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

A cheque is crossed generally. The holder, Sunita, then crosses it specially to Bank X. Later the holder of the cheque presents it at the drawee Bank Y's counter and demands cash. What should Bank Y do?

Bank Y should pay only Bank X or Bank X's agent for collection. A general crossing can be converted to a special crossing by the holder, and Section 126 then restricts payment to that named banker or its collecting agent.

  1. APay cash, because the general crossing is superseded by the holder
  2. BPay cash after verifying the holder's identity
  3. CPay only to Bank X or its agent for collectionCorrect
  4. DPay any banker presenting it, as the general crossing still governs

Explanation

Under Section 125, a generally crossed cheque may be crossed specially by the holder. Section 126 then bars the drawee from paying a specially crossed cheque otherwise than to the banker to whom it is crossed or his agent for collection. Paying any banker is wrong, as that is the rule for general crossing only.

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