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The Law On Account Payee Cheques
According to S. 6 of the Negotiable Instruments Act, 1881, the term cheque is defined as “a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand." However, to understand this definition clearly it is important that we also consider how a bill of exchange has been defined under the Act.
According to S. 5 of the Act, a “bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."
Thus after scrutinizing the definitions mentioned above, we can see that there are certain requisites for a cheque to be valid. They are:
Instrument in writing: Any instrument which is not in writing cannot be considered a cheque.
Unconditional Order: The modern day cheque instrument has to be an unconditional order. “As regards the order, it is not necessary that the word ‘order’ or its equivalent must be used to make the document a cheque.  "
Specified Banker Only: This requirement leads to two conclusions: Firstly, the cheque can only be drawn on a banker and secondly, the banker should be clearly specified in name and if possible also in address.
Specified Sum Of Money: The cheque should make an order only for the payment of a sum of money which is clearly specified in the instrument.
Payee Should Be Clearly Identified: For any instrument to be considered a valid cheque, the person to whom it should be paid i.e. the payee should be clearly identified.
Payable On Demand: A cheque cannot be expressed to be made payable otherwise than on demand.
Since a cheque is an unconditional order, the drawer of the instrument cannot impose any conditions on the same. However, the drawer is free to provide for specific instructions regarding the payment of the cheque to the banker. “Ordinarily the payee of a cheque is entitled to encash the cheque at the counter of the paying banker by presenting it within the specified banking hours on any working day of the bank. In case of a bearer cheque, the paying banker need not seek the identification of the holder of the cheque. An order cheque is paid by the paying banker on being satisfied about the true identity of the presenter of the cheque.  " However, in the latter kind, there are substantial risks involved of payments being made to the wrong person. These risks can be avoided by giving a clear direction to the paying banker regarding the person to whom the cheque is to be paid by marking out certain words on the cheque itself. This is known as crossing. “Crossing is an instruction given to the paying banker to pay the amount of the cheque through a banker only and not directly to the person presenting it at the counter.  " Such an instrument is known as a crossed cheque. The Negotiable Instruments Act, 1881, lays down the provisions regarding crossing of cheques in Sections 123-131.
Chapter 1: Types Of Crossing.
Crossing of cheques is of two types: General Crossing and Special Crossing of cheques. The Researcher shall handle both the types of crossing in this chapter.
According to Section 123 of the Negotiable Instruments Act (henceforth referred to as the NI Act), “Where a cheque bears across its face an addition of the words and company or any abbreviation thereof, between two parallel transverse lines, or two parallel transverse lines simply, either with or without the words ‘not negotiable’ that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed generally."
Thus it can be seen that for a cheque to be crossed generally, the drawing of two parallel lines is sufficient. The effect of general crossing is that such a cheque should be presented to the paying banker by any other banker. The payee cannot present himself at the counter with a cheque crossed generally. The banker then proceeds to credit the amount of the cheque to the account of either the holder of such a cheque or the payee.
According to Section 124 of the NI Act, “Where a cheque bears across its face an addition of the name of a banker, either with or without the words ‘not negotiable’, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially and to be crossed to that banker."
Thus it can be seen that for a cheque to be considered as having been crossed specially, the name of the banker had to be added across the face of the cheque. A cheque need not be cross by the drawing of two parallel lines in the case of special crossing  .
It can also be seen that there are material differences between special and general crossing of cheques. Whereas in the case of special crossing, the inclusion of the name of the banker is a must, the necessity in the case of general crossing is the drawing of two parallel lines. The special crossing of a cheque indicates that the paying banker is to honor the cheque only when the same is presented to him by the bank mentioned in the crossing. No other person can be awarded the cheque.
After a discussion of the types of crossing, it is also important to know what persons are authorized to cross a cheque. According to S. 125 of the NI Act, the following people, apart from the drawer, are authorized to cross a cheque:
The holder of a cheque is authorized to cross a cheque, either generally or specially, if the same is uncrossed. He is also entitled to cross a cheque specially if the same has been crossed generally. He can also add the words ‘non-negotiable’ in both generally and specially crossed cheques.\
The banker in whose favor a cheque is crossed specially can also cross it specially in favor of another banker or his agent for the purposes of collection. Such a crossing is known as double special crossing.
According to S. 126 of the Act, the paying banker is duty bound to make the payment on a crossed cheque in accordance with the terms of the crossing. Such has also been laid down in S. 126 of the NI Act, which says “where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker and 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."
Thus only a banker is authorized to receive the payment of a crossed cheque. The paying banker is not authorized to forward the proceeds of a crossed cheque to the payee or the holder of such a cheque. Any default by the paying banker in making the payment of a crossed cheque is punishable with liability as defined in Section 129 of the NI Act.
In addition to the above, the paying banker is also accountable to the true owner of the cheque and to the drawer of such a cheque for the following reasons:
If the paying banker makes a payment of a crossed check which is not in accordance with the wishes of the of the drawer which are conveyed through the crossing of the cheque, then the banker in question will be held liable to the true owner of the crossed cheque for any loss sustained by him as a result of such a payment. “If a crossed cheque is lost by the true owner and its finder gets it payment at the counter of the paying banker, the true owner will be entitled to recover the amount of the cheque from the person who received its payment from the bank. Whatever is the loss suffered by the true owner or are the expenses incurred by him will be reimbursed by the banker.  "
Similarly if the paying banker fails to make the payment in accordance with provisions laid down in S. 126 of the NI Act, the law shall consider it as a payment which has not been made according to the instructions of the drawer. Thus law will prevent such a banker to debit his customer’s account with the cheque amount as such a payment will be considered to have been made to the wrong person.
At this point of time it becomes imperative for the Researcher to get into a brief discussion about the concept of ‘non-negotiable’ crossing. Though non-negotiable crossing does not result in the cheque becoming non-transferrable, it still makes such a crossing lose much of a cheques negotiability, thus preventing anyone apart from the transferor of the cheque to hold a better title than the one he has. However, if such a cheque is transferred for a consideration and if such a transfer does not lead to a defect in the title held by the transferor, then such a non negotiable crossing still does not rid the cheque of its validity. Section 130 of the NI Act which deals with non-negotiable crossing says that “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 person from whom he took it had."
Chapter 2: Account Payee Crossing Of Cheques.
As the researcher has highlighted before, special crossing of a cheque makes it even more secure as a bill of exchange, as a person who does not have a valid claim will find it extremely tough to obtain such a payment. However, even this method is not foolproof. In order to ensure that a cheque will not be able to be encashed by anyone but the rightful owner of the cheque, the words “account payee" are often added to the crossing ensuring that the bank receiving such a cheque is to collect the amount only for the purposes of the payee’s account  . Making a cheque with an account payee crossing does not affect the paying banker in any way as all he has to ensure is that even though the cheque might not be collected by the payee himself, the proceeds of the same are being credited to the payee’s account.
Although the words ‘account payee’ are not mentioned in the NI Act, they are still considered to a part of the law due to highly extensive practice and usage of this custom. Another added advantage of account payee crossing is that the same does not result in a decrease in the negotiability or transferability of the cheque. Such has also been held by the Court to be the case in various matters like National Bank v. Lilke  and also in the case of A.Z. Underwood Ltd. v. Bank of Liverpool & Martins Ltd. 
It has often been noted that both non-negotiable crossing and account payee crossing help to make cheques extremely safe bills of exchange. However, sometimes a type of crossing is resorted to which can only be described as ‘non-negotiable account payee crossing’. The combination of these two forms of crossing provides two benefits for the payee of such a cheque: the non-negotiable element of the crossing makes the cheque not-negotiable thus taking away the more insecure element of negotiability of the cheque; the element of ‘account payee’ crossing then serves as a direction for the payee banker to collect the cheque from the payee only, serving as a warning of liability on the banker if he fails to do the same  .
It can be seen from the abovementioned points that crossing of a cheque, whether general or specific, serves the purposes of making the cheque safer as it makes it difficult for a person without a claim to obtain a payment on it. Of all the various methods of crossing, non-negotiable and account payee crossing are considered to be two of the most secure ones as they provide an extra layer of securities due to the reasons mentioned above by the Researcher. A cheque which is crossed as ‘non-negotiable account payee’ is considered to be the most advantageous method of crossing a cheque as it makes it operation even more foolproof.
The RBI, in a circular issued by it to the banks has laid down certain rules regarding the crossing of cheques as “Account Payee". They are  :
The proceeds of an account payee cheque cannot be credited to any party other than the one which is clearly highlighted in the instructions provided by the issuer of the cheque as such would amount to an unauthorized act on the part of the payee banker.
“If any bank credits the account of a constituent who is not the payee named in the cheque without proper mandate of the drawer, it would do so at its own risk and would be responsible for the unauthorized payment. Reserve Bank has also warned that banks which indulge in any deviation from the above instructions would invite severe penal action.  "
In cases where the bank serves as the payee of an ‘account payee’ cheque, it is the duty of the payee bank to ensure that there exists concrete instructions regarding the handling of the proceeds of the said cheque as provided by the drawer of the same. If such are not provided for by the drawer, the cheque in question should be returned to him.