Site navigation

How does crossing a cheque protect the drawer against payment to a wrong person?

Question and options

How does crossing a cheque protect the drawer against payment to a wrong person?

  1. It must be paid through a banker, so the proceeds can be traced to an account

  2. It can no longer be transferred to anyone else by indorsement and delivery

  3. It must not be paid until the drawer confirms the details to the drawee bank

  4. It must be paid across the counter, and only to the payee named on its face

Answer and explanation

Correct answer: A - It must be paid through a banker, so the proceeds can be traced to an account

Under section 126 of the Negotiable Instruments Act, 1881, a crossed cheque can be paid only to a banker, so its proceeds pass through a bank account and can be traced. A crossing does not by itself stop negotiation; even the words 'not negotiable' only limit the transferee's title under section 130. Confirmation by the drawer before payment is a bank's positive-pay arrangement, not an effect of crossing.

Practice for these exams

Related exam syllabi

More solved explanations in Crossing of cheques & protection of bankers