Sections 128-130 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 128 to 130 explain what follows when a crossed cheque is paid. If the drawee bank pays in due course, bank and drawer are placed as if the true owner had been paid (Section 128). If it pays out of due course, the bank is liable to the true owner for loss (Section 129). And a cheque marked "not negotiable" carries no better title than the giver had (Section 130). This follows the consolidated text consulted.
A bank that pays a crossed cheque in due course, and the drawer where the cheque has reached the payee, are placed as if the true owner had been paid (s.128). A banker who pays out of due course, that is, to a person other than the banker or collecting agent the crossing allows, is liable to the true owner for any loss (s.129). A person taking a crossed cheque marked "not negotiable" gets no better title than the person from whom he took it, and cannot give a better one (s.130).
Context
The crossing rules and the bank's duties on payment are in Sections 123 to 125 and Sections 126 and 127. Sections 128 to 130 answer: what is the position afterwards? They matter to drawers, payees, banks and anyone who takes a cheque from someone else.
A "true owner" is not defined in the text of these sections; the copy consulted does not supply a definition, and this article does not add one. For a title question around a crossed cheque that has gone to the wrong person, a legal dispute resolution adviser can map out who holds what rights. A note on spelling: the Act writes "indorse"; "endorse" is the common spelling.
Section 128: payment in due course of a crossed cheque
The text: "Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be entitled to the same rights, and be placed in the same position in all respects, as they would respectively be entitled to and placed in if the amount of the cheque had been paid to and received by the true owner thereof."
In plain terms:
- Who is protected. The paying banker and, if the cheque has come to the payee's hands, the drawer.
- How. Each is treated as if the amount had been paid to, and received by, the true owner.
- Condition. The bank must have paid "in due course". The Act defines payment in due course in Section 10, which should be read together with this section. The text of Section 128 does not repeat the definition.
The practical value to a drawer is that, where the cheque has reached the payee and has been paid in due course, the drawer is treated as having paid the debt to the true owner.
Section 129: payment out of due course
The text: "Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid."
This is the consequence of breaking Section 126. Two situations are named:
- A generally crossed cheque paid otherwise than to a banker.
- A specially crossed cheque paid otherwise than to the banker to whom it is crossed, or his agent for collection, being a banker.
In both, the paying banker is "liable to the true owner of the cheque for any loss he may sustain" because of the wrong payment. The liability is limited by the words "any loss he may sustain", so it measures the true owner's loss. The text does not give an amount, time limit or procedure.
Section 130: cheque bearing "not negotiable"
The text: "A person taking a cheque crossed generally or specially, bearing in either case the words 'not negotiable', shall not have and shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had."
Two rules are packed in:
- The taker does not have a better title than his transferor.
- The taker is not capable of giving a better title than he himself got.
This cuts against the usual idea that a holder in due course may take a clean title. A holder's protection is described in Section 9; the words "not negotiable" on a crossed cheque limit it. The section does not say the cheque cannot be transferred. It speaks only about the quality of title.
Side by side
| Section | Situation | Result |
|---|---|---|
| 128 | Crossed cheque paid in due course by the drawee bank | Paying bank, and the drawer if the cheque has come to the payee, are placed as if the true owner had been paid |
| 129 | Cheque crossed generally paid otherwise than to a banker, or crossed specially paid otherwise than to the named banker or his agent for collection | Paying banker liable to the true owner for any loss |
| 130 | Crossed cheque bearing "not negotiable" | Taker has, and can give, no better title than the person from whom he took it |
Examples
Example 1 (Section 129). A cheque from Mehra Exports to Naidu Imports is crossed generally. The cheque is stolen and the drawee bank pays cash over the counter to the thief. The paying bank has paid a generally crossed cheque otherwise than to a banker, so under Section 129 it is liable to the true owner, Naidu Imports, for any loss sustained.
Example 2 (Section 130). A cheque crossed generally and marked "not negotiable" is stolen from Oza Chemicals and sold to Patil Traders, who knows nothing of the theft and pays for it. Patil Traders cannot claim a better title than the thief had, and cannot give a better title to anyone else, so Oza Chemicals' claim to the cheque is not defeated merely because Patil Traders acted honestly.
Points to watch
- Cheques marked "not negotiable" are not worthless. They can be taken and paid; Section 130 only limits the title.
- Drawer protection requires the payee to have the cheque. Section 128's protection for the drawer is "in case such cheque has come to the hands of the payee".
- Check the crossing first. Whether the bank acted in due course depends on the crossing and on to whom it paid.
- Not an offence section. These sections concern title and loss; the offence for a returned cheque is in Section 138.
Need help with a crossed cheque dispute?
When a crossed cheque has been paid to the wrong person, three questions arise: was the payment in due course, who is the true owner, and did the "not negotiable" words limit anyone's title. Our legal dispute resolution team can help you order the facts around those questions.
Key takeaways
- Payment in due course puts the paying bank, and the drawer where the cheque reached the payee, in the position as if the true owner had been paid (s.128).
- Payment of a crossed cheque otherwise than as the crossing allows makes the paying banker liable to the true owner for loss (s.129).
- A "not negotiable" crossing means the taker has, and can give, no better title than his transferor (s.130).
- The text gives no amounts, periods or procedure.
Read next
- Sections 126 and 127: payment of crossed cheques by the drawee bank
- Sections 131 and 131A: protection of collecting banker and drafts
- Sections 8 to 10: holder, holder in due course and payment in due course
- Section 138: cheque bounce (dishonour of cheque)
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.