Cheque

Cheque

Definition of a Cheque

"Cheque is an instrument in writing containing an unconditional order, addressed to a banker, sign by the person who has deposited money with the banker, requiring him to pay on demand a certain sum of money only to or to the order of certain person or to the bearer of instrument."

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. If the amount is written in words only and NOT in figure than NO payment will be made because it would be Inchoate (incomplete).

 Types of Cheques 

1.      Bearer Cheque

When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to the bank for payment. However, such cheques are risky; this is because if such cheques are lost, the finder of the cheque can collect payment from the bank.

2.      Order Cheque

A cheque which is paid to a named person with the words 'or order' after the payee's name, showing that he or she can endorse it and pass it to someone else if desired.

3.      Uncrossed / Open Cheque

When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque". The payment of such a cheque can be obtained at the counter of the bank. An open cheque may be a bearer cheque or an order one.

4.      Crossed Cheque 

Crossed Cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed. A common instruction is to specify that it must be deposited directly into an account with a bank and not immediately cashed by a bank over the counter.

5.      Ante Dated Cheque

A cheque bearing a date prior to actual date of signing the cheque or opening of an account is called an ante dated cheque which is valid and can be paid till it become stale. Such a cheque is valid upto three months from the date of the cheque.

6.      Post-dated cheque 

If a cheque bears a date which is yet to come (future date) then it is known as post-dated cheque. A post dated cheque cannot be honoured earlier than the date on the cheque.

7.      Stale Cheque

If a cheque is presented for payment after three months from the date of the cheque it is called stale cheque. A stale cheque is not honoured by the bank.