What is the difference between a Crossed cheque and A/C Payee cheque?

Before we understand the difference between the Crossed cheque and A/C Payee cheque, it is necessary to understand the concept of Endorsements
The section 15 of the Negotiable Instruments Act 1881 defines endorsing as “signing on the face or an instrument for the purpose of negotiating a negotiable instrument (such as Cheque).

A person who signs the cheque and transfers the instrument is an endorser and in whose favor it is transferred is endorsee. The endorsee acquires a right to negotiate the instrument to anyone he / she likes. By making an endorsement the endorser promises that in case of dishonor, he / she provides a guarantee to compensate the holder.
Crossing a cheque by making two parallel lines with or without such words as ___& company is general crossing. Section 126 of the NI Act says that this is a direction to the bank to not to pay the cheque across the counter.
This crossed cheque is no more a bearer cheque where anyone can negotiate and get payment across the counter.
In case of a crossed cheque, the payee is free to make further endorsements. For example , Ayesha receives a check from Rohan which has been crossed, Ayesha can get this payment in her account only and not across the counter. But in this case Ayesha is free to endorse the cheque in favor of Suresh and further Suresh is free to endorse the instrument in favor of Mukesh and so on…This means that crossing a cheque does not put restrictions on endorsements. In case the cheque gets dishonored, Mukesh can sue Suresh and Suresh can sue Ayesha and Ayesh can sue Rohan.

Now lets discuss A/C Payee cheques. The NI act does not talk about the A/C payee crossing. There is no definition of A/C payee crossing in the NI act and it is a child of banking practice. Making a cheque A/C Payee is a result of custom, use and practice and is now accepted legally.
But, the A/C payee cheque cannot be further endorsed. This means that if the cheque in the above example which is in favor of Ayesha bears “A/C Payee”, payment can be collected in Ayesha’s account only. The paying bank makes sure that amount is being credited to the account of the payee only.

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  • Dj

    Thanks for ur explanation i m fully satisfied.


    can an a/c payee cheque be endorssed further


    It would be better if we can say, ” a holder of a cheque who transfers (either by mere delivery in the case of baerer cheque or by endorsement and delivery in case of crossed cheque) the instrument to another person is called the endorser and the person to whom it is transferred is called the endorsee”.


    An account payee cheque cannot be further transferred to any person as the transferability characateristic of the cheque is taken away through “A/C pyaee Crossing”. Hence a banker will collect the cheque only for the payee and no one else. Thus when the transferability of the cheque is restricted, the question of negotiability does not arise.However, there is no mention of “A/C payee Crossing” in the NI Act. The act is silent on this, but Courts in India have upheld the sanctity of the “A/C Payee”crossing. Thus it has legal sanction.