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

Meera Textiles of Surat issues a cheque payable to Kavita Traders and crosses it generally with two parallel lines. Kavita Traders' representative walks into the drawee bank branch and asks for cash over the counter. What must the drawee bank do?

The drawee bank must refuse cash and pay only to a banker. Under Section 126, a generally crossed cheque cannot be paid otherwise than to a banker, so payment must go through a collecting bank into the payee's account, not across the counter.

  1. APay cash, since the payee is named on the cheque
  2. BPay cash only if the payee's representative gives a written receipt
  3. CRefuse cash and pay only to a banker, for example by credit to the payee's account through a collecting bankCorrect
  4. DPay cash after obtaining the drawer's telephonic consent

Explanation

Under Section 126, where a cheque is crossed generally, the drawee banker shall not pay it otherwise than to a banker. Over-the-counter cash payment is therefore barred. The named payee, a receipt or the drawer's consent does not remove this restriction.

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