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

Anita Sharma draws a cheque for Rs 60,000 in favour of Vikram and writes the words 'Account Payee' between two parallel transverse lines across its face. Under the Negotiable Instruments Act, 1881, which description best fits this cheque?

The cheque is generally crossed with an additional 'Account Payee' direction. Two parallel lines make the crossing general, and the added words instruct that the money be credited to the payee's account. No banker is named, so it is not special, and the cheque is not open.

  1. AIt is a general crossing with an added direction that the drawee banker must pay only into the payee's accountCorrect
  2. BIt is a special crossing because the words name a particular banker
  3. CIt is an open cheque because the words 'Account Payee' are only a request
  4. DIt is a not-negotiable crossing because the cheque cannot be endorsed further

Explanation

Two parallel transverse lines with or without words like 'and Company' make a general crossing. Adding 'Account Payee' is a direction that the proceeds be credited to the payee's account. It does not name any banker, so it is not special. It is not an open cheque, and it is not a not-negotiable crossing.

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