Negotiable Instruments Act: The rules related to bank check which do not know 90% of the people, when to write ‘Not Negotiable’?

News India Live, Digital Desk: Do you know that when you give a check to someone and write ‘A/C Payee only’ on it, you think that now this check will be deposited in the account of the same person and no other will be able to cash it? It is true that this check will be deposited only in the account of the designated person, but there is a very fine mistake in it, which is very important to know.

There is a rule related to bank check, which 90% of people do not know and this is why many times they also become a victim of fraud. According to an important decision of the Indian law and the Supreme Court, the ‘Account Payy’ check can be endored (transferred)!

What is this special rule?

According to Section 130 of the Negotiable Instrument Act, 1881, if you write only ‘Account Payee’ on a check, it only means that the only check will be paid to the bank account of the designated person. However, this does not prevent the check holder from endoring a third person. That is, the person who has received the check can give it to someone else and that third person can also deposit it in his account.

Then what is the benefit of ‘Account Payee’?

‘Account Paye’ ensures that the money goes directly to the bank account, not cash. But it does not stop further transfer.

How to make the check completely safe?

If you want your check not to transfer further at any cost, that is, it is completely non-transferable, then writing ‘Account Payee’ as well as on check ‘Not negotiable’ Or ‘Not Transferable’ It is also important to write.

Why is this important?

Indian law says that by adding the word ‘not negotiated’, the person who gets a check cannot get better ownership from the person who has transferred him.

Understand in simple words:

• Only ‘Account Payee’ written check: ‘A’ gave a check to ‘B’. If ‘B’ wants, it can endorse ‘C’ and ‘c’ can deposit it in its account.

• ‘Not Negotable’ with ‘Account Payee’ wrote check: ‘A’ gave a check to ‘B’. ‘B’ can endors it to ‘C’, but if ‘B’ had taken this check in some wrong way, ‘C’ cannot claim that check, because ‘C’ will not get better ownership of ‘B’. This protects the check -by -drawer from potential fraud.

Therefore, next time you release a check, especially of a large amount, take care of this rule and do not forget to write ‘not negotiated’ for your safety.

JEE Advanced 2025 Toppers List Released: Rajit Gupta achieved All India Rank 1