Crossing of Cheques

Crossing of Cheques:  A cheque may be classified

(a) an open cheque which can be presented for payment by the holder at the counter of the drawee‘s bank.

(b) a crossed cheque which can be paid only through a collecting banker.

Crossing defined : A cheque is said to be crossed when two transverse parallel lines with or without any words are drawn across its face. A crossing is a direction to the paying banker to pay the money generally to a banker or a particular bankers as the case may be, and not to the holder at the counter. Crossing may be written, stamped, printed or perforated.

How does the payment modality change with the crossing of a cheque?

Crossing affords security and protection to the true owner, since payment of such a cheque has to be made

through a banker. It can, therefore, be easily detected to whose use the money has been received. Cheques are crossed in order to avoid losses arising from open cheques falling into the hands of wrong persons.

Crossing of a cheque does not affect its negotiability. Crossed cheques are negotiable by delivery in case they are payable to bearer and by endorsement and delivery where they are payable to order. Holder of a crossed cheque, who has no account in any bank, can obtain payment by endorsing it in favour of some person who has got an account in a bank.

Crossed Cheque :

When two parallel lines are drawn across the face of a cheque, it is called crossed cheque. A crossed cheque

can not be paid at the counter. It can be paid only through an account.

Kinds of Crossing.

01. General Crossing

02. Special Crossing

General Crossing :

When a cheque bears two parallel lines across its face, it is called a general crossing. A cheque bearing

a general crossing can be paid only through an account. General crossing is usually put either at the top left corner or in the middle of the cheque.

Special Crossing :

When the name of the particular bank is written across the face of a cheque, it is called a special crossing.

As per Section-124 of N.I. Act, a cheque shall be deemed to be crossed specially and to a particular banker “Where a cheque bears across its face an addition of the name of a banker, either with or without the words „not negotiable”.

When a cheque bears a special crossing, it can be paid only to that bank which is mentioned in the crossing.

In case of special crossing, drawing of two parallel lines is not necessary. Simply writing of the name of the bank is sufficient.

Restrictive Crossing :

Besides the above two types of statutory crossing, in recent years the practice of crossing cheques with the

words ‗account payee‘ or ‗account payee only‘ has sprung up. Such a crossing is termed as ‗restrictive

crossing‘.

Restrictive crossing is only a direction to the collecting banker that the proceeds are to be credited only to the account of payee named in the cheque. In case the collecting banker allows the proceeds to be credited

to some other account, it may be held liable for wrongful conversion of funds. It does not in any way affect the paying banker, who has simply to see that the cheque has been presented to it for payment by any bank in case of general crossing and by the particular bank (named in crossing) in case of special crossing. It is under no duty to ascertain that the cheque is in fact collected for the account of the person named as payee. Specimen of Restrictive Crossing.

 

A/C PAYEE ONLY	A/C PAYEE ONLY	A/C PAYEE
IFIC BANK LTD.	A/C PAYEE	NOT NEGOTIABLE

 

 

It is to be noted that the basic ingredient of crossing, „the two transverse parallel lines‟ across the face of the cheque, must be present in order to constitute any cheque as a crossed cheque. The cheque will not be taken as a crossed cheque if this has not been done.

Endorsement

The signature of the payee or holder on the back of a cheque/draft is called an endorsement.

Kinds of Endorsement.

01. Blank endorsement

02. Full endorsement

03. Partial endorsement

04. Restrictive endorsement

05. Conditional endorsement

06. Endorsement Sans Recourse

07. Facultative endorsement

Blank Endorsement :

When the endorser signs his name only (Mashud)

Full Endorsement :

When the endorsement adds the name of the endorsee above his signature, with a direction to pay him or to 

his order. A blank endorsement may be converted into full endorsement by writing the name of the endorsee over the signature of endorser. It is also called special endorsement : Pay to M/S. Liberty Impex.

Restrictive Endorsement :

Where the endorser prohibits further negotiation.

Partial Endorsement :

Where only a part of the amount of the bill is transferred to a particular endorsee.

Material Alteration

Material alteration is that change in the negotiable instrument which causes it to speak a different language

in legal effect from that which it had originally spoken. Change in order to be material must alter the business  effect  of the instrument.  These changes  may relate to  the legal  identity or character of the instrument either in the terms or in the legal relation to the parties to it. All changes which alter the operation of the instrument or the rights and liabilities of the parties shall be material, it will be immaterial whether the alteration is for the benefit or detriment to any party to the instruments.

Instances of Material Alteration :

(a) Alteration in the date of the instrument

(b) Alteration of the sum payable

(c) Alteration in the of payment.

(d) Alteration in the place of payment

(e) Alteration in the rate of interest.

(f) Alteration by the addition of a new party

(g) Alteration of an order instrument into a bearer instrument

Effect of Material Alteration :

A material alteration shall discharge all parties who are liable on the instruments at the time of alteration

and who do not consent to such alteration. But an alteration shall not affect the liabililty of persons becoming parties subsequent to the alteration. Besides this, section-89 provides that where a negotiable instruments has been materially altered but does not appear to have been so altered, payment thereof (a) by a person or banker liable to pay (b) paying the same in good faith and (c) according to the apparent tenor thereof and without negligence, shall discharge such person or banker from all liability thereon.

cheque , Main Characteristics of a cheque

What is cheque ?

Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on

demand. (an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or the bearer of the instrument.

Kinds of Cheques :

Cheque supplied to the account holders can be used variously by them depending on the circumstances. In fact, based on the use and utility, cheques assume differing, characteristics and serve various purposes of

the  account  holders.  (01).  Bearer  Cheque  (02).  Order  Cheque,  (03)  Crossed  Cheque  and  (04)  Non

Negotiable Cheques.

Main Characteristics of a cheque

01. It must be an unconditional order.

02. Cheque must be a written order.

03. For certain sum of money

04. Drawn on a specific bank

05. Payee of a cheque to be certain

06. Cheque must be payable on demand.

Bearer Cheque:

Cheques in which the word ‗Bearer‘ appears after the payee‘s name are called Bearer Cheque. These kinds

of cheque are likely cash since they are freely transferable from one person to another without any bar and it can be encashed by anybody from the bank over the counter.

Order Cheque:

A cheque in which the word ‗Order‘ appears after the name of the payee is called Order Cheque. An order

cheque can be paid to the payee or to any person according to payee‘s order. Instructions are written on the

back of the cheque.

Crossed Cheque:

When two parallel lines are drawn across the face of a cheque, it is called crossed cheque. A crossed cheque

can not be paid at the counter. It can be paid only through an account.

Not Negotiable Cheque:

These cheque is a further check on fraud and forgery. These cheque are transferable from one hand to

another. But the drawer gives a message by adding the words „Not Negotiable‟ to the cheque. About such cheques the N.I. Act. says that ―a person taking a cheque crossed generally or specially bearing in either case the words ―Not Negotiable‖ shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had‖. This provision restricts the ‗negotiability‘ of the cheque. However, restriction  on  negotiability  does  not  restrict  ‗transferability‘.  It  implies  that  a  cheque  bearing  ‗not negotiable‘ crossing can not be encashed by the persons who got it from a thief or any finder even if he got it on consideration and without the knowledge of theft or less. Generally this kind of cheque is used by Government, Government Agencies or corporations etc. who want to restrict further negotiation of the cheques.

Stale Cheque :

A cheque, after 6 months from its date of issue is regarded as „Stale‟ and such a cheque is not paid by a

bank. Stale cheques are also called „out of date‟  cheque. A stale cheque should be encashed as soon as possible.

Post-dated Cheque : 

A cheque bearing a future date is called post-dated cheque. A bank can not pay cheque before date of cheque. Post dated cheque is not paid by a bank.

Ante-dated Cheque :

A cheque bears a date earlier to the date on which the cheque is drawn. For example : a cheque drawn on

January 15 bearing date January 10 is an ante-dated cheque. Bank generally pay an ante-dated cheque.

Blank Cheque :

A cheque without any details bearing only the signature of the drawer is called blank cheque. This is also called inchoate (incomplete) instruments.

Negotiable Instrument

 (1) A ―negotiable instrument" means promissory note, bill of exchange or cheque payable either to order

or to bearer.

Explanation (i) A promissory note, bill of exchange or cheque is payable to order which is expressed to be so  payable  or  which  is  expressed  to  be  payable  to  a  particular  person,  and  does  not  contain  words prohibiting transfer or indicating an intention that it shall not be transferable.

Explanation (ii) A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last indorsement is an indorsement in blank.

Explanation (iii) Where a promissory note, bill of exchange or cheque, either originally or by indorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.

(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable 

in the alternative to one of two, or one or some of several payees.

Disclose of Customers Account information

 

(A) Under compulsion of law (say, the banker responds to the court‘s order for presenting

statement of accounts for legal purpose).

(B) In the public interest (say, disclosing enemy accounts during war period) (C) In the interest of the bank (say bank has to file a suit to recover dues)

(D) Under express or implied consent of the customer (implied in case of supplying credit information in general terms).

In addition to above, there are some authorities who can call for the returns and information specially or generally. These authorities are :

a)  Income Tax Authority

b)  Registrar of Joint Stock Companies c)  Bangladesh Bank

Why Introduction need to an Account

Why Introduction need to an Account?

        Proper introduction serves as precaution against any fraud.

        It is a safeguard in case of inadvertent overdraft.

    Banker can get help to be satisfied on a proposed account opener about the identity, character, integrity and respectability.

        Real reason for obtaining introduction by the banks is to get legal protection from the courts (Sec-

131, N.I. Act)

    It helps the banker to give proper and correct confidential opinion regarding the standing and creditability of the customer.

Why Introduction to an Account?

In case any fraudulent transaction takes place in the account, the banks may get some relief since it is the

moral responsibility of the introducer at least to help the bank in finding out the customer or tracing him out.

 

A banker is found to be very careful in selecting his customers. Before opening an account, he is to be satisfied himself about the identity, character, integrity and respectability of the proposed account opener. To this end he talks to the proposed customer informally to gather as much information as possible to satisfy himself about his bonafide. Not only that, a banker is also now required to obtain information about the  possible  transaction  needs  of  the  customers  and  maintain  those  in  the  customer  profile.  Most importantly the banks are to compulsorily obtain introduction as well.

Who can Introduce an Account :

Anybody acceptable to a bank may introduce an account such as existing account holders, government high

official, respectable person.

Describe the role of Bangladesh Bank in developing the financial system of our country

 B.Bank performs all the functions that a central bank of any country is expected to perform, and such

functions  include  maintaining  the  price  stability  through  economic  and  monetary  policy  measures, managing the country‘s  foreign exchange and the gold reserve and regulating the banking sector of the country. Like all other central banks across the globe, Bangladesh Bank is both the Government‘s banker and the banker‘s bank, a ―Lender of the Last Resort‖. Bangladesh Bank, like most of the central banks of different countries, exercises monopoly over the issue of  currency and the  banknotes. Except for the 1 and 2 taka notes, it issues all other denominations of Bangladeshi  Taka.Credit control, Clearing House, Control Money Market, Job creation,Agricultural development, Industrial development,and Natural resources development are also the functions of Bangladesh Bank.