Definition of a Cheque

A cheque is defined in section 6 of Negotiable Instruments acts 1881 which provides that,

“A cheque is a bill of exchange, drawn on a specified banker and expressed to be payable otherwise than on demand”.

The electronic image of a truncated cheque and a cheque in the electronic form (e-cheque) are also termed as ‘cheque’ after coming into force of The Negotiable Instruments (Amendment And Miscellaneous Provisions) Act, 2002.

A cheque has three principal parties viz. Drawer; Drawee and Payee.

The drawer is the person who issues (draws) the cheque.

The drawee is the paying bank whose name and address is printed on the cheque. The drawee makes payment when the cheque is presented for payment.

Payee is the person whose name is written on the cheque. The payee is entitled to receive amount mentioned in the cheque.

The meaning of ‘Bearer Cheque’: Bearer cheque means a person in possession of a cheque which is payable by the drawee bank to the bearer of the cheque.

The meaning of ‘Order cheque’: ‘Order cheque’ means the payment of that cheque will be made by the bank only to ‘Payee’ or to a person to whom payee has endorsed to collect the payment and not to the bearer. The endorsement (indorsement) shall be on the instrument itself.

The meaning of crossed cheque: When simply two parallel transverse lines either with or without any words appearing on the face of a cheque, that cheque is called crossed cheque. Normally cheques are crossed on left top corner of a cheque, because such crossing is prominently visible to whosoever handles it. The crossing of cheques can be classified as 1.General crossing, 2.Special crossing.

Unlike open cheque (uncrossed cheque), the proceeds of crossed cheque shall be credited only to the bank account of the payee or the holder in due course of the cheque. The Special or Restrictive Crossing on a cheque means the banker name is written in the crossing, where the payment of the cheque can be made only to the banker to whom it is crossed.

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1. Definition of a Cheque

2. Definition of bill of exchange

3. Definition of Promissory Note

4. Definition of Usance Bills
5. Difference between a bill of exchange and a Cheque

6. Difference between Bills of Exchange and Promissory Note

7. Difference between Hundi and Hawala

8. Varieties of Bills of Exchange used in trade

9. What is a negotiable instrument?

10. Who are the parties to a negotiable instrument?