Home  /  Negotiable Instruments Act  /  Section 127

Section 127: Payment of cheque crossed specially more than once

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1881
Section 126 All 148 Sections of Negotiable Instruments Act Section 128

Legal Commentary & Landmark Judgments: Section 127

Section 127 regulates payment of a cheque crossed specially more than once, enacting that where a cheque is crossed specially to more than one banker, the drawee bank must refuse payment, unless crossed to an agent for collection.

  • Mandatory Refusal of Payment: If a cheque bears two distinct special crossings to two different banks, the drawee bank must refuse to honour it.
  • Single Exception of Collection Agency: Permitted only where the second crossing is explicitly to a banker acting as an agent for collection for the first banker.
  • Anti-Fraud Mechanism: Prevents fraudulent parallel negotiations and conflicting bank clearance claims.
Key Landmark Precedents:
  • Indian Overseas Bank v. Industrial Chain Concern (1990) 1 SCC 484: Discussed the strict operation of Section 127 in preventing multiple competing banking indorsements on crossed commercial paper.
  • Smith v. Union Bank of London (1875): Affirmed that a drawee bank paying on conflicting multiple special crossings forfeits all protection under the Act.
Courtroom Practice & Strategic Litigation Guidance:

When reviewing clearing rejects, if a cheque was dishonoured with the memo 'crossed to two banks', check if the second crossing states 'for collection'. If not, the drawee bank acted in strict compliance with Section 127, and the cheque must be reissued.

Section 126 All 148 Sections of Negotiable Instruments Act Section 128