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

Mehta Traders in Surat receives a cheque drawn by Kapoor Steels that is crossed generally with two parallel transverse lines. Mehta Traders wants to restrict collection to its own bank, Sahyadri Bank. Under the Negotiable Instruments Act, 1881, what may Mehta Traders, as holder, do?

The holder may cross the generally crossed cheque specially to Sahyadri Bank. Section 125 permits a holder to convert a general crossing into a special crossing, which restricts payment to the named banker. The holder cannot cancel the crossing or compel cash payment.

  1. ACross it specially to Sahyadri BankCorrect
  2. BCancel the crossing by writing a note on the cheque
  3. CInsist that the drawee bank pay it in cash across the counter
  4. DConvert it into a bearer cheque by deleting the lines

Explanation

Under Section 125, where a cheque is crossed generally, the holder may cross it specially. The Act gives no power to a holder to cancel a crossing or to demand cash payment, and a generally crossed cheque cannot be paid otherwise than to a banker.

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