The Salient Features of a Cheque

 The Salient Features of a Cheque

Cheque

A cheque is a document of great importance in the business world. It can be passed from one hand to another easily and so it has become a popular mode of payment. A cheque is the most economical and safe method of money transaction because the transfer cost is very low and also the possibility of loss is minimum.

According to section 6 of the N.I. Act, 1881 “a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.”

 The Salient Features of a Cheque:

  1. Instrument in writing: a cheque must necessarily be an instrument in writing.
  2. An unconditional order: a cheque is an order to pay and it is not a request. The order must be unconditional. If any condition is attached to the order, the instrument can no longer be called a cheque.
  3. On a specified banker:- a cheque is always drawn only on a particular banker. A cheque drawn on a particular branch of a particular bank can’t be encashed at another branch of the same bank unless there is an agreement between the parties.
  4. Payee to be certain: a cheque must be payable to the order of a certain specified person or to his agent or bearer thereof. The payee is the person to whom the amount of the cheque is payable. So, the payee must be a certain person. He may be a human being or an artificial person i.e. a company.
  5. A certain sum of money: a cheque is usually drawn for a definite sum of money, which is to be written both in words and figure.

If there is any difference between the amount in figures and words the banker can return the cheque, since, the amount is not certain. However, see. 18 of the N.I.A. permit the banker to honor the cheque to the extent of the amount stated in words.

  1. Payable on demand: a cheque is payable only on demand. As per section 19 of the N.I.A 1881 unless a time factor is specified by the drawer, the cheque is always payable on demand.
  2. To be signed by the drawer: a cheque must be signed by the drawer i.e., the account holder or his authorized agent.

Difference between a Cheque and a bill of exchange:

The distinguishing features of a Cheque and a bill of exchange are as follows:

The Salient Features of a Cheque

Cheque

Bill of exchange

  1. A cheque is always drawn on a printed form.
  2. A bill need not be drawn on a printed form.
  3. The drawee (banker) need not accept a cheque.
  4. Acceptance by the drawee is essential.
  5. A cheque is always supposed to be drawn against the funds in the hands of the banker.
  6. There is no such supposition.
  7. A cheque is an instrument for immediate payment.
  8. It is drawn for a specified period and so it is intended for circulation. Therefore, it is entitled to days of grace.
  9. The liability of the drawer usually continues for 6 months.
  10. Unreasonable delay in the presentation will discharge the bill.
  11. A cheque is free from stamp duty.
  1. A bill is subject to Ad-Valorem stamp duty
  2. It is not drawn in sets.
  3. Foreign bills are always drawn in sets
  4. It may be crossed to ensure safety.
  5. It cannot be crossed
  6. A cheque may be countermanded.
  7. Countermanding of a bill is not possible.
  8. It is not protested or noted on dishonor.
  9. It is usually protested and noted for dishonor.
  10. In case of dishonor, notice of dishonor to the drawer is not essential.
  11. Notice of dishonor must be sent to hold the party liable.
  12. Statutory protection as given under Sec. 85 and Sec. 131 of the Negotiable Instruments Act applies only to cheque.
  13. Statutory protection is not available in the case of bills.

The Salient Features of a Cheque

Basically a cheque is a bill of exchange with two additional qualifications:

(a) It is always drawn on a specified banker.

(b) It is always payable on demand.

Difference between a Cheque and a bill of exchange:

The distinguishing features of a Cheque and a bill of exchange are as follows:

Cheque

Bill of exchange

1. A cheque is always drawn on a printed form.

1. A bill need not be drawn on a printed form.

2. The drawee (banker) need not accept a cheque.

2. Acceptance by the drawee is essential.

3. A cheque is always supposed to be drawn against the funds in the hands of the banker.

3. There is no such supposition.

4. A cheque is an instrument for immediate payment.

4. It is drawn for a specified period and so it is intended for circulation. Therefore, it is entitled to days of grace.

5. The liability of the drawer usually continues for 6 months.

5. Unreasonable delay in the presentation will discharge the bill.

6. A cheque is free from stamp duty.

6. A bill is subject to Ad-Valorem stamp duty

7. It is not drawn in sets.

7. Foreign bills are always drawn in sets

8. It may be crossed to ensure safety.

8. It cannot be crossed

9. A cheque may be countermanded.

9. Countermanding of a bill is not possible.

10. It is not protested or noted on dishonor.

10. It is usually protested and noted for dishonor.

11. In case of dishonor, notice of dishonor to the drawer is not essential.

11. Notice of dishonor must be sent to hold the party liable.

12. Statutory protection as given under Sec. 85 and Sec. 131 of the Negotiable Instruments Act applies only to cheque.

12. Statutory protection is not available in the case of bills.

Basically a cheque is a bill of exchange with two additional qualifications:

(a) It is always drawn on a specified banker.

(b) It is always payable on demand.

 

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