Cheque - A Brief Introduction and Requisites

Sec.6 of the Negotiable Instruments Act defines a cheque as "A bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than on demand". A cheque is defined as a bill of
exchange. But it is different from a bill in many aspects. Chalmer rightly points out that, "All cheques are
bills of exchanges but all bills of exchanges are not cheques".
Dr. Hard, in his Law of Banking defines a cheque as "an unconditional order in writing drawn on a
banker signed by the drawer, requiring the banker to pay on demand a sum of certain in money to or to
the order of a specified person or bearer and which does not order any act to be done in addition to the
payment of money".
Simple Definition :In simple words we can say that "A Cheque is an order to a bank to pay a stated sum
from the drawer's account, written on a specially printed form"
A cheque is also a bill of exchange with two additional features :
1. It is always drawn on a specified banker.
2. It is always payable on demand.
Here is a specimen of MICR Cheque
Requisites of Cheque :
1. Form of the Cheque : A cheque can take the form of an order written on an ordinary piece of
paper. But generally the banks will supply printed cheque forms to the customer while opening the
account and the customers as a rule must use only the printed cheque forms supplied only as that
rule, if the order is made on piece of paper the bank will refuse payment.
2. Issue of Cheque : A cheque is said to be issued when the drawer parts it to another person. The
issue of cheque is very important because the drawer is not liable on a cheque until he has issued
it. Even if drawer is induced by fraud, it is deemed to be duly issued.
3. Dating of Cheque : A cheque is not invalid simply because it is not dated. But dating of a cheque
is essential to find whether it is stale cheque or not. A stale cheque is one which is not presented
for payment before three months from the date of issue of cheque.
4. Payee : Where the cheque is payable to or order, it is essential to mention the name of the payee.
If the drawer has not mentioned the payee's name, any holder of the cheque can insert the payee's
name. Bank will dishonor a cheque presented without the name of the payee.
5. Amount of the cheque : Amount of the cheque is to be stated clearly both in words and figures
without leaving any space before and after teh amount stated to avoid any alteration of the amount.
6. Signature : The cheque must be properly signed by the drawer and it should tally with the
specimen signature signed at the time of the opening account. If the drawer is illiterate, cheques
can be drawn by; means of the thumb impression duly witnessed by a person known by the
banker.
7. Delivery : Unless the cheque is properly delivered, the drawer does not become liable there on.
Hence to make drawer liable, he must have delivered the cheque complete in all respects to the
payee, with the intention that the amount is payable to payee or to his order.

Characteristics / Features of a Cheque

12:05 PM Banking Awareness 2 comments
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Friends, in our last post we have discussed about the introduction of Cheque. In this post we shall discuss
some features / characteristics of a Cheque.
1. Instrument in writing : A cheque must be necessarily in writing. Oral orders to the bank to pay
some money do not constitute a cheque.
2. Contains an Unconditional Order : A cheque is an order to a particular bank to pay a particular
sum of money. It should not contain any words of request like "please" or "kindly". It is also not
necessary that the words 'order' must form a part of the writing because the word 'pay' itself
denotes an order. The order must be unconditional. Any conditional order does not constitute a
cheque.
3. Drawn on a Specified Banker : A cheque is always drawn on a particular banker only. Generally
the full name and address of the bank is printed on the cheque. The cheque is encashable at the
bank on which it is drawn. Even a cheque drawn on a particular branch cannot be encashed at
another branch of the same bank unless there is an agreement between the parties.
4. Payee to be certain : To be a valid cheque, it must be payable to a certain specified person or to
his agent or the bearer there off. Sir John Paget rightly pointed out in this regard that, "A normal
cheque is one in which there is a drawer, a drawee banker and a payee or no "payee but bearer."
5. Order to Pay a Certain sum of Money " A cheque is usually drawn for a definite sum of money.
Indefiniteness has no place in monetary transactions. That is the modern bankers insist on writing
the amount both in fugures and words.
6. Payable on Demand only : A cheque is always payable only on demand. It is not necessary to use
the word 'on demand' as in the case of demand bill. As per Sec. 19 of the Negotiable Instruments
Act, unless a time factor is specified by the drawer, the cheque is alwayas payable on demand.
7. Signed by the Drawer : To be valid, a cheque should be signed by a customer who draws it. The
drawer normally puts his signature at the bottom right hand corner of the cheque. When this
signature differs from the specimen signature, the cheque will be dishonored.

Difference between a Bill of Exchange and

Cheques
3:59 PM Banking Awareness 2 comments
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Friends, so far we have discussed about Bill of Exchanges and Cheques. As we have already mentioned,
even though a cheque is similar to Bill of Exchange still they have some differences. Have a look,
1. Drawee :
1. Cheque : The drawee of a cheque is always a Bank.
2. Bills of Exchange : Any one can be drawee in the case of Bill of Exchange.
2. Form :
1. Cheque : A cheque is always drawn on a printed form.
2. Bills of Exchange : A bill need not be drawn on a printed form.
3. Acceptance :
1. Cheque : The drawee (banker) need not accept a cheque.
2. Bills of Exchange : Acceptance by the drawee is essential.
4. Supposition :
1. Cheque : A cheque is always supposed to be drawn against the funds in the hands of the
banker.
2. Bills of Exchange : There is no such supposition.
5. Time of Payment :
1. Cheque : A cheque is an instrument for immediate payment.

2. Bills of Exchange : It is drawn for a specified period and so it is intended for circulation.
Therefore it is entitled to days of grace.
6. Period of Liability :
1. Cheque : The liability of the drawer continues for 6 months.
2. Bills of Exchange :Unreasonable delay in the presentation will discharge the bill.
7. Stamp Duty :
1. Cheque : A cheque is free from stamp duty.
2. Bills of Exchange : A bill is subject to stamp duty.
8. Sets :
1. Cheque : It is not drawn in sets.
2. Bills of Exchange :Foreign bills are always drawn in sets.
9. Crossing :
1. Cheque : It may be crossed to ensure safety.
2. Bills of Exchange : It cannot be crossed.
10.
Countermanding :
1. Cheque : A cheque may countermanded.
2. Bills of Exchange : Countermanding of a bill is not possible.
11.
Protest :
1. Cheque : It is not protested or noted on dishonor.
2. Bills of Exchange : It is usually protested and noted for dishonor.
12.
Notice of Dishonor :
1. Cheque : In case of dishonor, notice of dishonor to the drawer is not essential.
2. Bills of Exchange : Notice of dishonor must be sent to hold the party liable.
13.
Statutory Protection :
1. Cheque : Statutory Protection as given under Sec. 85 and Sec. 131 of the Negotiable
Instruments Act applies only to cheques.
Bills of Exchange :Statutory protection is not available in the case of bills