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

A cheque drawn on Narmada Bank is crossed specially to Deccan Bank. Dinesh, the payee, presents it directly at the counter of Narmada Bank and asks for cash. What is the position under the Negotiable Instruments Act, 1881?

Narmada Bank may pay only to Deccan Bank, the banker to whom the cheque is crossed, or that bank's agent for collection. Under Section 126, a specially crossed cheque cannot be paid otherwise, so cash payment to the payee is not allowed.

  1. ANarmada Bank may pay Dinesh in cash if he is properly identified
  2. BNarmada Bank may pay only to Deccan Bank or its agent for collectionCorrect
  3. CNarmada Bank may pay any banker, since crossing only requires payment through a bank
  4. DNarmada Bank may pay Dinesh if he gives an indemnity

Explanation

Section 126 states that for a cheque crossed specially, the drawee banker shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection. Paying any banker is the rule for general crossing only, so that option is wrong.

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