Difference between a Crossed Cheque and A/C Payee 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 Ayesha can sue Rohan.

Now let’s 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.


15 Comments

  1. One9Osix

    May 4, 2012 at 4:31 pm

    This is a very useful and helpful site.

    Reply
  2. K.L. Thukral

    March 28, 2014 at 6:46 pm

    Excellent & relevant article…

    Reply
  3. r j unecha

    December 15, 2014 at 12:32 pm

    Really Helpful thanks…………….

    Reply
  4. RAJNEESH KUMAR

    January 5, 2015 at 7:41 pm

    it is wonderful site please update sir

    Reply
  5. saptarshi

    February 14, 2015 at 11:31 am

    thnx….very simple & clear explanation…

    Reply
  6. Salman

    April 16, 2015 at 4:25 pm

    what if Ayesha want to deposit cheque in her proprietorship account, ‘AYESHA TEXTILE’, whereas cheque crossed account payee in her name?

    Reply
  7. SHASHANKA SEKHAR SAHOO

    April 17, 2015 at 2:23 pm

    thanks very usefull things…………

    Reply
  8. Omondi Alphonce

    May 10, 2015 at 10:34 am

    So good an explanation….thanks

    Reply
  9. siva

    June 23, 2015 at 9:48 pm

    pls clarify ..a party has a chq with &co crossed seal but he has no a/c ..whether he has put the chq for collection in another a/c

    Reply
  10. shankar

    July 7, 2015 at 12:30 pm

    excellent ……

    Reply
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    August 2, 2015 at 11:40 pm

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    August 5, 2015 at 11:47 am

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    September 1, 2015 at 1:23 am

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  14. venkat

    August 15, 2017 at 9:54 am

    Very helpful.easy to understand quickly with simple examples.thanks.

    Reply
  15. the ctitic

    August 18, 2017 at 3:51 pm

    clear, logical, brief and revevant…….nice work

    Reply

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