Meaning of Cheque

A cheque may be regarded as a bill of exchange; the only difference is that the bank is always the drawee in case of a cheque. The Bill of Exchange Act defines a cheque as “A bill of exchange drawn on a banker payable on demand.”

From the above definition it appears that a cheque is an instrument in writing, containing an unconditional order, signed by the maker, directing a specified banker to pay, on demand, a certain sum of money only to, to the order of, a certain person or to the bearer of the instrument. The person who draws a cheque is called the ‘drawer’. The banker on whom it is drawn is the ‘drawee’ and the person in whose favor it is drawn is the ‘payee’. Actually, a cheque is an order by the account holder of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer.

Features of Cheque

The essential requisites of cheque are as follows:

Must be in Writing – The cheque may be written in hand by using ink or ballpoint pen, typed or even it may be printed. But the customer should not use pencil to fill up the cheque form. Even though other columns may be permitted to be written in hand or printed or typed, the signatures should be made by ink pen or ballpoint pen by the maker.

Must be Unconditional – The order to pay the amount must be unconditional. If there is any condition imposed to pay the amount to the holder of the cheque then it will not be considered as a cheque. A cheque made payable on the happening of a contingent event is void ab-initio.

Must be Drawn on a Specified Banker – For the validity of a Cheque it must be drawn on a specified banker. If there is not mentioned in the cheque about the banker it would not be a valid cheque. In addition to it, it must contain all the three parties i.e. Drawer, Drawee and Payee.

Certain Sum of Money – It is one of the essential requirement of the Cheque that it must be payable in money and money only. If is not in term of money then it will be a valid one. The sum mentioned in it must be certain.

Certain Payee – The parties of the Cheque must be certain. There are three parties of the cheque i.e. Drawer, Drawer and Payee. In a valid Cheque the name of the must contain in other words they must be certain. It must contain an order, which must be unconditional. If any condition were imposed then it would not be a valid cheque.

Date – In a valid cheque it must be signed by the drawer with date otherwise it would not be a valid cheque. It must be written in hand by using ink or ball point pen, typed or even it may be printed as it becomes conclusive proof i.e. presumption under Section 118(b) unless contrary is proved.

Types of Cheques

1. Bearer Cheque: When the words “or bearer” appearing on the face of the cheque are not cancelled, the cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to the bank for payment. However, such cheques are risky, this is because if such cheques are lost, the finder of the cheque can collect payment from the bank.

2. Order Cheque: When the word “bearer” appearing on the face of a cheque is cancelled and when in its place the word “or order” is written on the face of the cheque, the cheque is called an order cheque. Such a cheque is payable to the person specified therein as the payee, or to any one else to whom it is endorsed (transferred)…

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SS1 Business Administration Third Term: Cheque – meaning and features of cheque