Cheque

A cheque is a bill of exchange in which one party (Drawee) is a Bank. So a Drawer (account Holder) draws the Cheque on the (Drawee bank) in the name of a Payee.

• The Drawer has to write the amount in both in figures and words.
• If different values are written in Figures and words, the value of words can be paid as per section 18 NI act. This means that if a person writes a check with the following :

• Figures :             Rs. 5000
• Words:                 Rupees Five Lakh Only
• This means that amount of Five lakhs is to be paid.
• If the amount is written in words only and NOT in figure than NO payment will be made because it would be Inchoate. This means that a person writes a check with the following:
  • Figures:             _________ (Left Blank)
  • Words:                 Rupees Five Lakh Only
  • No payment would be made (Section 20 NI Act)

Bearer Cheque

Bearer cheque is payable to the bearer. Sometimes “Self” is written, that is also a bearer cheque payable to the account holder.

Dating in Cheque

• If a check does not bear a date, it will be returned.
• The holder / bearer can fill a date , if there is no date written
• If the date filled is a holiday, it can be paid only after that Holiday.
• If a person opens an account on November 10, 2010 and gives a check to somebody with date say October 25, 2010, then it is Valid and will be paid. This is called “Ante dated Cheque”.
• Normal validity is 3 months but can be restricted by the account holder.
• The check older than 3 months is called Stale Cheque and is NOT paid and will be returned.
• After the state Cheque is returned , it can be revalidated for any number of times J and each time it becomes valid for next 3 months.
• A post dated check can bear any date of future and the payment can be stopped.

Crossing of Cheque

Crossing provides an additional security. Crossing means that sum of that cheque can only recovered from a specified banker and it will be credited to the holders account. The crossed cheques are not paid at the counter. Crossing is applicable in case of cheques only and not in case of Bill of Exchange or promissory notes.

• Crossing may be General crossing or Special crossing. General crossing (NI Act Section 123) is where a cheque bears two parallel lines with words such as a/c payee etc.
• In Special crossing (NI Act Section 124) the cheque bears the name of the banker also. Section 126 directs that such cheques shall be paid to the banker to whom it is crossed specially or to his agent for collection.