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

Meera Textiles issues an uncrossed cheque for Rs 2,00,000 to Kiran Traders. Kiran Traders, the holder, wants to make sure the money goes only into a bank account and not over the counter. What may the holder lawfully do?

The holder may cross the uncrossed cheque either generally or specially. Section 125 of the Negotiable Instruments Act expressly gives the holder this power after issue, without needing the drawer's consent or the drawee bank's approval.

  1. ACross the cheque generally or speciallyCorrect
  2. BDo nothing, since only the drawer can ever cross a cheque
  3. CCross it only after obtaining the drawer's written consent
  4. DCross it only after getting the drawee bank's approval

Explanation

Under Section 125, where a cheque is uncrossed, the holder may cross it generally or specially. No consent of the drawer or drawee bank is required. The option stating only the drawer can cross is wrong because the Act gives this power to the holder after issue.

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