In simple words we can say that crossing is a kind of protection and safety of the cheque amount for the account holder as well as to the person to whom it is actually given or intended to be given.
A cheque is called a 'Negotiable Instrument'. In simple sense it means that it can be taken and transferred freely by one person to another straightaway or by simple endorsement(signing on the back side). That is why we get cash for the cheque across the bank counters, even if we go ourselves, send our son or servant or any other person.
However when a cheque is 'crossed' it means different. For bankers, 'Negotiable Instruments Act' is the base for their dealings with cheques Demand drafts etc.
The NI Act under section 123 says about crossing. It is just two parallel transverse lines drawn on the face of the cheque. Practically, to avoid defacing what is written on the cheque the crossing is done on the blank corner of the cheque. As allowed by the Act, there was a practice to add '& Co" between the crossed lines. Now people just cross a cheque by drawing the two parallel lines
Crossed cheque means it cannot be given cash across the counter. A crossed cheque can be given to a banker only. It can be transferred from the drawer's account to the payee's account if both are in same bank. If they are in different banks, then the payee's bank should 'collect' it from the drawer's bank via permitted procedures like interbank clearing, collection etc.
A more specific crossing is 'Account payee crossing'. That is by writing words 'account payee within the crossing lines. It specifically means that the proceeds of the cheque should go only to the account of the payee whose name is written on the cheque.
Crossing helps to trace who received the money. Account payee crossing helps us in maters where disputes take place after money is paid and also acts as proof in court cases of making payment . It also helps to avoid suppression of financial transactions by avoiding cash over counter method.
If a cheque is not crossed, and the cheque is lost(but not informed to the bank and stopped), then anyone who gets the cheque can encash it. But when a crossed cheque is presented to a bank, direct cash is not given and the amount is credited to the person's account, after identifying him by the name on the cheque or by the endorsement.
If our intention is to create a record of payment and avoid direct cash payment, but want the money to be credited to the account of the person or firm in whose name cheque is given, then we have to cut the words 'bearer' in the cheque and cross the cheque with words 'account payee.
Crossing is also very significant to the bankers and their interbank dealings, as it decides the relative position and responsibility and liability of the concerned bankers.