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

Anand Textiles drew a cheque and crossed it generally with two parallel lines. The payee, Kiran, presented it at the drawee bank's counter and asked for cash. Kiran is not a banker. What is the drawee bank's obligation?

The drawee bank must refuse cash payment. For a cheque crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker, so Kiran must collect the proceeds through a banking channel rather than at the counter.

  1. APay cash, since the payee is identified on the cheque
  2. BPay cash only if Kiran is an account holder of that bank
  3. CRefuse cash, because a cheque crossed generally must be paid only to a bankerCorrect
  4. DPay cash after obtaining Anand Textiles' written approval

Explanation

Section 126 provides that where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker. Kiran is not a banker, so cash cannot be paid over the counter. Being an account holder or having the drawer's approval does not change the statutory bar.

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