Cheques

‘A cheque is a bill of exchange, drawn on a specified banker, and not expressed to be payable otherwise than on demand”. (section 6 of NI Act). This means that a cheque is an instrument that is exclusive to the banking system and no other institution is empowered to operate a cheque system, A cheque has three parties. The drawer is the account holder signing the cheque drawee is always the bank (branch, where the account holder maintains his account) and the payee is the beneficiary who will receive the amount, mentioned in the cheque. Other features of a cheque may be described as follows.

(i) In writing : A cheque should be in writing (by ink pen or ball point pen, or typed, but not in pencil as the writing can be easily erased or altered). A cheque can be written by another person, and not necessarily by the drawer only.

(ii) Drawer’s signature: The cheque has to be signed in ink, by the account holder, as per the specimen signature on record with the bank branch. If the signature of the drawer differs materially, the cheque may be returned by the banker, to protect the customer’s interest from possible forgery.

(iii) Date of cheque: A cheque has to be dated, as date constitutes a material element of a cheque. A holder of an undated cheque may fill in the date while presenting it for payment. A post-dated cheque cannot be paid before its due date. An ante-dated cheque (i.e. date prior to the presentment) may be paid, provided more than six months have not elapsed from the date of the cheque. As per the banking practice in India, a cheque presented after the expiry of 6 months from its written date (called a stale cheque), cannot be paid unless it is revalidated by the drawer under his signature.

(iv) Amount of cheque: In the printed cheque forms of all banks, there two spaces for writing the amount of the cheque - in figure and also in words. While both these requirements have not been laid down in law, it has become a banking practice not to pay a cheque written only in figures, as the amount written only in figures can be easily altered by the holder or any other person. However, a banker can pay a cheque written only in words or where the amount in words and figures mutually differs, after consulting the drawer, who can later remove the deficiency.