Negotiable Instruments Act Section 85 — Cheque payable to order
CHAPTER VII OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES
General
Summary
If a cheque says it is payable to a specific person (pay to order), and it appears to be signed over by that person or someone acting for them, the bank that pays it is released from its obligation once it makes the payment properly. If a cheque is originally made out to the bearer (meaning it is payable to whoever holds it), the bank is also released from its obligation by paying the person holding the cheque, even if there are signatures on the back, and even if those signatures try to restrict who can cash it next.
Official Text
3[(1)] Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course. 4[
(2) Where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer thereof, notwithstanding any endorsement whether in full or in blank appearing thereon, and notwithstanding that any such endorsement purports to restrict or exclude further negotiation.] 5