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CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

A cheque for Rs 45,000 issued by Neha to Sameer Traders is crossed generally. It reaches Sameer Traders, who write the name 'Canara Bank' between the crossing lines. What is the legal effect?

The holder has converted the general crossing into a special crossing, which the Act allows. Where a cheque is crossed generally, the holder may cross it specially by naming a banker. The drawee bank must then pay only to Canara Bank or its collecting agent.

  1. AThe holder has made it a special crossing, which is permittedCorrect
  2. BThe cheque becomes an open cheque
  3. CThe cheque becomes invalid because only the drawer can cross it
  4. DThe cheque becomes a restrictive cheque that cannot be transferred

Explanation

The holder of a cheque crossed generally may cross it specially by adding the name of a banker. The drawee bank must then pay only to Canara Bank or its agent for collection. It does not become open, and the Act allows the holder to do this, so the invalidity option fails.

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