Cheques

Contents
• Meaning
• Cheques, Bills of exchange and promissory
note (Difference)
• Essesntials of Cheque
• Crossing of Cheque
- General Crossing
- Special Crossing
- Not Negotiable Crossing
- Account Payee
- Double Crossing
 Cheque

Section 6 of the Negotiable Instrument Act defines a cheque as follows:“A

bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand.”
 Promissory Note Bill of Exchange Cheque
i) In writing i) In writing i) In writing
ii) Signed by the maker ii) Signed by the maker ii) Signed by the drawer
iii) Containing an iii) Containing an iii) Containing an
unconditional Undertaking unconditional order unconditional order
to pay
iv) A certain sum of iv) A certain sum of iv) A certain sum of
money only money only money only
v) Pay to or to the order iv) Pay to or to the order iv) Pay to or to the order
of a certain person or to of a certain person or to of a certain person or to
the bearer of the P.N. the bearer of the B.E. the bearer
vi) Needs to be stamped vi) Must be properly vi) Need not be stamped
stamped
vii) RBI Act prohibits a P. vii) RBI Act prohibits a BE vii) Must be dated and
Note payable on demand drawn payable on presented for payment
to a bearer. demand to a bearer after date only.
viii) May be drawn in any viii) May be drawn in any viii) May be drawn in
form form prescribed Form
Distinguishing features of a cheque and B.O.E
Cheque
1. A cheque is always drawn on
printed form.
2. The drawee (banker) need not
accept a cheque
3. A cheque is always supposed to
be drawn against the funds in the
hands of the banker
4. A cheque is an instrument for
immediate payment.
5. The liability of the drawer
continues for 6 months.
6. A cheque is free from stamp duty
Bill of Exchange
1. A bill need not be drawn
on a printed form.
2. Acceptance by the drawee
is essential.
3. There is no such
supposition
4. It is drawn for a specified
period and so it is intended for
circulation.
5. Unreasonable delay in the
presentation will discharge the
Bill
6. A bill is subject to ad valorem
duty.
 Promissory Note

Is an instrument in writing (not being a bank note or a currency note)

containing an unconditional undertaking, signed by the maker, to pay a
certain sum of money only to, or to the order of certain person, or to the
bearer of the instrument(Section 4)
 Specimen of Promissory Note
• A promissory note is drawn and signed by
the debtor, who promises to pay the
creditor a certain sum of money.
Place: New
Delhi 110023
Rs. 2500/- Date: 15May,2010

On demand, I promise to pay Mr. Joseph or order the sum of

Rupees two thousand five hundred only for value received.

To Witness
Mr. Joseph (1)
(2)
Stamp
Signatur
e
 Specimen of Bills of Exchange
Rs. 2500/- Place: New
Delhi
Date: May
15, 2009

Three months after date, pay to Mr. X or order the sum of

Rupees two thousand and five hundred only, for value received.
To
Mr. Senthil Babu, Accepted
65, Church Street, Senthil Babu
Stamp
Nazareth.
Signature
Crossed Cheque
 Essentials of a Cheque
• Place
• Date
• Payee
• Amount
• Signature
• Account No.
• Counterfoil
 Crossing of Cheque

Crossing of In case of fraud, if

cheque means a If not cheques are
direction to the crossed, crossed, it will
enable to ascertain,
drawee banker cheques are if such cheques are
not to pay the called open paid, to what use
money over the the money has
counter,. cheques. been paid
• General Crossing, Section 123
- the cheque bears two parallel transverse
lines across its face with/without the words “
& Co.”, “Not Negotiable”, etc.
- the paying banker shall make payment only
to a banker.

• Special, Section 124

- the cheque bear the name of a specific bank
in addition of two parallel transverse lines
with/without the words “Not Negotiable”.
- such cheque can be payable to the so
specified banker only by the paying banker.
 Not Negotiable Crosing
• In the case of a cheque crossed generally
or specially and bearing, in either case,
the words “Not Negotiable,” the position
would be that such instrument shall not
have, and shall not be capable of giving, a
better title to the holder than that which the
person from whom it was taken had.
(Section 130)
 Account Payee
• The amount mentioned in such a cheque
is deposited only in the account of the
payee.
• Even if such a cheque is endorsed, the
amount can be deposited only in the
account of the payee and of no other
person.
 Double Crossing
• When the names of two banks written in
crossing, it is known as double crossing.
• A double crossing by an individual is not
permitted.
• Acc. To 125 and 127 of the Negotiable
Instruments Act, a double crossing even in
the case of bankers is permissible only
when it is shown that the second crossing
was placed by the collecting banker for the
purpose of the clearing house.
 THANK YOU

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