Skip to content

CS Professional · Banking and Insurance - Laws and Practice · Payment and Collection of Cheques and Other Negotiable Instruments

A cheque drawn on Bank P is crossed specially to 'Bank Q'. Bank Q sends it for collection to its agent, Bank R, which crosses it specially to Bank R. The drawee Bank P is asked to pay. What is the correct position?

Bank P may pay Bank R. A banker to whom a cheque is specially crossed may cross it again to another banker as its agent for collection, and Section 127's refusal rule does not apply to such an agent crossing.

  1. ABank P must refuse payment because the cheque is crossed to two bankers
  2. BBank P may pay Bank R, since Bank Q crossed it to its agent for collectionCorrect
  3. CBank P may pay Bank Q or Bank R only with the drawer's fresh instruction
  4. DBank P must pay the holder in cash across the counter

Explanation

Section 125 allows the banker to whom a cheque is crossed specially to cross it again specially to another banker, his agent, for collection. Section 127 requires refusal only when crossed to more than one banker other than as agent for collection. Refusing payment is therefore wrong here.

Did you get it right without looking?

One question tells you little. A timed set on Payment and Collection of Cheques and Other Negotiable Instruments shows your real accuracy, how long you take and where you lose marks.

Practise Payment and Collection of Cheques and Other Negotiable InstrumentsFree diagnostic mock

More Payment and Collection of Cheques and Other Negotiable Instruments questions