Negotiable Instruments and Crossed Cheque

Negotiable instruments are written documents that promise the payment of a fixed amount of money to the holder of the instrument or to the person whose name is mentioned in the instrument. These instruments are transferable by delivery, endorsement, or delivery and endorsement. Negotiable instruments include promissory notes, bills of exchange, and bearer cheques.

Crossed Cheque Not a Negotiable Instrument

A crossed cheque is a type of cheque that has two parallel lines drawn across its face. The purpose of crossing a cheque is to ensure that the cheque is deposited directly into the payee's bank account, rather than being cashed over the counter. The following are the reasons why crossed cheques are not negotiable instruments:

1. Restriction of Negotiability: Crossing a cheque restricts its negotiability, which means that it cannot be transferred to another person by mere delivery. The payee can only deposit the cheque in his/her bank account or transfer it to a third party by endorsement.

2. Protection against Fraud: Crossing a cheque also provides protection against fraud. It makes it difficult for unauthorized persons to cash the cheque over the counter, as it can only be deposited into a bank account.

3. Statutory Provisions: The Negotiable Instruments Act, 1881 provides that a crossed cheque is not a negotiable instrument. Section 123 of the Act defines a crossed cheque as "a cheque which has two parallel transverse lines, and either with or without the words ‘and company' or any abbreviation thereof, between them."

Conclusion

In conclusion, crossed cheques are not negotiable instruments because they are restricted in their negotiability, provide protection against fraud, and are not recognized as negotiable instruments under the Negotiable Instruments Act, 1881. The other options - bearer cheque, promissory note, and bill of exchange - are all negotiable instruments.

Crossed cheque means the amount should be deposited in payee's account and shouldn't give cash directly .
so it can't be transferred to others.