Sections 128, 129 and 130 of Negotiable Instruments Act 1881: Crossed Cheque Payment Rules

Sections 128, 129 and 130 of the Negotiable Instruments Act, 1881 deal with the legal consequences of payment of crossed cheques. Section 128 protects the position of the paying banker and drawer when a crossed cheque is paid in due course. Section 129 imposes liability for payment contrary to the statutory crossing rules. Section 130 limits the title that can pass through a cheque bearing the words "not negotiable".

Statutory context: These provisions form part of Chapter XIV, "Of Crossed Cheques". They operate with Sections 123 to 127, which define general and special crossing and prescribe the manner in which crossed cheques are to be paid.

Section 128 - Payment in Due Course of Crossed Cheque

Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be entitled to the same rights, and be placed in the same position in all respects, as they would respectively be entitled to and placed in if the amount of the cheque had been paid to and received by the true owner thereof.

Meaning and effect of Section 128

Section 128 addresses the legal position where the drawee banker has paid a crossed cheque in due course. When the statutory condition is satisfied, the paying banker receives the same protection and position it would have had if payment had reached the true owner. Where the cheque has come into the hands of the payee, the section similarly protects the drawer.

The cheque must be a crossed cheque.
The banker on whom the cheque is drawn must have paid it in due course.
The paying banker is placed in the position it would have occupied if the true owner had received the amount.
The section also addresses the drawer's position where the cheque has come to the hands of the payee.

Section 129 - Payment of Crossed Cheque Out of Due Course

Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid.

Liability for payment contrary to crossing

Section 129 imposes statutory liability where a banker disregards the payment restrictions attached to a crossing. A generally crossed cheque must not be paid otherwise than to a banker. A specially crossed cheque must not be paid otherwise than to the banker named in the crossing or that banker's collection agent, who must also be a banker. If payment is made contrary to these rules, the paying banker is liable to the true owner for loss caused by that payment.

Payment of a generally crossed cheque otherwise than to a banker may attract liability.
Payment of a specially crossed cheque must follow the named banker or banker-agent collection route.
The statutory liability is to the true owner of the cheque.
The recoverable liability is linked to loss sustained because of the improper payment.

Section 130 - Cheque Bearing "Not Negotiable"

A person taking a cheque crossed generally or specially, bearing in either case the words "not negotiable", shall not have, and shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had.

Meaning of "not negotiable" crossing

The words "not negotiable" do not mean that the cheque cannot be transferred. Section 130 instead limits the title that can pass. A person who takes such a cheque cannot obtain, or transfer to another person, a better title than the title held by the person from whom the cheque was taken.

The rule applies to either a generally or specially crossed cheque bearing the words "not negotiable".
The transferee cannot obtain a better title than the transferor possessed.
The transferee likewise cannot pass a better title to a later person.
The provision therefore restricts the quality of title that can pass through the cheque.

How Sections 128, 129 and 130 Work Together

Section 128 deals with the protected position arising from payment in due course. Section 129 addresses the opposite situation, where payment disregards the statutory crossing requirements and causes loss to the true owner. Section 130 concerns the effect of adding the words "not negotiable" to a crossed cheque and limits the title acquired through transfer.

Related Crossed Cheque Provisions

Sections 123 and 124 define general and special crossings. Sections 125, 126 and 127 deal with crossing after issue and payment of generally and specially crossed cheques. Section 131 deals with protection of a banker receiving payment of a cheque in specified circumstances.

Official Statutory Source

For the authoritative text and applicable amendments, refer to the Negotiable Instruments Act, 1881 through India Code and the Legislative Department of the Ministry of Law and Justice.