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. 

That's all for now friends. In our next post we shall discuss about the characters of cheques and the differences between cheques and bill of exchanges. Happy Reading :)