CHEQUE

                                             CHEQUE

                     Section 6 of Negotiable Instrument Act, 1881 defines a cheque as "a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand"

                     Section 5 of the Act defines a bill of exchange as "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 bearer of the instrument'

                     Section 6 of Negotiable Instruments(Amendment) Act 2002, defines a cheque as follows;"A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form."

                    A cheque in the electronic form means a cheque which contains the exact mirror image of a paper cheque. A truncated cheque can be encashed only through a clearing house or through a bank.

Requisite of a cheque

       From the above definition, cheque must have the following characteristics;
1) Cheque must be in writing; A cheque must be an instrument in writing . Cheque should be drawn in the proper form. The proper form is the cheque supplied by the bank. Bankers prefer pen to pencil for drawing cheque.

2) Cheque must be an unconditional order; A cheque should not contain any condition. The banker or customer can not attach any condition before making the payment of the cheque. Further, cheque ia an order made by the customer directing the banker to pay a certain sum of money. In the cheque, the word;"Please Pay", never be used.

3) Cheque must be drawn on a bank; Cheque should be drawn on a bank, where the drawer has bank account.

4) Cheque should be signed by the drawer; In order to encash cheque, it should be signed by the drawer, who has sufficient balance with the bank. Unsigned cheque will not be paid.

5) Cheque is an order given by the customer directing the banker to pay a fixed sum of money. Bank deals with money only . The banker can not be directed to pay anything other than money.

6) The payee must be certain; The payee is the person to whom the amount of the cheque is made payable. A cheque can be made payable to a particular person or to his order to the bearer.

7) Cheque should be made payable on demand; The banker has to make the payment of a cheque, as and when it is demanded by the customer by presenting it before the bank for payment. The bank has no right to postpone of a valid cheque.

Parties of Cheque

  Three parties are involved in cheque transaction. They are;
a) Drawer ; Drawer is the person who draws the cheque and he is the person who is signing the cheque, and has money deposited with the bank.

b) Drawee ; Drawee willalways be the bank where the drawer has bank account or to which bank the cheque is addressed.

c) Pyee ; Payee is the person to whom the amount of the cheque is made payable. Payee may be either the drawer himself or the payee named in the cheque or payee's order or the bearer of the cheque.

Kinds of Cheque

  Cheque is classified mainly into two types. They are;
a) Bearer cheque; Bearer cheque is a cheque which need not necessarily contain the name of the payee, to whom the amount of the cheque is made payable. Bearer cheque can be encashed by any person who bears or holds the cheque.

b) Order cheque; Order cheque must contain the name of the payee to whom the amount of the cheque is made payable.

Printed forms of cheque

     Cheque drawn on ordinary pieces of paper are legally valid. But, now a days, bank,insist on printed forms of cheques. For this purpose banks give cheque books to their customers.

Advabtages of printed forms of cheques

 a) It is very convenient to the drawer to draw cheques. He need only to fill the blanks and put his signature.
b) Alteration of a printed cheque is difficult. If it is altered, it can be found out easily.
c) The serial numbers of cheque leaves issued by the bank to customers are noted i their accounts. This minimises the possibility of forging cheques.
d) If the drawer wants to stop payment of a cheque he has issued, it can be done easily by intimating the bank the serial number of the cheque.

Drawings of a cheque

   The cheque must be properly filled and signed by the drawer. Then it must be handed over to the payee. Before issuing a cheque the drawer must consider the following points to avoid subsequent dishonour of the cheque.
1) Adequency of fund ; A cheque will be honoured by the bank only when there is sufficient balance in the account of the drawer. So the drawer must verify the same before issuing a cheque.
2) Dating of a cheque ; Before issuing a cheque, the drawer must put the date on the cheque. If the cheque is not dated, the bank may return it unpaid. The person who presents the cheque can insert the date on it before presentation. The date shown on the cheque is taken as the date of issue of the cheque. But the drawer can put any date on the cheque including a holiday. Thus a cheque may be antedated or post dated.
Antedated cheque ; If a cheque bears a date earlier than the date of issue, it is called an antedated cheque. For example, if a cheque issued on 15 th June 2007 with a date of 1st may 2007 it is an antedated cheque. Such cheque are valid if presented within six months of the date of the cheque.
Post dated cheque ; A cheque which bears a date subsequent to the date of issue is called a postdated cheque. For example, a cheque which is issued on 20th june 2007 if dated as 10 th july 2007, it is a post dated cheque. such a cheque is payable only on or after the date specified in the cheque.
Stale cheque ; A cheque has a validity of six months from the date of cheque. A cheque in circulation for more than six months of its issue is called a state cheque in India . It is an out dated cheque and banks will not honour such cheque. Example , if a cheque dated 1st january 2007 is not presented for payment on or before 1st july 2007, it will be considered as a a state cheque.
3)Amount of the cheque ; The amount payable on a cheque should be written both in words and figures. There should not be any discrepancy between the amount in figures and words.If the amount written in figures and words vary, the cheque will not be paid by the banker.
4)Drawers signature ; The drawer must sign the cheque before presenting it before the bank. A cheque without drawer's signature is invalid. The signature can be put by using pen and not by pencil or rubber stamp. The signature given in the cheque should tally with the specimen signature given to the bank at the time of opening the account. If the drawer is an illitrate person, he can give his thumb impression in place of signature.
        All alterations made in the cheque like overwriting and alteration of date, amount etc. must be confirmed by the full signature of the drawer. Banks will not honour cheque which contain unauthorised alterations.

Marked cheques

  A cheque is said to be marked when the paying banker initials the cheque with the words ' marked good for payment'. This is usually done at the request of the drawer. By marking a cheque, the paying banker guarantees the genuineness of the cheque and undertakes to pay it. A marked cheque is to be paid by the bank even if unforeseen incident like death, insolvency etc. of the drawer. Therefore, the paying banker set aside the required amount for the payment of such cheques from the accounts of the drawer. Usually unknown parties insist on a marked cheque when they accept a cheque in payment of dues.