Sections 125, 126 and 127 of Negotiable Instruments Act 1881: Crossing and Payment of Cheques
Sections 125, 126 and 127 of the Negotiable Instruments Act, 1881 regulate what may be done with a cheque crossing after issue and how a banker must deal with payment of generally or specially crossed cheques. These provisions form part of Chapter XIV, "Of Crossed Cheques".
Section 125 - Crossing After Issue
Where a cheque is uncrossed, the holder may cross it generally or specially.
Where a cheque is crossed generally, the holder may cross it specially.
Where a cheque is crossed generally or specially, the holder may add the words "not negotiable".
Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker, his agent, for collection.
Meaning and effect of Section 125
Section 125 recognizes that crossing is not confined to the time when a cheque is first issued. A holder may cross an uncrossed cheque generally or specially. A general crossing may later be converted into a special crossing, and the words "not negotiable" may be added to either form of crossing. The section also permits a banker named in a special crossing to cross the cheque specially to another banker acting as its agent for collection.
- An uncrossed cheque may subsequently be crossed generally or specially by the holder.
- A generally crossed cheque may subsequently be crossed specially.
- The holder may add the words "not negotiable" to a general or special crossing.
- A banker to whom a cheque is specially crossed may cross it specially again to another banker acting as its collection agent.
Section 126 - Payment of Cheque Crossed Generally or Specially
Payment of cheque crossed generally
Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker.
A general crossing therefore restricts the drawee banker from paying the cheque otherwise than to a banker. This statutory direction is part of the protection created by the crossing system.
Payment of cheque crossed specially
Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection.
With a special crossing, the payment channel is narrower. The drawee banker must pay the cheque to the banker named in the special crossing or to that banker's agent for collection.
Section 127 - Payment of Cheque Crossed Specially More Than Once
Where a cheque is crossed specially to more than one banker, except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.
Meaning and effect of Section 127
Section 127 addresses multiple special crossings. If a cheque is specially crossed to more than one banker, the drawee banker must refuse payment. The statutory exception is a further special crossing to an agent for collection, which corresponds with the collection-agent crossing permitted by Section 125.
- Multiple special crossings ordinarily require the drawee banker to refuse payment.
- The exception applies where the further crossing is to an agent for collection.
- The provision should be read with Section 125, which expressly permits a specially crossed banker to cross again to another banker acting as its collection agent.
How Sections 125, 126 and 127 Work Together
Section 125 governs permissible crossing after a cheque has been issued. Section 126 directs the drawee banker how a generally or specially crossed cheque may be paid. Section 127 deals with the special case of more than one special crossing and requires refusal of payment unless the additional crossing is for collection through an agent banker.
Related Provisions on Crossed Cheques
Sections 123 and 124 define general and special crossings. Sections 128, 129 and 130 deal with payment in due course of crossed cheques, consequences of payment out of due course, and cheques bearing the words "not negotiable".
Official Statutory Source
For the authoritative text and amendments, refer to the Negotiable Instruments Act, 1881 on India Code and the official Legislative Department portal.