Demand draft is discussed in section 85(A) of the NI Act.

A Demand draft is an order to pay money drawn at

one office of a Bank upon another office of the same bank for a sum of money payable to order on demand.
A Demand Draft is payable on demand A Demand Draft can NOT be paid t a bearer A DD is negotiable and
its features are similar to Bill of Exchange and NOT a Check. If a Bank fails to honor the Draft, the Bank is
liable and not the person. If there are wrong signatures on the Bank Draft, the Bank is liable. If there is a
prior arrangement , the DD can be payable by different bank also. A person reaches the Bank with a
Demand Draft payable to his account. At this situation, the Bank works as which of the following? Creditor
Debtor Beneficiary Trustee Answer to the above question is D (Trustee). This means that when a Bank draft
is purchased , the relations between the purchaser and bank are that of a debtor and creditor , and as soon
as this bank reaches the Payee, the Payee becomes beneficiary and the Bank becomes trustee. Please note
that once, the payee gets a DD, the payment CANNOT be stopped unless there is an order by a competent
court. So, When a draft reaches a payee, the relationship between the purchaser and Bank comes to an
end. Please note these points: A demand draft can be prepared with cash payment if the value is less than `
50,000. For a value of ` 50,000 or more, only paid through bank account. Draft is valid for 6 months. On
expiry of this date, the draft can be revalidated by the Bank.
http://www.gktoday.in/demand-draft/

Demand Draft
It is a negotiable instrument similar to a bill of exchange, with some special features.

Demand Draft or DD is always issued by a bank (drawer) on behalf of its customers after taking the amount
from him/her. The bank then directs another bank or its own branches (drawee) to pay a certain sum
(the amount received from the customer) to the specified party (payee, whom the customer wants to pay).

You could think that why would you use a Demand Draft instead of a Cheque. There
are few good reasons behind it -

 Before issuing a DD, the bank will take the amount (advance payment) from the customer, i.e.,
the payment is guaranteed. But in case of Cheque, it could bounce, if the account of
the customer doesn't have sufficient balance in it. So, to eliminate the risk, the payee could ask you to
provide a DD instead of a Cheque.
 For issuing a DD, you don't need a bank account, you can go to the bank counter, and issue it.
But cheque is inherently related with a bank account.

- See more at: http://www.bankoncepts.in/2015/01/demand-draft-dd.html#sthash.vSIYJFkr.dpuf

 Now, try to understand about the differences between a Demand Draft and a Cheque -

Demand Draft (DD) Cheque

Drawer – bank only (individual pays), Drawer – individual/ac holder,
Parties Drawee – Same or other banks, Payee – Drawee – banker of individual, Payee
any party – any party
DD can only be made payable to a
Cheques can also be made payable
Negotiability specified party, also known as pay to
to the bearer, along with pay to order
order
Orders of payment by a bank to another Orders of payment from an account
Payments
bank holder to the bank
Can be dishonored, depending
Honor Always honored, because already paid
on account balance
Issuer party is backed by a bank Issuer party is liable to the cheque
Guarantee
guarantee and not backed by a bank guarantee
Defined Not precisely defined in NIA Act NIA Act, 1881

Comparison Chart

BASIS FOR
CHEQUE DEMAND DRAFT
COMPARISON

Meaning Cheque is a negotiable Demand Draft is a negotiable

instrument which contains
an order to the bank, signed
by the drawer, to pay a
certain sum of money to a
specified person.
instrument used for the
transfer of money from one
place to another.
 BASIS FOR
CHEQUE DEMAND DRAFT
COMPARISON

Payment Payable either to order or to Always payable to order of a

bearer. certain person.

Issuance Cheque is issued by an Demand Draft is issued by a

individual. bank.

Bank Charges No Yes

Drawer Customer of the bank. Bank itself.

Parties Involved Three Parties- Drawer, Two Parties- Drawer, Payee.

Drawee, Payee.

Dishonour Yes, due to insufficient No

balance or other similar
reasons.
 Banker
According to Section 3 of the Negotiable Instruments Act the term ‘banker’ includes any person acting as a
banker.

According to Halsbury’s Laws of England a banker as "an individual, partnership or corporation whose sole
predominating business is banking, that is the receipt of money on current account or deposit account and the
payment of cheques drawn by and the collection of cheques paid in by the customer."

A banker is one who in the ordinary course of his business, honors cheques drawn upon him by persons from and
for whom he receives money on their account. No person or body corporate can be a banker who does not (1) take
deposit accounts and current accounts, (2) issue and pay cheques and (3) collect cheques crossed and uncrossed
for its customers. One claiming to be a banker must acknowledge himself to be one, and the public must accept
him as such; his main business must be that of banking from which normally he should be able to earn his
livelihood.
Customer
A customer is a person who has some kind of account, such as deposit or current with a bank and from this it
follows that any person may become a customer by opening a deposit or current account or having some similar
relation with a bank." To constitute a customer, there must be some identifiable course or habit of dealing in the
nature of regular banking business. It is difficult to settle the idea of a single transaction with that of a customer. A
customer is a person; he should have some kind of an account with the bank. The initial transaction in opening an
account will not create the relation of a banker and customer. According to the ‘duration theory’ the relation of a
banker and customer begins as soon as the first cheque is paid in and accepted for collection.

In simple words a customer can be any person for whom the bank agrees to conduct an account.
Legal Requirements to be qualified as Customer :
 Customer should be a major
 Customer be of sound mind
 He should not be debarred under any law
 There must be an offer and acceptance of the proposal.
Things to be noted :
 A single transaction can constitute a customer
 Every customer should have an account
 There should be some frequency in transactions
 All the dealing must be of banking nature
 The customer can be a person, a company, a society or a legal entity.
General Relationship between the Banker and Customer
Bellow given are the general relationship between a banker and customer
 Debtor – Creditor
 Creditor – Debtor
 Principal – Agent
 Bailor – Bailee
 Trustor – Trustee
 Pledger – Pledgee
 Mortgagor – Mortgagee
Debtor and Creditor Relationship

When customer deposits money with a bank the relationship of debtor and creditor will be established, in this case
Banker is the Debtor and Customer is the Creditor. It is the basic rule of banking law that in the case of a general
deposit of money in the bank, the moment the money is deposited it becomes the property of bank; here the bank
and the depositor assume the legal relation of debtor and creditor.
Creditor and Debtor

When a bank grants loan and other credit facilities to the customer, the relationship between the banker and
customer is reversed, that is

Customer is Debtor and Banker is Creditor. In such cases banker doesn’t carry/ hold the money of the customer
but it is the money of the bank in the hands of the customer. In all such cases when a customer’s account is over
drawn, the customer does not cease to be a customer.
Principal and Agent

In some situations, the banker serves as agent of the customer (principal). Some of the agency activities of a
banker are specified below :
 Collecting cheques on behalf of the customer
 Collecting dividends and bills of exchange
 Acting as an attorney, representative or executor of a customer
 Buying and selling securities on behalf of his customer.
 Duties of the Agent (Banker):

Some of the important duties of an agent are given below :

 To follow the instructions given by principal
 To show required skill and carefulness
 Duty to provide proper accounts
 Duty to pass on any benefits derived from agency
Duties of Principal (customer):

 The principal should pay remuneration to the agent

 The principal should not prevent his agent from performing the duties/ acts assigned to him under the contract
and for which remuneration is payable.
 Any lawful expenses which have been incurred by the agent in the course of performance of his duties are to be
indemnified by the principal.
Bailor and Bailee Relationship :

Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when
the purpose is fulfilled, be returned or disposed of according to the directions of the person delivering them. The
person delivering the goods is called the "bailor" and the person to whom these are delivered is called the "bailee".
Bailment is also an important type of relations between the banker and customer. It may arise in the following
situations :
 Availing safe custody services (lockers)
 Pledge of stocks as security for availing credit from bank
In these cases Customer is the Bailor and the Bank is the Bailee
Pledger and Pledgee Relationship

Pledge means the bailment of goods as security for payment of a debt or performance of a promise. When credit
facility is provided by a bank to its customers against collateral security of movable property, the Relationship of
Pledger and Pledgee is established.

In this case customer is the Pledger and banker is the pledgee.

Mortgagor and Mortgagee Relationship
 Mortgage means the transfer of an interest in specific immoveable property for the purpose of getting the payment
of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an
engagement which may give rise to a financial liability.

When credit facility is provided by the bank to a customer against the security of immovable property, the
relationship of Mortgagor and Mortgagee is established.

In this situation:
 Mortgagor - Customer
 Mortgagee - Bank

 What is a Negotiable Instrument?

A Negotiable Instrument is that document that includes a ‘promise to pay’ a certain

amount of money to the bearer of the document. Its a mode of transferring a debt from
one person to another. Negotiable Instruments are always in written form.

Examples of Negotiable instruments are- a cheque, a promissory note, a bill of

exchange.
 The best thing about Negotiable instruments is that they are easily transferrable,
negotiable and a good and easy substitute for money.

Negotiable instruments are widely used for trade/business.

 Types of Negotiable Instruments?

As stated above, among the various, a cheque, a promissory note and a bill of exchange
are provided under the Act which are explained in detail below-

1. PROMISSORY NOTE-

A promissory note is that written document by way of which a written promise to pay a
certain amount of money taken/levied from the payee is made.
 The person who makes the promissory note and who lends the money from another is
known as the ‘Maker’ and the person from whom such amount is lended/levied is
known as the ‘Payee’.

A promissory note should always be made with that person who has the ability to repay
the money. A promissory note requires two parties to come into existence.

A promissory note must always be signed by the Maker, should always be in writing, it
must contain an undertaking to pay and should also bear a sufficient stamp as required
under the Indian Stamp Act.

2. BILL OF EXCHANGE-

Section 5 of the Act provides that a bill of exchange is that instrument which is in
writing consisting of an unconditional order, which is signed by the maker in order to
pay a certain amount of money to a certain person at a predetermined future date.
 A bill of exchange is made between three parties namely the- drawer, drawee and
payee.

A person who makes the bill of exchange is known as the drawer. A person on whom
the bill is drawn is called a drawee and to whom the amount mentioned in the bill of
exchange is payble is known as payee.

The difference between a promissory note and a bill of exchange is that a bill of
excxhange can bind one party to pay a third party the money who was not a party to the
bill of exchange at the time it was executed.

3. CHEQUE-
 A cheque in general is that document that orders a payment of money from a bank
account. But as per Section-6 of the Negotiable Instruments Act provides that- A
“cheque” is a bill of exchange drawn on a specified banker and not expressed to be
payble otherwise than on demand and it includes the electronic image of a truncated
cheque and the cheque in the electronic form.

A cheque is always payable by the banker only on demand and must fullfill all the
requirements of a bill of exchange and can be drawn for a certain sum of money.

The person who writes the check is known as the ‘drawer’. The drawer writes the date
on the cheque, writes the amount of money payable, signs it ordering his bank which is
known as the ‘drawee’ to pay the amount of money stated in the cheque to such person,
in the favour of whom the cheque has been signed.

A cheque is always drawn on the funds of the drawer and it does not requires any
stamping.

 Kinds of cheques-
 Cheques are of different kinds-

1. Bearer Cheque
2. Crossed Cheque
3. Open cheque
4. Order Cheque
5. Marked Cheque
6. Not payable or bad cheque
7. Ante-dated Cheque
8. Post dated Cheque
9. Stale Cheque
10. Multilated Cheque
11. Digital Cheque- Cheques in Electronic form and Truncated Cheques.
12. Banker Cheque
13. Golden Cheque
14. Travellers Cheque

Endorsement
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

The writing on the back of a negotiable or other instrument. The endorsement of a

check, bill of exchange, or note consists of words, qualifying nor not, followed by the
signature of the endorser, who may be the payee, drawee, accommodation endorser,
or holder, or simply the signature alone thereof. Endorsement is the means, plus
delivery, by which order instruments are negotiated to another person. Negotiation
consists of the transfer of title to and rights in an instrument from one person to another
so that the transferee becomes the legal holder. If the instrument is payable to bearer,
it is negotiable by delivery alone; if payable to order, it is negotiated by the
endorsement of the holder completed by delivery.

An endorsement must be written on the instrument itself or upon a paper attafched

thereto, called an ALLONGE. An endorsement must be an endorsement for the full
amount of the instrument, but where the instrument has been paid in part, it may be
endorsed as to the remainder. There is no limit to the number of endorsements that
may be made on a negotiable instrument, except where negotiability has been
destroyed.

There are five kinds of endorsements recognized in the Uniform Commercial Code:

1. Endorsement in blank, also known as general endorsement. If the instrument is

payable to A.B. See, the endorsement in blank is his simple signature without
additional words, i.e., "A.B. See." It specifies no particular endorsee, and thereafter is
payable to bearer and may be negotiated by delivery alone. It is a common form of
endorsement, but has the objection that if the instrument is lost or stolen, it may be
more easily negotiated by the finder or thief to a holder in due course, the latter as
such then having superior rights as against the original owner. The holder may
convert an endorsement in blank into a special endorsement.

An endorsement in blank is an unqualified endorsement, and thus the endorser thereof

makes all the warranties to all subsequent holders in due course specified in Section 3-
417, Uniform Commercial Code.

2. Special endorsement, also known as direct endorsement and endorsement in

full. This endorsement specifies the person to whom or to whose order the instrument
is payable, and the endorsement of such endorsee is necessary to the further
negotiation of the instrument. If an instrument is payable to A.B. See, the special
endorsement is "Pay to Adam Smith, A.B. See." This is the most proper form of
unqualified endorsement and offers the owner the greatest protection from both a
legal and a practical standpoint. Without Adam Smith's endorsement, the instrument
cannot be negotiated except by forgery, and forgery is a "real" defense against a
subsequent holder in due course.
A special endorsement is an unqualified endorsement, and the endorser thereof makes
all the warranties to all subsequent holders in due course detailed in Section 3-417 of
the Uniform Commercial Code.

3. Conditional endorsement. This is an infrequent form of endorsement in which the

endorser imposes some condition upon the transferee, e.g., "Pay Adam Smith upon
the satisfactory performance of his contract, (signed) A.B. See," or "Pay Adam Smith
or order if I am elected to the City Council, (signed) A.B. See." Where an
endorsement is conditional, a party required to pay the instrument may disregard the
condition and made payment to the endorsee or his transferee, whether the condition
has been fulfilled or not; but any person to whom an instrument so endorsed is
negotiated will hold the same, or the proceeds thereof, subject to the rights of the
person endorsing conditionally.

The conditional endorsement is an unqualified endorsement dependent upon the

condition's fulfillment, and the endorser thereof thus makes all the warranties, if the
condition is fulfilled, specified in Section 3-417, Uniform Commercial Code. Qualified
endorsements are of two types and constitute the endorser a mere assignor of title to
the instrument:

4. Qualified endorsement "Without Recourse," or words of similar import. The

qualified
endorsement "Without recourse, (signed) A.B. See" does not destroy the
negotiability of the instrument. The effect of this endorsement is to limit the warranties
and engagement to pay; instead the "without recourse" endorser makes the limited
warranties found in Section 3-417, Uniform Commercial Code.

5. Restrictive endorsement. A restrictive endorsement is a blank or special

endorsement accompanied by words which either (1) prohibit the further negotiation of
the instrument; or (2) constitute the endorsee the agent of the endorser; or (3) vest the
title in the endorsee in trust for or to the use of some other person. The endorsement
"Pay Adam Smith for collection, (signed) A.B. See" constitutes the endorsee the agent
of the endorser for the specified purpose. The third type, "Pay Adam Smith in trust for
John Jones, (signed) A.B. See," is rare.

A restrictive endorsement confers upon the endorsee the rights to (1) receive payment
of the instrument; (2) bring any action thereon that the endorser could bring; (3)
transfer his rights as such endorsee, where the form of the endorsement authorizes
him to do so. All subsequent endorsees acquire only the title of the first endorsee
under the restrictive endorsement.

The restrictive endorser is a qualified endorser, and makes the limited warranties found
in Section 3-417, Uniform Commercial Code.

For further details and incidents of endorsements, see Article 3, Part 2 of the Uniform
Commercial Code.

A restrictive endorsement confers upon the endorsee the rights to (1) receive payment
of the instrument; (2) bring any action thereon that the endorser could bring; (3)
transfer his rights as such endorsee, where the form of the endorsement authorizes
him to do so. All subsequent endorsees acquire only the title of the first endorsee
under the restrictive endorsement.

The restrictive endorser is a qualified endorser, and makes the limited warranties found
in Section 3-417, Uniform Commercial Code.

For further details and incidents of endorsements, see Article 3, Part 2 of the Uniform
Commercial Code.

Negotiable Instrument:

The negotiable Instruments Act (1881) does not define a negotiable instrument but merely state that a
“negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or
bearer (Section- 13)

A negotiable instrument is a transferable document that passes freely from hand to hand & forms an integral
part of the modern business mechanism.

Endorsement:

Endorsement means the signature of the maker/ drawer or a holder of a negotiable instrument, either with or
without any writing, for the purpose of negotiation. The endorsement is done by the payee or endorsee, as
the case may be by signing on the instrument customarily on its back & where the space is insufficient on a
slip of paper annexed thereto called “allonge”.
 There are five kinds of endorsement:

1. Blank endorsement: If the endorser signs his name only, the endorsement is said to be in blank and it
becomes payable to bearer, e.g. Mahbubul Haq.

2. Special or Full endorsement: An endorsement “in full” or a special endorsement is one where the endorser
not only puts his signature on the instrument but also writes the name of a person to whom or to whose order
the payment is to be made. Example: Pay to Mr. Rafiqul Islam or order-Sd/Sarafat All.

3. Conditional endorsement: In conditional endorsement the endorser puts his signature under such a writing
which makes the transfer of title subject to fulfillment of some conditions of the happening of some events.
Example: Pay to Mr. Sarwar Jahan or order after his marriage-Sd/Badrul Kamal.

4. Restrictive endorsement: An endorsement is called restrictive when the endorser restricts or prohibits
further negotiation. Example: “Pay to Miss. / A. Pereira only” Sd/Hosne Ara.

5. Partial endorsement: In Partial endorsement only a part of the amount of the bill is transferred or the
amount of the bill is transferred to two or more endorsees severally. This does not separate as a negotiation
of the instrument. The law lays down that an endorsement must relate to the whole instrument. However,
where the amount has been partly paid, a note to that affect may be endorsed on the instrument which may
then be negotiated for the balance. This is not done in case of cheques or banker’s drafts.

Give correct endorsement on cheques payable to the order of the following:

i) M/s. Ralli; ii) A. B. C. Co. Limited; iii) A. K. Khan & Co.; iv) A. R. Chowdhury (non-deceased) v) The Dhaka
club;

Answer:
I) For M/s. Ralli
P. Ralli
Proprietor/Partner

ii) For A. B. C. Co. Limited.

Z. H. Chowdhury
Managing Director/Chairman

iii) For A. K. Khan & Co.

Aminul Karim Khan
Partner

iv) A. R. Chowdhury

v) For and on behalf of

The Dhaka Club
Azizur Rashid
 Treasurer

Crossing:

When an instrument bears across its face two parallel transverse lines or an addition of the name of a
Banker, either with or without the words “& Co.”, “Account Payee” etc.

The significance of crossing is that the payment of the instrument can only be made through a Banker(
Account Holder). When it is a crossed instrument it gives direction to the paying Banker (Bank) to pay the
money to a Banker. Thus the holder of such an instrument must deposit the same into his or same other
person’s Bank a/c for collection. An instrument is crossed in order to provide a safeguard against theft of
fraud.

Persons who can Cross a Cheque: Crossing is an instruction or a direction to the paying banker.
Obviously, the drawer of a cheque is competent to cross it generally or specially. Section 125, however,
permits the following persons also to cross the cheque.

(1) The holder of a cheque may cross it generally or specially, if it is uncrossed or may cross it specially if it
is crossed generally or may add the words ‘not negotiable’ in case of both types of crossing.

(2) The banker to whom the cheque is crossed specially may again cross it especially to another banker, his
agent, for collection. This is called Double Special Crossing.

A general crossing may be converted into a special crossing by a holder by adding the name of a banker to
make the payment of the cheque safer. But the reverse is not possible into a general crossing, because such
alteration amounts to a material alteration and needs confirmation by the drawer.

Types of Crossing:

Crossing are mainly two types, these are (i) General Crossing (ii) Special Crossing.

i) General Crossing: Section 123 of Negotiation Instruments Act, 1881, defines a general crossing as follows:

Where a cheque bears across its face an addition of the words ‘and company’ or any abbreviation thereof,
between two parallel traverse lines or two parallel lines simply either with or without the words “not
negotiable” and that addition shall be deemed a crossing and the cheque shall be deemed to be crossed
generally.

e.g. (1) (2) & Co. (3) A/c. Payee

(4) Payee’s Account only (5) Not negotiable

ii Special Crossing: Section 124 of the Negotiable Instruments Act, 1881, defines special crossing as follows:
Where a cheque bears across its face an addition of the name of a Banker with or without the words “not
negotiable”, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed
specially and to be crossed to that Banker.

(1) Pubali Bank (2) Payee’s A/c. at Sonali Bank

(3) Janata Bank (4) Not negotiable Agrani Bank

Opening of Crossing: If the crossing on a cheque is cancelled, it is called opening of the crossing. The
cheque thereafter becomes an open cheque. Only the drawer of the cheque is entitled to open the crossing
of the cheque by writing the words ‘Pay Cash’ and canceling the crossing along with his full signature. His
initials are not sufficient for this purpose.

The paying banker must be very careful in ascertaining the validity or genuineness of the drawer’s signature
opening the crossing. If drawer’s signature (already on the cheque) is forged by the holder in order to open
the crossing and the payment is obtained at the counter, the banker will remain liable to the true owner of the
cheque. The banker is under an obligation to pay the cheque according to the direction of the drawer
conveyed through the crossing on the cheque.

Significance of “Not Negotiable” Crossing:

The terms of not negotiable literally means not transferable. But in case of crossing of a cheque or bill of
exchange, the phrase does not mean that the instrument is not at all transferable. The instrument may still
pass from hand to hand, but only with certain degree of care and caution. According to section 130 of the
Negotiable Instruments Act, any person taking a cheque crossed generally or specially with the words ‘not
negotiable’ shall not have and shall not be capable to give a better title to the cheque than that which the
person from whom he took it at the first hand.

The cheque remains transferable but its important quality i.e. negotiable is withdrawn. Negotiability means
that a holder in due course derives a better title than that of the transferor provided he comes to the
possession thereof for value, in good faith and without any reason to believe that the transferor from whom
he took it, had a defective title. Not negotiable crossing destroys this feature. Suppose cheque crossed with
Not negotiable” has been stolen by B form A and handed over to C who receives it bonafide and for value
without any knowledge of B’s defective title. C does not acquire a better title to the cheque, than B. In case of
dispute, C will have to return the cheque or pay equivalent in money to A, the true owner of the cheque. C
can not also pass a good title to any one else, say to D.

A stolen cheque with this crossing is just like a stolen pen and can be claimed by the true owner.

Significance of “Not Transferable” Crossing:

Every cheque is transferable unless it contains words prohibiting transfer or indication intention that it shall
not be transferable. If the drawer wishes to make the cheque a non transferable one, he should indicate the
fact by the way he draws the cheque e.g. pay A or B only with further words “Not Transferable” should be
 plainly written horizontally on the face of the cheque. A cheque so crossed restricts the transferability to any
other person and is only payable to the person or payee noted therein.

Significance of “Payee’s Account” Crossing:

Section 123 of Negotiable Instruments Act defines that when a cheque crossed generally bears across its
face an addition of the words ‘Payee’s Account’ between the two parallel transverse lines, it is known as
Payee’s Account Crossing.
It has two characteristics:
a) It cases to be negotiable,
b) The collecting Banker is required to credit the proceeds thereof only to the account of the payee. The
collecting Banker will be liable if he does not adhere to this mandate of the drawer. A cheque crossed
‘Payee’s Account’ bearing endorsements subsequent to that of the payee proves that it has been negotiated.
If such cheque is paid, the drawer is entitled to sue for conversion. It is a notice to the collecting Banker who
will be looked upon as having acted negligently if he disregards the crossing.

3-501. PRESENTMENT.
(a) "Presentment" means a demand made by or on behalf of a person entitled to
enforce an instrument (i) to pay the instrument made to the drawee or
a party obliged to pay the instrument or, in the case of a note or
accepteddraft payable at a bank, to the bank, or (ii) to accept a draft made to the
drawee.

(b) The following rules are subject to Article 4, agreement of the parties, and
clearing-house rules and the like:

(1) Presentment may be made at the place of payment of

the instrument and must be made at the place of payment if the
instrument is payable at a bank in the United States; may be
made by any commercially reasonable means, including an oral,
written, or electronic communication; is effective when the
demand for payment or acceptance is received by the person to
whom presentment is made; and is effective if made to any one
of two or moremakers, acceptors, drawees, or other payors.

(2) Upon demand of the person to whom presentment is made,

the person making presentment must (i) exhibit the instrument,
(ii) give reasonable identification and, if presentment is made on
 behalf of another person, reasonable evidence of authority to do
so, and (iii) sign a receipt on the instrument for any payment
made or surrender the instrument if full payment is made.

(3) Without dishonoring the instrument, the party to

whom presentment is made may (i) return the instrument for
lack of a necessary indorsement, or (ii) refuse payment
oracceptance for failure of the presentment to comply with the
terms of the instrument, an agreement of the parties, or other
applicable law or rule.

(4) The party to whom presentment is made may treat

presentment as occurring on the next business day after the day
of presentment if the party to whom presentment is made has
established a cut-off hour not earlier than 2 p.m. for the receipt
and processing of instrumentspresented for payment
or acceptance and presentment is made after the cut-off hour.

Crossing and Endorsement of Cheque.

Introduction:
Ordinarily, the payee of a cheque is entitled to encash at the counter of the paying banker by presenting it
within the specified banking hours. In case of a bearer cheque, the paying banker does not need to go into an
elaborate exercise with regard to the identity of the holder of the cheque. An order cheque is also paid by the
paying banker on being apparently satisfied about the true identity of the presenter of the cheque. To ensure
that the cheque is not encashed by a wrong person, by concealing his identity, there has developed a practice
called ‘crossing of a cheque’. The practice has been given legal coverage in the Negotiable Instrument Act,
1881.

When cheque is crossed it in effects means a request-more appropriately, an instruction by the client not to
pay the cheque directly over the counter but to a banker only for crediting the payees account with the bank.
A cheque bearing such an instruction is called a ‘crossed cheque’. The crossing of a cheque is intended to
ensure that its payment is made to the right payee. Section 123 to 131 of the Negotiable Instrument Act
contain provisions relating to crossing. According to section 131-A, these sections are also applicable in case
of drafts. Thus not only cheques but bank drafts also may be crossed.
For our discussion we may differentiate crossing into following two types:

1. General Crossing.
2. Special Crossing.
1. GENERAL CROSSING:
a) Meaning: According to section-123 of NI Act, where a cheque bears across its face an addition of the
words “and company” or any abbreviation thereof between two parallel transverse lines or two parallel
transverse lines simply, either with or without the words “not negotiable” that addition shall be deemed a
crossing & the cheque shall be deemed to be crossed generally.
b) Specimen of General Crossing:

c) Features of General Crossing:

i. From the above section we find that a cheque is said to be crossed generally when it bears across its face
any of the following:
• Two transverse parallel lines.
• Two transverse parallel lines with the word “And Company”.
• Two transverse parallel lines with any abbreviation of the word “& Company”.
• Two transverse parallel lines with the words “Not Negotiable”.
• Two transverse parallel lines with the words “Account Payee Only”.
ii. The cheque crossed generally does not ceases to be negotiable further.
iii. The collecting banker can collect the proceeds of the cheque in the account of that person mentioned on
the cheque.

d) Significance of General Crossing:

i. The effect of general crossing is that it gives a direction to the paying banker.
ii. The direction is that, the paying banker should not pay the cheque at the counter. It should be paid only to
a fellow banker. In other words, payment is made through an account and not at the counter. Sec.126 of the
NI Act clearly lays down that, “Where a cheque is crossed generally, the banker on whom it is drawn, shall
not pay it otherwise than to a banker”.
iii. If a crossed cheque is paid at the counter in contravention of the crossing:
a) The payment does not amount to payment in due course. So, the paying banker will lose his statutory
protection;
b) He has not right to debit his customer’s account, since, it will constitute a breach of his customer’s
mandate;
c) He will be liable to the drawer for any loss, which he may suffer;
d) He will be liable to the true owner of the cheque who may be a third party, irrespective of the fact, that,
there is no contract between the banker and the third party. As a general rule, a banker is answerable only to
his customer.
iv. The main intention of crossing a cheque is to give protection to it. When a cheque is crossed generally, a
person who is not entitled to receive its payment, is prevented from getting that cheque cashed at the counter
of the paying banker. But, it gives only a limited protection, in the sense, that if the thief is not the customer
of the paying banker, he can encash that cheque through his banker, by forging the signature of the payee.
However, it can be detected. To avoid this danger, special crossing was introduced.
4. Special Crossing
a) Meaning: A special crossing implies the specification of the name of a banker on the face of the cheque.
Sec.124 of N.I. Act 1881 reads. “Where a cheque bears across its face an addition of the name of a banker,
either with or without the words “Not Negotiable” that addition shall be deemed a crossing and the cheque
shall be deemed to be crossed specially, and to be crossed to that banker”.
Drawing of two transverse and parallel lines is not necessary in case of a special crossing. When a cheque has
been specially crossed, the banker upon whom it has been drawn will make the payment only to that banker
in whose favour it has been crossed.
b) Specimen of Special Crossing:

c) Significance of Special Crossing:

i. It is also a direction to the paying banker. The direction, is the, that paying banker should pay the cheque
only to the banker, whose name appears in the crossing or to his agent. Sec.126 the NI Act clearly lays down
that “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.
ii. If a cheque specially crossed to a bank is presented by another bank, not in the capacity of its agent, the
paying banker is justified in returning the cheque.
iii. A special crossing gives more protection to the cheque than a general crossing. It makes a cheque still
safer because a person, who does not have a real claim for it, would find it difficult to obtain payment. In
special crossing, the cheque is specially crossed to the payee’s banker. Hence, the banker, in whose favour the
cheque has been crossed, knows the payee and his specimen signature well. So, he will not collect if for any
person other than the payee. If there is any forgery, it can be easily detected by the banker. But, we can not
say that, it gives full protection in the sense, that, an unscrupulous person, who has an account in the same
bank but at a different branch, can encash it by forging the signature of the payee. It can also be detected.

Difference between General and Special Crossing

General Crossing Special Crossing
1. Drawing of two parallel transverse lines is 1. Drawing of two parallel transverse lines is not
a must. essential.
2. Inclusion of the name of a banker is not
2. Inclusion of the name of a banker is essential.
essential.
3. In Special Crossing paying banker to honor the
3. In General Crossing paying banker to
cheque only when it is presented through the bank
honor the cheque from any bank A/C.
mentioned in the crossing and no other bank.
4. General Crossing can be converted into a 4. Special Crossing can never be converted to General
Special Crossing. Crossing.
5. In case of General Crossing the words 5. In case of Special Crossing the name of a banker
“And Company” or “& Company” or “Not may be written within two parallel transverse lines or
Negotiable” between the transverse lines to with the words “And Company” or “Account Payee
highlight the crossing does not carry special Only” or “Not Negotiable” the inclusion of these
significance. words has become customary.
Double Crossing
When a cheque bears two separate special crossing, it is said to have been doubly crossed.
As per section-127, “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.”
Thus a paying banker shall pay a cheque doubly crossed only when the second banker is acting only as the
agent of the first collecting banker and this has been made clear on the instrument. Such crossing may be
done in those cases where that banker in whose favour the cheque is to be paid.

Who can cross a cheque?

a) A cheque may be crossed generally or specially by the drawer.
b) Holder may also cross it.
c) Holder may turn a general crossing into special crossing.
d) A banker may cross an uncrossed cheque & he may cross it specially to himself or to another banker for
purpose of collection through him.

The above contention is substantiated by section-125 of NI Act-1881.

Opening of crossing/cancellation of crossing

If the crossing on a cheque is cancelled, it is called opening of the crossing. The cheque thereafter becomes an
open cheque. Only the drawer of the cheque is entitled to open the crossing of the cheque by writing the
words “Pay Cash” and canceling the crossing along with his full signature. His initials are not sufficient for
this purpose.
The paying banker must be very careful in ascertaining the validity or genuineness of the drawer’s signature
opening the crossing. If drawer’s signature (already on the cheque) is forged by the holder in order to open
the crossing and the payment is obtained at the counter, the banker will remain liable to the true owner of
the cheque. The banker is under an obligation to pay the cheque according to the direction of the drawer
conveyed through the crossing on the cheque.

Definition of Negotiable Instrument

Negotiable Instrument means a promissory note, bill of exchange or cheque payable either to order or bearer
(Section-13).
Promissory Note: A ‘Promissory Note’ is an instrument in writing containing an unconditional undertaking,
signed by the maker, to pay a certain sum of money only to, or the order of certain person, or to the bearer of
the instrument (Section 4 of NI Act).
Bill of Exchange: According to Section 5 of NI Act, a bill of Exchange is “an instrument in writing containing
an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only
to, or to order of, a certain person or to the bearer of the instrument”.
Cheque: A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand (Section 6 of NI Act). A cheque is a bill of exchange which is always (i) Drawn on a
banker specified therein and (ii) Payable on demand.

Introduction:
A negotiable instrument may be transferred by negotiation. (i) Negotiation can be effected by mere delivery if
the instrument is a bearer one. (ii) By endorsement and delivery in case it is an order instrument. An order
instrument means instrument payable to a specified person or to the order of that specified person. If an
instrument payable to order is transferred without endorsement, it is merely assigned and the holder thereof
is not entitled to the rights of a holder in due course.

Meaning of Endorsement:
An endorsement is the mode of negotiating a negotiable instrument. A negotiable instrument payable
otherwise than to a bearer can be negotiated only by endorsement and delivery. An endorsement, according
to sec. 15 of the NI Act is “when the maker or holder of a negotiable instrument signs the same, otherwise
than as such marker. For the purpose of negotiation on the back or face thereof or on a slip of paper annexed
thereto, he is said to endorse the same and is called the endorser. The person to whom the instrument is
endorsed is called the endorsee.
“The word endorsement is said to have been derived from Latin ‘en’ means ‘upon’ and ‘dorsum’ meaning ‘the
back’. Thus usually the endorsement is on the back of the instrument though it may be even on the face of it.
Where no space is left on the instrument, the endorsement may be made on a slip of paper attached to it.
This attached slip of paper is called ‘Allonge’.

Essentials of a Valid Endorsement:

An endorsement in order to operate as mode of negotiation must comply with the following conditions,
namely:

1. It must be written on the instrument itself and be signed by the endorser. The simple signature of the
endorser, without additional words, is sufficient. An endorsement written on an allonge is deemed to be
written on the instrument itself.
2. The endorsement must be of the entire instrument. A partial endorsement, that is to say, an endorsement,
which purports to transfer to the endorsee a part only of the amount payable, or which purports to transfer
the instrument to two or more endorsees severally (i.e. separately), does not operate as a negotiation of the
instrument.
3. Where a negotiable instrument is payable to the order of two or more payees or endorsees who are not
partners, all must endorse unless the one endorsee has authority to endorse for the others.
4. Wherein a negotiable instrument payable to order, the payee or endorsee is wrongly designated or his
name is misspelt, he should sign the instrument in the same manner as given in the instrument. Though, he
may add, if he thinks fit, his proper signature.
5. Where there are two or more endorsements on an instrument, each endorsement is deemed to have been
made in the order in which it appears on the instrument, until contrary is provided.
6. An endorsement may be made in blank or special. It may also be restrictive.

Types of Endorsement:
According to the N.I. Act, 1881 endorsement may take any of the following forms:

1. Endorsement in blank or general endorsement.

2. Endorsement in full or special endorsement.
3. Restrictive endorsement.
4. Partial endorsement.
5. Conditional endorsement.

1. Endorsement in Blank or General Endorsement:

In case of an endorsement in blank, the payee or endorser does not specify an endorsee and he simply signs
his name (S. 16 NIA).
2. Endorsement in Full or Special Endorsement:
When the payee or endorser specifies the person to whom or to whose order the instrument is to be paid, the
endorsement is called special endorsement or endorsement in full. The specified person i.e. the endorsee
then becomes the payee of the instrument.
3. Restrictive Endorsement:
An endorsement is restrictive when it prohibits further negotiation of a negotiable instrument. Sec. 50 of the
NI Act 1881states. “The endorsement may, by express words, restrict of exclude the right to negotiable or pay
constitute the endorsee an agent to endorse the instrument or to receive its contents for the endorser or for
some other specified person.”
For example, if B endorses an instrument payable to barer as follows, the right of C to further negotiate is
excluded
• Pay the contents to C only
• Pay C for my use

4. Partial Endorsement:
If only a part of the amount of the instrument is endorsed, it is a case of partial endorsement. An
endorsement which purports to transfer to the endorsee only a part of the amount payable, or which
purports to transfer the instrument to two or more endorsees severally, is not valid.

5. Conditional Endorsement:
If the endorser of a negotiable instrument, by express words in the endorsement, makes his liability or the
right of the endorsee to receive the amount due thereon, dependent on the happening of a specified event,
although such event may never happen, such endorsement is called a conditional endorsement (Section 52 of
NI Act). Such an endorser gets the following rights:
He may make his liability on the instrument conditional on the happening of a particular event. He will not
be liable to the subsequent holder if the specified event does not take place to the instrument even before the
particular event takes place.
For example, “pay C if he returns from London”. Thus C gets the right to receive payment only on the
happening of a particular event, i.e. if he returns from London.
Effect of Endorsement

An unconditional endorsement of a negotiable instrument followed by its unconditional delivery has the
effect of transferring the property therein to the endorsee. The endorsee acquires a right to negotiate the
instrument further to anyone he likes.

Section 50 of NI Act also permits that an instrument may also be endorsed so as to constitute the endorsee
an agent of the endorser.
• To endorse the instrument further or
• To receive its amount for the endorser or for some other specified person.

Usual forms of Banks Endorsement:

1. Payee’s Account Credited
For: EXIM, Elephant Road Branch Officer Where the payees name in the cheque and name in the depositors
slip is same.
2. Payee’s Account will be Credited on realization
For: EXIM, Elephant Road Branch Officer In case of OBC
3. Our Branch endorsement conformed
For: EXIM, Elephant Road Branch, Dhaka. OBC received from other branch for collection
4. Purchaser’s Account Credit
For: EXIM, Elephant Road Branch In case of cancellation of DD/PO etc.
5. Received Payment for EXIM, Elephant Road Branch Officer In case of a cheque where the Branch is the
Beneficiary in the name of EXIM, Elephant Road Branch or yourself.