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Section 126: Payment of cheque crossed generally

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Competent Court / Tribunal
Act 1881
Section 125 All 148 Sections of Negotiable Instruments Act Section 127

Legal Commentary & Landmark Judgments: Section 126

Section 126 establishes the statutory mandate governing payment of crossed cheques, enacting that a cheque crossed generally must not be paid otherwise than to a banker, and a cheque crossed specially must be paid only to the designated banker.

  • Prohibition of Cash Counter Payments: The drawee bank is statutory forbidden from paying cash over the counter for any crossed cheque.
  • Adherence to Special Crossing: Must pay only to the specified banker named in the crossing, or to another bank acting as its authorized collection agent.
  • Consequence of Breach: A bank violating Section 126 is guilty of negligence and loses all statutory discharge protections under the Act.
Key Landmark Precedents:
  • Canara Bank v. Canara Sales Corporation (1987) 2 SCC 666: The Supreme Court affirmed that a paying bank that pays a crossed cheque in violation of Section 126 acts in breach of statutory duty and cannot debit the customer's account.
  • Smith v. Union Bank of London (1875) 1 QBD 31: The leading authority establishing that crossing imposes an absolute statutory restriction upon the paying banker's authority.
Courtroom Practice & Strategic Litigation Guidance:

If a bank employee erroneously pays cash across the counter on a crossed cheque presented by a thief, the bank is 100% liable under Section 126 and Section 129 to reimburse the drawer or true owner. Issue an immediate demand for restoration of funds.

Section 125 All 148 Sections of Negotiable Instruments Act Section 127