Special Contracts · Negotiable Instruments

Material Alteration and Crossing of Cheques

Understand which changes invalidate an instrument and how general, special and not-negotiable crossings control cheque payment.

6 min readReviewed by Advocate Aditya Sharma
Sections 87 to 89Sections 123 to 131A

In one line

An unauthorized material alteration can discharge prior parties, while crossing directs the banking channel through which a cheque must be paid.

After this note, you should be able to

  • Recognize a material alteration and its exceptions.
  • Distinguish general, special and not-negotiable crossings.
  • Apply paying and collecting banker protections.

Material alteration

The change must affect legal effect, rights, liabilities or identity of the instrument.

Typical alterations
Unauthorized changes to amount, date, payment time, payee or place of payment are commonly material.
Effect
Section 87 makes the instrument void against a party who did not consent and was already a party when the alteration occurred.
Valid changes
Consent, correction carrying out original common intention and statutory alterations under Sections 20, 49, 86 and 125 are protected.
Not apparent
Section 89 protects payment in due course according to apparent tenor where the alteration or erased crossing is not visible.

Crossing of cheques

Crossing improves traceability and restricts how payment is made.

General crossing
Two parallel lines, with or without words such as "and company" or "not negotiable", require payment only to a banker.
Special crossing
The name of a banker directs payment only to that banker or its collection agent.
Not negotiable
Transfer remains possible, but the transferee cannot obtain a better title than the transferor.
Account payee
Though not separately defined in the Act, banking practice directs collection for the named payee's account.
Banker protection
A paying banker must follow the crossing. A collecting banker receives Section 131 protection only when acting for a customer in good faith and without negligence.

Work through the facts

Illustration

Facts

A cheque specially crossed to Bank X is paid directly in cash across the counter by the drawee bank.

Likely result

Payment disregards the special crossing and may expose the paying bank under Section 129.

What to learn

Crossing does not merely decorate a cheque; it gives a binding payment direction.

Cases with a purpose

Landmark judgments

Learn the rule and where to use it. A case name without its legal function adds little to an answer.

Loonkaran Sethia v. Ivan E. John

Further reading

AIR 1977 SC 336

Principle: An alteration is material when it changes the rights, liabilities, legal position or legal effect of the original instrument.

Use in an answer: Use it to test whether an apparently small change is legally material.

Indian Overseas Bank v. Industrial Chain Concern

Further reading

(1990) 1 SCC 484

Principle: A collecting banker claiming Section 131 protection must establish good faith and absence of negligence in the connected collection.

Use in an answer: Use it where suspicious account opening or cheque collection exposes the true owner to loss.

For a 10-mark answer

Answer structure

  1. Identify the original tenor and disputed change.
  2. Test materiality, consent and statutory exception.
  3. Classify the crossing and required payment channel.
  4. Assess paying or collecting banker liability.

Common mistakes

  • Calling every correction a material alteration.
  • Saying "not negotiable" prevents all transfer.
  • Assuming banker protection applies despite negligence.

Before you close the tab

Quick revision

  • Material alteration changes legal effect.
  • Consent and common intention can preserve validity.
  • General crossing requires payment to a banker.
  • Special crossing names the collecting banker.
  • Not negotiable limits title, not transfer.

Test yourself

  1. What makes an alteration material?
  2. Does "not negotiable" prohibit endorsement?
  3. What must a collecting banker prove under Section 131?

Short answers

Frequently asked questions

Can the holder add a crossing after issue?

Yes. Section 125 permits specified crossings and additions, which are not treated as material alterations.

Does a not-negotiable crossing make the cheque non-transferable?

No. It prevents the transferee from obtaining a better title than the transferor.

Primary sources

This is an educational study note. Read the bare provision and full judgment before relying on a proposition in research or practice.