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CHEQUE

CHEQUESBy

NEELESH


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Cheque As An Negotiable Instrument

The Negotiable Instruments 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.

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.


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Speciman of cheque


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Features of cheques

A cheque must be in writing and duly signed bythe drawer.

It contains an unconditional order.

It is issued on a specified banker only.

The amount specified is always certain and mustbe clearly mentioned both in figures and words.

The payee is always certain.

It is always payable on demand. The cheque must bear a date otherwise it is

invalid and shall not be honoured by the bank.


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Types of cheques

Open cheque - 1.cash receives on the counter

2.Can deposit on his own account

3.Can pass it to someone else

Crossed cheque-1.cash cant receive on counter

2.Credited on the account of payee

Bearer cheque - 1.payable to any person over thecounter

2. Requires no endorsement

Order cheque - 1.payable to perticular person only

2. The word order is written on the

cheque


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Types of crossing of cheques

General Crossing-only crossed lines are made

Special Crossing-crossed with the name of the person

Account Payee-for crediting the amount in the account ofthe payee

Not Negotiable Crossing-The words 'Not Negotiable'can be added to General as well as Special crossing and a

crossing with these words is known as Not Negotiable crossing.

2.it removes the most important characteristic of a negotiableinstrument i.e. the transferee of such a crossed cheque cannot

get a better title than that of the transferor (cannot become a

holder in due course) and cannot convey a better title to his

own transferee, though the instrument remains transferable.


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When the banker MAY dishonour

customers cheque

The banker does not have sufficient funds

The cheque is of doubtful legality

The cheque is mutilated or torn

The cheque is irrgular or materially altered

The cheque is post dated

The cheque is stale


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Customers signature do not agree with specimen

signature

The cheque is presented other than the one

branch where customer has account

The account is in the joint name and all of them

has not signed

Where the banker has a claim for a set off on the

funds of the customers and the cheque for anamount in excess of the balance over the claim


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When banker must dishonour

customers cheque

The instructions regarding stop paymentshould be honoured only if it is in writing,signed by the drawer, mentions the details ofthe cheque

Cheques presented after the death of thecustomer

Person being declared insolvent

Cheques drawn and received after the receiptof a notice of the customers insanity


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Garnishee order is absolute

Cheque presented after the receipt of a noticeof assignment of the customers credit balance

If banker thinks trustee is using amount for

personal useBanker receives notice to close the account

Banker is under an obligation to make

payment to the holder, if banker feels that theperson is not entitled to receive the paymentthereon he must refuse to pay


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