Section 126 NI Act: Payment of cheque crossed generally

Negotiable Instruments Act, 1881

Section 126 NI Act at a Glance

Section 126 NI Act restricts how a crossed cheque may be paid. The banker on whom it is drawn must not pay a cheque crossed generally except to a banker, or a cheque crossed specially except to the named banker or its collection agent.

Section 126 NI Act Bare Act Text

126. 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.
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.

Section 126 NI Act in Simple Words

Section 126 NI Act lays down the payment duties of the banker on whom a crossed cheque is drawn. The first paragraph deals with a cheque crossed generally. Where a cheque is crossed generally, the banker on whom the cheque is drawn must not pay the cheque otherwise than to a banker.

The second paragraph of Section 126 NI Act deals with a cheque crossed specially. Where a cheque is crossed specially, the banker on whom the cheque is drawn must not pay the cheque otherwise than to the banker to whom the cheque is crossed, or that banker's agent for collection.

When Section 126 NI Act Applies

Where a cheque is crossed generally, the banker on whom it is drawn must not pay it otherwise than to a banker.
Where a cheque is crossed specially, the banker on whom it is drawn must not pay it otherwise than to the banker to whom it is crossed, or that banker's agent for collection.

Example of Section 126 NI Act

Sunil in Bhubaneswar draws a cheque for ₹1,00,000 on Sunil's banker in favour of Dinesh and crosses the cheque generally with two parallel transverse lines. Under Section 126 NI Act, Sunil's banker in Bhubaneswar must not pay the ₹1,00,000 cheque otherwise than to a banker. If the cheque is instead crossed specially to Dinesh's named banker, Sunil's banker must not pay the cheque otherwise than to Dinesh's named banker, or to that banker's agent for collection.

FAQs on Section 126 NI Act

What is Section 126 NI Act?▼

Section 126 NI Act governs who may receive payment of a crossed cheque from the banker on whom the cheque is drawn. It provides that the banker on whom the cheque is drawn must not pay a cheque crossed generally otherwise than to a banker, and must not pay a cheque crossed specially otherwise than to the banker to whom it is crossed or that banker's agent for collection.

To whom can the drawee banker pay a cheque crossed generally under Section 126 NI Act?▼

Only to a banker. Section 126 NI Act states that where a cheque is crossed generally, the banker on whom it is drawn must not pay it otherwise than to a banker.

To whom can the drawee banker pay a cheque crossed specially under Section 126 NI Act?▼

Only to the banker to whom the cheque is crossed, or that banker's agent for collection. Section 126 NI Act prohibits the banker on whom a specially crossed cheque is drawn from paying it to anyone else.

What happens if a banker pays a crossed cheque in breach of Section 126 NI Act?▼

The banker is liable to the true owner of the cheque under Section 129 NI Act for any loss the true owner may sustain owing to the cheque having been so paid.

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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·