Negotiable Instruments Act, Section 125

Negotiable Instruments Act, Section 125: Crossing After Issue

Section 125 of the Negotiable Instruments Act, 1881 deals with the alteration or addition of crossing on a cheque after its issue and authorizes the holder to convert an uncrossed cheque into a crossed cheque.

The provision also permits certain modifications in existing crossings and is intended to provide greater security and flexibility in cheque transactions through banking channels.

1. Meaning of Crossing of Cheque

Crossing of a cheque refers to making certain markings or additions across its face that direct the banker regarding the mode of payment.

A crossed cheque is generally payable only through a bank and not directly over the counter, thereby safeguarding against loss, theft, fraud, or unauthorized encashment.

2. Purpose of Section 125

The object of Section 125 is to enable the holder of a cheque to enhance its security even after it has been issued.

The provision permits the conversion of open cheques into crossed cheques, the addition of protective words such as Not Negotiable, and safer collection through banking channels, thereby promoting secure commercial transactions.

3. Crossing of Uncrossed Cheque

Where a cheque is originally uncrossed, the holder may subsequently cross it generally or specially, thereby converting it into a crossed cheque according to convenience and security requirements.

4. General Crossing of Uncrossed Cheque

Where the holder crosses a cheque generally, two parallel transverse lines are added across its face, making it payable only through a banker and preventing direct encashment over the counter.

5. Special Crossing of Uncrossed Cheque

The holder may also specially cross an uncrossed cheque by adding the name of a banker, making it payable only through that banker and thereby ensuring greater security and traceability.

6. Conversion of General Crossing into Special Crossing

The section further provides that where a cheque is already crossed generally, the holder may convert it into a special crossing by adding the name of a banker.

Once so converted, payment is restricted to the specified banker, thereby enhancing the security of the cheque during its circulation.

7. Addition of Not Negotiable

The holder may add the words Not Negotiable to a cheque already crossed generally or specially, but a transferee cannot acquire a better title than the transferor, thereby helping to prevent misuse of the cheque.

8. Purpose of Not Negotiable Crossing

The words Not Negotiable are intended to restrict the transfer of defective title, protect the true owner, and reduce the risks of fraudulent negotiation, thereby strengthening commercial safety and banking discipline.

9. Re-Crossing by Banker as Agent for Collection

The section permits a specially crossed cheque to be crossed again specially by the banker to whom it is crossed, but only to another banker acting as its collection agent, a practice commonly known as double special crossing for collection purposes.

10. Purpose of Re-Crossing

Re-crossing is permitted where a collecting banker uses another banker as its agent for collection, thereby facilitating banking operations across different locations without compromising security.

11. Restriction on Re-Crossing

A second special crossing is permitted only by the banker to whom the cheque is originally crossed and only in favour of another banker acting as a collection agent, thereby preventing unauthorized double crossing and confusion in payment instructions.