unscrupulous persons causing loss either to the bank or to the customer. With a view to avoiding such risk and protecting the owner of the cheque, the system of crossing of cheques has been introduced where by the holder of an open cheque directs the paying bank to carryout his mandate in particular way.
Thus, a crossed cheque is one on the face of which two transverse parallel lines have been drawn with or without certain words in them (Look at Art, 863 sub article 2).
Classification of crossings: Crossings are of two types: General crossing and Special crossing.
General crossing: It is a crossing which consists of two transverse parallel lines across the face of the cheque. In between the line certain additional words like "banker" or some equivalent term may be written or it may be left without any additional word. (Look at sub article 3 of art 863 of the commercial code. )
Special crossing: when inside the two transverse parallel lines across the face of a cheque, the name of a particular bank is written, it is known as special crossing.
Effects of Crossing: The effect of crossing of cheque is that the payment of this cheque can be made by the drawee banker to some other banker as agent of the holder or to the customer of the drawee bank, and the payee or the holder there of cannot obtain case from the drawee bank. When a cheque is crossed, no one can case it at the counter of the drawee bank, except a customer of the drawee bank or another bank. The amount can be either deposited with the drawee bank for the credit of his customer's account, or have the drawee bank pay its proceeds to another bank for the credit of his account which the holder has with such other bank through the local clearing house.
Article 864 deals with the effects of generally and specially crossed cheques. The effect of general crossing is that payment of such a cheque can be obtained through a bank only or the customer of a drawee bank, and the payee or the holder cannot get payment in cash at the counter of the drawee bank. (Look at sub-article 1, 864). If the payee or holder of a generally crossed cheque is not a customer of the drawee bank or does not have a bank account in any bank, he must hand it over to a friend or relation who has a bank account will be credited with the amount of the cheque.
The effect of a special crossing, on the other hand, is that the cheque can be paid by the drawee bank only to the named banker or, where the latter (the named bank) is the drawee, to a customer of the drawee. The holder cannot get payment through any and every bank, but only through the bank whose name is mentioned in the crossing or where the named banker is the drawee, through the customer of the drawee bank. Thus, for purpose of receiving payment in such a cheque, the holder either must have an account with the named bank, or must negotiate it to some one who already has such an account. (Look at sub-article 2, Art 864)
A cheque can be crossed by the drawer or by any subsequent (sub-article 1 of art. 863).No restriction is imposed here. Again, a general crossing can be turned into a special crossing, but a special crossing may not be converted into a general crossing (sub-art-4, Art. 863).
Purpose of crossing of cheques: Crossing is mainly used to safeguard the cheque against theft, fraud and other tampering. Naturally, a crossed cheque becomes much safer than an open or uncrossed cheque. It can be easily traced into whose hands the money has been paid. Even if it is lost by the payee, he dose not stand to lose anything because the finger can not collect the amount at the counter unless he has an account in the drawee bank that was named in the special crossing.
Article 865 introduces an additional purpose of crossing. The drawer or holder of a cheque may prohibit negotiability of the cheque by inserting in between the line words "not negotiable". The effect of inserting such word is that the holder may not negotiate the cheque. Where a person takes a crossed cheque which bears on it words "not negotiable" he shall not have and shall not be capable of giving a better title to another person than that which the whom he took it had (Sub art 2,Art. 865)
Liability of the banker (Art. 866):- A banker who pays a cheque crossed generally otherwise than to a banker or the drawee bank, or a cheque crossed specially otherwise than to the banker whose name is mentioned, or to the customer of the drawee bank, (where the drawee bank is the named bank) shall be liable for the resulting damage up to the amount of the cheque .