NAME:- MEET SHAILESH

RATHOD
CLASS:- SYBCOM
DIVISION:- B
ROLL NO:- 45
TITLE:- CHEQUE
INTRODUCTION
Cheque refers to a negotiable instrument that contains an unconditional order to the
bank to pay a certain sum mentioned in the instrument, from the drawer’s account, to the
person to whom it is issued, or to the order of the specified person or the bearer.
The ancient Romans are believed to have used an early form of cheque known as
praescriptiones in the 1st century BC. Beginning in the third century AD, banks in Persian
territory began to issue letters of credit.
Definition of a cheque as per The National Provincial Bank circa 1968 was "an
unconditional order in writing drawn on a Banker, signed by the drawer, instructing the
Banker to pay on demand a sum certain in money to or to the order of a specified person or
to Bearer and which does not order any act to be done in addition to the payment of money".
POINTS TO REMEMBER
The person who writes the cheque is called the “drawer” and the person in whose
name the cheque has been issued is called the “payee”. The amount of money that
needs to be transferred, payee’s name, date and signature of the drawer are all
mentioned in a cheque.
I. A cheque can only be issued against a current or savings bank account
II. A cheque without date shall be considered invalid
III. Only the payee, in whose name the cheque has been issued, can encash it
IV. A cheque is only valid 3 months from the date it has been issued
V. A 9-digit MICR (Magnetic Ink Character Recognition) code is mentioned at the
bottom of the cheque. This makes the clearance of cheques easier for the banks.
ESSENTIALS OF CHEQUE
1. Instrument in writing : A cheque must be in writing. An oral order to pay does not constitute a
cheque.
2. It should be drawn on banker: It is always drawn on a specified banker. A cheque can be drawn
on a bank where the drawer has an account, saving bank, or current.
3. unconditional : A cheque is an order to pay and it is not a request .The order must be
unconditional.
4. The check must have an order to pay a certain sum: The cheque should contain an order to pay
a certain sum of money only. If a cheque is drawn to do something in addition to, or other than to pay
money, it cannot be a cheque.
5. It should be signed by the drawer and should be dated: A cheque does not carry any validity
unless signed by the original drawer. It should be dated as well.
6. It is payable on demand: A cheque must be an order to pay a certain sum of money on
demand but it is not necessary to the word ‘ on demand ‘ or equivalent words.
7. Validity: A cheque is normally valid for six months from the date it bears. Thereafter it is
termed as stale cheque. A post-dated or antedated cheque will not be invalid. In both cases,
the validity of the cheque is presumed to commence from the date mentioned on it
8. It may be payable to the drawer himself: Cheques may be payable to the drawer
himself/herself. It may be drawn payable to bearer on demand unlike a bill or a pro-note.
9 .Specific banker only : A cheque is always drawn only on a particular banker.Usually , the
name & address of the banker is clearly printed on the cheque leaf itself .
10. It does not require acceptance and stamp: Unlike a bill of exchange, a cheque does not
require acceptance on part of the drawee. There is, however, a custom among banks to mark
cheques as ‘good’ for the purpose of clearance. But this marking is not an acceptance.
Similarly, no revenue stamp is required to be affixed on cheques.
PARTIES TO CHEQUES
Basically, there are three parties to a cheque:
• Drawer: The person who draws the cheque, i.e. signs and orders the bank to pay
the sum.
• Drawee: The bank on which the cheque is drawn or who is directed to pay the
specified sum written on the cheque.
• Payee: The beneficiary, i.e. to whom the amount is to be paid.
Apart from these three, there are two more parties to a cheque:
• Endorser: When a party transfers his right to take the payment to another party,
he/she is called endorser.
• Endorsee: The party in whose favour, the right is transferred, is called endorsee.
TYPES OF CHEQUE
 Open Cheque: Otherwise called as uncrossed cheque, it is one on which cash is payable at the
counter of the bank, or it is transferred to the bank account of the person whose name is
written on the cheque. It is negotiable, i.e. it is transferable in nature.
 Bearer Cheque: Bearer cheque refers to the cheque which can be encashed by the person
whose name is written on the cheque or anyone who presents the cheque before the bank for
payment. It is negotiable in nature, which can be transferred by simply delivering it and so
endorsement is not needed. No identification of the presenter or holder is required in case of a
bearer cheque.
 Order Cheque: As the name suggests, it is the cheque which becomes payable to the person or
organization whose name is specified on the cheque or to his order. To convert a bearer
cheque into an order cheque, the word ‘or bearer’ is stricken off from the cheque.
Endorsement of the cheque to the third party is done by simply signing on the cheque.
 Crossed Cheque: You might have observed, two transverse parallel lines at the top left
corner of some cheques, which may or may not have the words – & Co., A/c payee or Non-
Negotiable. Such cheques are regarded as crossed cheques. The amount on such cheques is
credited to the account of the payee.
 Self Cheque: When a person wants to withdraw money from his own account, by writing
‘self’ at the name of the payee, is called self-cheque. Do not cross the cheque or cancel the
words 'or bearer’ from the cheque. These cheques should not be crossed, as well as the
words ‘or bearer’ should not be stricken off from the cheque, so that any person as your
representative can receive the amount on your behalf.
 Blank Cheque: A cheque which is only signed, but the name of the payee and date is not
indicated, is called a blank cheque. Such cheques can be made account payee, and the
maximum limit of withdrawal can be mentioned.
 Cancelled Cheque: Due to any kind of mistakes while writing the cheque, it is cancelled,
and so it is called cancelled cheque.
 Stale Cheque: A cheque bears a date and is valid up to three months of the stated
date. If a cheque is presented before the bank, after the expiry of the reasonable
period, i.e. three months after the date, then it is called stale cheque.
 Post-Dated Cheque: When a cheque is drawn containing a future date, it is called
post-dated cheque. In such cases, money will not be payable by the bank before
that date.
 Ante-dated Cheque: A cheque containing a prior date, is called an ante-dated
cheque. Bank honours cheques until three months to the date mentioned.
 Ante-dated Cheque: A cheque containing a prior date, is called an ante-dated
cheque. Bank honours cheques until three months to the date mentioned.
 Traveler’s Cheque: A cheque issued by a bank for a fee, containing a fixed
amount. These cheques are enchased or used to make payment in a foreign
country, after endorsement by the signature of the holder.
SPECIMEN OF CHEQUE
CONCLUSION
Thus it is concluded that Cheque is an important negotiable instrument which
can be transferred by mere hand delivery. Cheque is used to make safe and convenient
payment. It is less risky and the danger of loss is minimised. 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 different types of cheques have their own features and they are utilised
according to the purpose of issuers as well as payees. The cheques are significant
financial instruments which ensure risk-free, convenient and flexible delivery of
payment for business entities and individuals in the modern era.
REFERENCE

 www.thesisbusiness.com
 www.businessjargons.com
 www.investopedia.com
 https://en.m.wikipedia.org/wiki/Chequeisbusiness.com