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

Kavita Enterprises holds a cheque crossed generally and marked "not negotiable". She wants to cross it specially to her bank, Coastal Bank, before depositing it. Which statement is correct under the Negotiable Instruments Act, 1881?

Kavita may cross the cheque specially to Coastal Bank. Section 125 allows the holder of a generally crossed cheque to cross it specially, and nothing in the text makes this subject to the drawer's consent or to the cheque becoming stale.

  1. AShe may cross it specially, because a generally crossed cheque can be crossed specially by the holderCorrect
  2. BShe cannot, because the words "not negotiable" prevent any further crossing
  3. CShe can only cross it specially if the drawer agrees in writing
  4. DShe can do so only after the cheque becomes stale

Explanation

Section 125 provides that where a cheque is crossed generally, the holder may cross it specially. The text does not make this power depend on the drawer's consent or on staleness, and it does not bar special crossing because of the added words.

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