Cheques and its types in Negotiable Instrument Act, 1881

A cheque is an unconditional order addressed to a banker, signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of the certain person or to the bearer of the instrument.

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Bearer Cheque

A cheque that is payable to a person whosoever bears is called a bearer cheque.

• The cheque sometimes can be made payable to “Cash” or bearer or made payable to a specific name, for example, “bujji Sekhar or Bearer”.
• This cheque is payable by the drawee bank over the counter to the Bearer or presenter of the cheque.
• A Bearer cheque can be negotiated or passed to another person by mere delivery. In other words, the holder (or the Transferer), when giving it to another person need not endorse the cheque.
• No identification is needed when a bearer cheque is presented for encashment. However, in normal banking practice, where the amount of the cheque is substantial, the identity of the encasher is insisted on.
• A bearer cheque can be collected by the bank for credit to anyone’s account
• In banking practice, the need for the encasher’s signature on the back of the cheque is merely to evidence that the encasher has received the money from the bank.

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Order Cheque:

A cheque that is payable to a particular person or his order is called an order cheque.

• This is a cheque whereby the printed word “Bearer” on the cheque is cancelled. The cancellation of the word “Bearer” automatically makes the cheque an “order” cheque.
• An order cheque can be paid to the named payee across the bank’s account if so presented.
• Identification must be insisted on by the bank when encashing the order cheque for the presenter. The ID number and the named payee’s signature will be asked for on the back of the cheque.

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Crossed Cheque:

A crossed cheque is one which has two short parallel lines marked across its face.

• A cheque that carries too parallel transverse lines across the face of the cheque with or without the words “I and co”, is said to be crossed.
• Crossed cheques are of two types. By simply crossing a cheque or with the words ” & Co”, by the payer, the payee can either deposit it in his/her account or endorse it in favour of another person on the reverse. This practice is nowadays not accepted by the banks.
• The advantage of crossing is that it reduces the danger of unauthorised persons getting possession of a cheque and cashing it. A crossed cheque can only be cashed through a bank of which the payee of the cheque is a customer.
• A cheque crossed generally will be paid to any bank through which it is presented.
• A cheque crossed especially will be paid only when it is presented for collection by the bank named between the parallel lines. Such crossing affords a greater measure of protection against loss.

Account Payee Cheque

When two parallel lines along with a cross are made on the cheque and the word ‘ACCOUNT PAYEE’ is written between these lines, then that type of cheque are called an account payee cheque. The payment of the account payee cheque takes place on the person, firm or company on which name the cheque is issued.

Stale Cheque

Check presented at the paying bank after a certain period (typically six months) of its payment date. A stale check is not an invalid check, but it may be deemed an ‘irregular’ bill of exchange. A bank may refuse to honor it unless its drawer reconfirms it payment either by inserting a new payment date or by issuing a new check. Also called stale dated check.

*NOW __The cheque which is more than three months old is a stale cheque.

Eg. If Mr CooL issues a cheque to Miss. Bujji, if Mr. CooL has issued a cheque from his SBI A/c then SBI is a drawee bank.

The banking regulation Act has not defined a specific period after which the instrument (cheque) becomes stale. Some of the banks write specific instructions on the cheque where the validity period is mentioned. In such case, the cheque will become stale after the expiry of the period from the date of issue (date on the instrument)

Post-Dated Cheque:

If a cheque bears a date later than the date of issue, it is termed as post dated cheque.

Any check or draft that has a future date written upon it by the user. The amount of the check will not be drawn from the account until the date written on the check. For example, a check written on the 14th of the month but dated the 28th will not be cashed for another two weeks.

Anti Dated Cheque

If any cheque is issued for the upcoming withdrawal date but it withdraws before the date printed on the cheque, then that type of cheque is called an anti-dated cheque.

Mutilated Cheque:

If a cheque is torn into two or more pieces such a cheque is a Mutilated Cheque. If it is presented for payment, such a cheque the bank will not make payment against such a cheque without getting confirmation of the drawer. In case, if a cheque is torn at the corners and no material fact is erased or cancelled, the bank may make payment against such a cheque.

If the payee is clear, the signature and the MICR line are intact – they can process it. There are sealable plastic carriers used to put such cheques through the high-speed transports used in Clearing.

Open Cheque:

• A cheque that is not a crossed cheque. The person whose name appears on the cheque can write the name of another person on it, and the money will be paid to them.
• An open cheque is a cheque that is not crossed on the left corner and is payable at the drawee bank on the presentation of the cheque.
• The words ‘OPEN’ should not be struck off and the person issuing the cheque should sign on the reverse of the cheque also before giving it to another person; otherwise, the bank may refuse payment. The latter can collect the money from any branch of the bank nowadays, depending on the bank. S/he should also sign at the back of the cheque while receiving the amount.

Gift Cheques

A gift cheque is a cheque flirted in the decorative form issued for a small extra charge by the banks for use by customers who wish to give presents or money on special occasions.

Gift cheques may be purchased in unlimited numbers from every branch of the ‘X’ Bank.

Gift cheques may be used to give presents or money as

• Birthday Gift
• Wedding Gift
• Honour Gift
• EASI SMART Gift

Gift cheques are used for offering presentations on occasions like birthdays, weddings and other situations. It is available in various denominations.

Features and Benefits

• Convenient
• Pre-denominated
• Elegant – Improve promotional impact with packaging customization and personalization options
• Flexible – Provide redemption flexibility by offering the reward with no expiration date
• Replaceable – Protect your investment and offer Reward Earners increased security and peace of mind with lost and stolen Cheque protection
• Simple – Order and administer rewards easily for timely reinforcement
• Reliable – Feel at ease with the American Express brand name — it conveys reliability, security and prestige

Traveller’s Cheques:

It is an instrument issued by a bank for the remittance of money from one place to another.

Traveller’s Cheques are accepted almost everywhere and are available in many denominations. Plus, the no-expiration feature allows you to cash in leftover cheques or retain them for the next time you travel.

benefits

• Convenience: Easy to use. Secured to protect your money when on the move.
• Choice: Available in United States Dollars (USD), Great Britain Pounds (GBP), EURO, Japanese Yen (JPY), Australian Dollars (AUD) and Canadian dollars (CAD).
• Acceptance: Accepted worldwide in over 400,000 locations spread across 200 countries. TCs can be encashed or used at Exchange bureaus, Banks, Hotels Shops, Restaurants and other establishments.
• Security: Signature-based security. If your cheques are lost or stolen, the 24-hour Call Centre is just a phone call away. Replacement of lost TCs is attended to on priority across the world.
• Buy-Back: When you return back to India, you can encash any unused TCs issued by us, at any of the Axis Bank Branches.
• Expiry: Valid forever! You can save any unused Travellers Cheques for future trips.

Self cheques:

A self-cheque is written by the account holder as pay self to receive the money in the physical form from the branch where he holds his account.

If your friend wants to pay YOU the amount of 10000/-, he/she should have written YOUR NAME in the space provided for PAYEE on the cheque. If he/she has written SELF in that area, it is supposed to be used by him (or the bearer as written on the cheque) and whoever possesses that cheque can go to the same branch and bank of the account holder to cash the cheque.

Some banks may honour cheques in their other branches than the account holder branch. However, this cannot be encashed in any other BANK.

You can either encash it by visiting the bank and the branch of your friend’s account or should return or tear this cheque off (If lost, the person who finds it can get it cashed from the bank and branch mentioned on the cheque) and ask for another cheque in your name that you can deposit in your account.

Bankers Cheque:

The banker’s cheque is an instrument issued by the bank on behalf of a customer containing an order to pay a certain sum to a specified person within the city. The validity period of the Banker’s cheque is 3 months, however, it can be re-validated subject to some legal formalities.

• In Banker’s cheque, the chances of dishonour are not possible because it is always prepaid. It is always pre-printed with the words ‘not negotiable’ which means it cannot be further negotiated.
• Banker’s Cheque or Payment Order is a cheque issued for making payments within the same city.
• Banker’s cheque is valid up to 3 months from the date of issue.
• All banker’s cheques are pre-printed with “NOT NEGOTIABLE”.
• It can be cleared in any branch of the same city.

Outstanding cheque:

A cheque which has been written and therefore has been entered in the company’s ledgers, but which has not been presented for payment and so has not been debited from the company’s bank account.