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Negotiable Instrument Act, 1881

Q. Define the term ‘Cheque’ and explain its essentials.

Ans: A Cheque is a special type of Bill of Exchange. It is drawn on banker and is required to be made payable on demand.

A "cheque” is defines as "a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.” [Section 6]

‘Cheque’ includes electronic image of a truncated cheque and a cheque in electronic form. The definition is amended by Amendment Act, 2002, making provision for electronic submission and clearance of cheque. The cheque is one form of Bill of Exchange. It is addressed to Banker. It cannot be made payable after some days. It must be made payable ‘on demand’.

The essentials of a Cheque are :-

1.      Essentials of Bill of Exchange – As a cheque is a bill of exchange, it must contain the essentials of a bill of exchange. In addition there are few more essentials as below.

2.      Drawn on a specified banker – The drawee in case of a cheque is always a specified banker.

3.      Payable on demand – The cheque is always payable on demand.

4.      No Stamp – A Cheque does not require a stamp.

5.      Acceptance – No acceptance is necessary by the draw before the demand for payment.

6.      Payable to bearer – A cheque can be made payable to bearer.


Q. When a banker is justified in dishonouring the cheque?

Ans: The banker is justified in dishonouring the customer’s cheques in the following cases :-

1.      The signature of the drawer on the cheque does not match with the speciment signature in the records of the Bank.

2.      Funds are not properly applicable to the payment of cheque. For eg. Funds are subject to lien, or banker is entitled to set-off.

3.      Customer becomes insolvent.

4.      Death, lunacy or insolvency of the customer and the banker has notice of the same.

5.      Cheque presented beyond a period of 6 months from the date of issue.

6.      If the banker is not holding sufficient funds of the drawer, unless the banker has agreed to honour the cheque without sufficient funds.

7.      If the customer countermands payment and communicates the same to the bank properly.

8.      Holder gives notice to the banker of loss of cheque.

9.      If the cheque is not presented within the usual banking hours.

10. Where the cheque is drawn on another branch office of the same bank where the customer does not have an account.

11. Where a garnishee order has been issued by the Court attaching customer’s balance. 

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