what is meant by due course in crossed cheque

What is a crossed cheque?

 · Payment of a crossed cheque by a banker in due course discharges him from all liability. Payment in due course would mean payment made in conformity with the provisions of sections 10 and 126. Such payment must be made in good faith, without negligence and if the cheque is crossed generally it should be made to a banker and if it is crossed specially it …

What is double crossing on a cheque?

 · The cheque was issued to discharge a legally enforceable debt. The cheque was returned or dishonoured for insufficiency of funds. The cheque was presented within six months from which it was drawn or validity period of cheque. The payee or the holder in due course has made a demand from the drawer within 30 days of dishonour.

What are the rules of crossing a cheque?

A cheque holder which has crossed any single leaf of cheque either generally or in a special case. In either case, the words “non-negotiable”. Thus, he becomes the holder in due course and acquires an indisputable title thereto. Also, once the instrument passes through a holder in due course, all the next holders conjointly receive an honest title.

What is the difference between open and uncrossed cheque?

Thus, he becomes the holder in due course and acquires an indisputable title to it. Also, when the instrument passes through a holder in due course, all the subsequent holders also receive a good title. But, Not Negotiable Crossing takes away this important feature. In this case, the transferee does not get the rights of the holder in due course.

What is due course payment?

Payment in due course is the payment by a debtor on a negotiable instrument which discharges the negotiable instrument, even though the payment is made on or after the maturity date of the negotiable instrument.

What is due course in banking?

In commercial law, a holder in due course is someone who takes a negotiable instrument in a value-for-value exchange without reason to doubt its legitimacy. A holder in due course acquires the right to make a claim for the instrument's value against its originator and intermediate holders.

What is payment of cheque in due course?

“Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.

Who is holder of cheque in due course?

—“Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if 1[payable to order], before the amount mentioned in it became payable, and without having sufficient cause to believe that any ...

Which of the following is an example of payment in due course?

For example, a banker makes the payment of a postdated cheque. In this case, payment made by the banker is not in accordance with the apparent tenor of the instrument (i.e. payment made before the date apparent on the instrument).

Why is holder in due course important?

The holder-in-due-course doctrine is important because it allows the holder of a negotiable instrument to take the paper free from most claims and defenses against it. Without the doctrine, such a holder would be a mere transferee.

What is payment in course?

Payment in due course is a payment made at or after the maturity of a bill of exchange to the holder of the bill by a payer in good faith and without notice that the holder's title might be defective. A bill is discharged by payment in due course by or on behalf of the drawee or acceptor.

Who can cross a cheque?

The Drawer of the Cheque can cross the cheque generally or specially. If it is an open cheque, then the holder can cross the cheque generally or specially. If the cheque is crossed generally, the holder can cross it specially.

What are stale cheques?

Stale cheques are outdated cheques issued to the bank after the date of payment has expired. While Post-dated cheques are dated in such a form that they can only be cashed in in the future. After three months from the issuance date, cheques become stale.

Can a payee be a holder in due course?

(1) A holder in due course is a holder who takes the instrument (a) for value; and (b) in good faith; and (c) without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person. (2) A payee may be a holder in due course.

What is holder in due course with example?

Holder in Due Course is a legal term to describe the person who has received a negotiable instrument in good faith and is unaware of any prior claim, or that there is a defect in the title of the person who negotiated it. For example; a third-party check is a holder in due course.

What is difference between holder and holder in due course?

A holder is a person who legally obtains the negotiable instrument, with his name entitled on it, to receive the payment from the parties liable. A holder in due course (HDC) is a person who acquires the negotiable instrument bonafide for some consideration, whose payment is still due.

What is the difference between payment in due course and holder in due course?

A holder can possess negotiable instrument, even without consideration. As opposed to a holder in due course, possess the negotiable instrument for consideration. A holder cannot sue all the prior parties whereas a holder in due course, has the right to sue all the prior parties for payment.

Will submit in due course?

If you say that something will happen or take place in due course, you mean that you cannot make it happen any quicker and it will happen when the time is right for it.

Who is paying banker?

Paying banker is a banker, who actually pays a cheque to his customer or to the order. of his customer. For example, a customer draws a cheque on his banker.

What are the rights and privileges of a holder in due course?

A holder in due course holds the negotiable instrument free from any defect of title of prior parties, and free from defences available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.]

1. Who could cross the cheque?

The Drawer: Normally or especially, the Drawer might Cross the Cheque.The Holder: Wherever the Cheque is uncrossed, the bearer has the option of cr...

2. Why are cheques crossed?

Adding a crossing to a cheque increases its security because it cannot be paid at a bank counter and must be deposited into an account with a name...

3. What is a Cheque?

A cheque is a negotiable instrument that may be used to send money and can also be used to prove your identification. A crossed or open check might...

4. What is the advantage of crossing a cheque?

The benefit of crossing is that it decreases the risk of unauthorized negotiables obtaining and cashing a check. A crossed cheque may only be cashe...

5. What is a restrictive cheque crossing?

The check's negotiability is limited by this sort of crossing. It instructs the assembling banker to credit the amount in a check to the receiver's...

When is a cheque deemed to be specially crossed?

A cheque is deemed to be specially crossed when in the parallel transverse lines in a cheque the name of the banker is written with or without the words “ not negotiable “.

What does crossing a cheque mean?

The crossing of Cheque means that the specific cheque can only be deposited straightway into a bank account and cannot be instantly cashed by a bank or any credit institution. This ensures a level of security to the payer since it requires the funds to be handled through a collecting bank. Crossing of a cheque means “ Drawing Two Parallel Lines ”.

What is an uncrossed cheque?

An open or uncrossed cheque is the one for which the banker has to pay cash across the counter when it is presented by the customer. An open cheque is risky because, if the holder of the cheque loses it, any person, who is in possession of it, can take the payment from the bank.

What is special crossing?

Special Crossing. A cheque is deemed to be specially crossed when in the parallel transverse lines in a cheque the name of the banker is written with or without the words “ not negotiable “ . In a special crossing, the paying banker will pay the sum only to the banker whose name is stated in the cheque or to his agent.

What is restricted crossing?

Restrictive crossing. Restrictive crossing involves the crossing of a cheque through two parallel lines on the left corner of a cheque. The words A/c payee are inserted inside the parallel lines. According to this crossing, the cheque can be collected by the bank only for the person, whose name is written on the cheque.

What is A/C payee?

The words A/c payee are inserted inside the parallel lines. According to this crossing, the cheque can be collected by the bank only for the person, whose name is written on the cheque. It provides higher protection to the drawer of the cheque, in a case; a cheque is misplaced or lost.

How long is a drawer in prison?

On the dishonour of the cheque, the drawer is punishable with imprisonment up to two years or fine not exceeding twice the amount of cheque or both if the following conditions are satisfied:

What is the purpose of crossing a cheque?

Crossing a Cheque. The crossing of the cheque is an instruction to the paying banker to pay the amount to a specific person. The crossing of the cheque secures the payment by the banker. It conjointly traces the person, therefore, receiving the quantity of cheque. The addition of the words ‘Not negotiable’ or ‘Account receiver only’ is critical ...

What is an open cheque?

An open cheque is that of the bearer cheque. It’s collectible over the counter on a presentation by the receiver to the paying banker. Whereas a crossed cheque isn't collectible over the counter however shall be collected solely through a banker, the quantity collectible for the crossed cheque is transferred to the checking account of the receiver. ...

Is a cheque an instrument?

A cheque could be an instrument. It will either be open or crossed. An open cheque is that of the bearer cheque. It’s collectible over the counter on a presentation by the receiver to the paying banker. Whereas a crossed cheque isn't collectible over the counter however shall be collected solely through a banker, ...

How many parallel lines are there on a cheque?

In general crossing, the cheque bears across its face which includes the addition of 2 parallel crossing lines with little spacing between them, within the case of general crossing on the cheque, the paying banker pays cash to any banker. For the aim of general crossing 2 crosswise parallel lines at the corner of the cheque are necessary.

What is a general crossing?

General Crossing – cheque bears across its face an addition of 2 parallel crosswise lines. Special Crossing – It bears the crossing across its face in which the banker’s name is included. Restrictive Crossing – It directs the assembling banker that he has to credit the number of cheques solely to the account of the receiver.

What is a crossing in a cheque?

A crossing is an instruction to the paying banker to pay the amount of cheque to a particular banker and not over the counter. The crossing of the cheque secures the payment to a banker. It also traces the person so receiving the amount of cheque. Addition of words ‘Not negotiable’ or ‘Account Payee only’ is necessary to restrain ...

What is a crossing in banking?

A crossing is an instruction to the paying banker to pay the amount of cheque to a particular banker and not over the counter. The crossing of the cheque secures the payment to a banker. It also traces the person so receiving the amount of cheque.

What is a general crossing?

General Crossing – cheque bears across its face an addition of two parallel transverse lines. Special Crossing – cheque bears across its face an addition of the banker’s name. Restrictive Crossing – It directs the collecting banker that he needs to credit the amount of cheque only to the account of the payee.

What does "not negotiable crossing" mean?

The Not Negotiable Crossing does not mean that the cheque is non-transferrable.

Is a cheque a negotiable instrument?

A cheque is a negotiable instrument. It can either be open or crossed. An open cheque is the bearer cheque. It is payable over the counter on presentment by the payee to the paying banker. While a crossed cheque is not payable over the counter but shall be collected only through a banker. The amount payable for the crossed cheque is transferred ...

What is a restricted crossing?

Restrictive Crossing – It directs the collecting banker that he needs to credit the amount of cheque only to the account of the payee. Non-Negotiable Crossing – It is when the words ‘Not Negotiable’ are written between the two parallel transverse lines. Let us learn about types of cheque crossing in greater detail.

What is cheque crossing?

A cheque is a negotiable instrument. It can either be open or crossed. An open cheque is the bearer cheque. It is payable over the counter on presentment by the payee to the paying banker. While a crossed cheque is not payable over the counter but shall be collected only through a banker. The amount payable for the crossed cheque is transferred to the bank account of the payee. Types of cheque crossing are General Crossing, Special Crossing and Restrictive Crossing. Let us learn about cheque crossing in more detail.

What is a crossing in banking?

A crossing is an instruction to the paying banker to pay the amount of cheque to a particular banker and not over the counter. The crossing of the cheque secures the payment to a banker.

What is the purpose of crossing a cheque?

The crossing of a cheque is intended to ensure that its payment is made to the right payee. Section 123 to 131 of the Negotiable Instrument Act contain provisions relating to the crossing. According to section 131-A, these sections are also applicable in case of drafts.

What is an open cheque?

1. An open cheque is payable at the counter of the drawee bank on the presentation of cheque. Such cheque runs great risk in the course of circulation because once a wrong person takes away the payment of an open cheque it is difficult to trace him. 2.

What is a crossing in banking?

A crossing is an instruction or a direction given to paying banker to pay the amount of the cheque through a banker only or a particular banker as the case may be and not directly to the person presenting it at the counter. The crossing is constituted by drawing two transverse parallel lines on the face of the cheque.

What is double crossing?

2. Double Crossing: When a cheque bears two separate special crossing, it is said to have been doubly crossed. As per section-127, “where a cheque is crossed specially to more than one banker except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.”.

How is a negotiable instrument transferred?

A negotiable instrument may be transferred by negotiation. (i) Negotiation can be effected by mere delivery if the instrument is a bearer one. (ii) By endorsement and delivery in case it is an order instrument. An order instrument means instrument payable to a specified person or to the order of that specified person.

What is the name of the person who endorses an instrument?

The person to whom the instrument is endorsed is called the endorsee. “The word endorsement is said to have been derived from Latin ‘en’ means ‘upon’ and ‘dorsum’ meaning ‘the back’. Thus usually the endorsement is on the back of the instrument though it may be even on the face of it.

What is endorsement in full?

Endorsement in Full or Special Endorsement: When the payee or endorser specifies the person to whom or to whose order the instrument is to be paid, the endorsement is called special endorsement or endorsement in full. The specified person i.e. the endorsee then becomes the payee of the instrument.

What is a crossed cheque?

Continue Reading. A crossed cheque is a cheque that is payable only through a collecting banker and not directly at the counter of the bank. Two parallel transverse lines, with or without any words, are drawn generally, on the left hand top corner of the cheque.

Can a cheque be crossed twice?

Hence, a cheque cannot be crossed specially again to another bank. In other words, a cheque cannot have two cross ings.

What is double crossing?

Double Crossing. When a cheque bears two special crossing, is called Double Crossing. In this second bank act as agent of the first collecting banker. It is made when the banker in whose favour the cheque is crossed does not have branch where the cheque is paid.

What does it mean when a cheque is drawn?

what it means is that, if the cheque is drawn account payee to say Mr X, the payee cannot further cross it as payable to account of ‘ Y’ ; such a crossing is valid only when ‘Y is the agent banker who is acting as the collecting banker of Mr X; Thus a paying banker shall pay a cheque. Continue Reading. Double Crossing.

Can a cheque be encashed directly?

Is a special crossing cheque using two parallel lines and in between a/c payee is written. So cheque neither be encashed directly nor be endorsed to someone. It has to be collected to the account of the payee only. So the main difference is endorsement of cheque.

Can a banker cross a cheque?

Crossing can be done by the drawer of the cheque; payee of the cheque or any holder of the cheque. Crossing cannot be done by the banker (drawee) By means of crossing, the collecting banker is advised to collect the cheque for an account holder and payment should not be made in cash.

What does crossing a check mean?

Crossing a check implies a restriction, that the check must be credited to an account rather than paid in cash. It may also indicate a restriction on the account to which it is paid. The effect of crossing it twice would require that the restriction of each cross must be complied with, assuming that is possible.