Cheque

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What is Cheque?

A cheque is a bill of exchange, drawn on a specified banker and it includes ‘the electronic image of truncated cheque’ and ‘a cheque in electronic form’.

The cheque is always payable on demand. A cheque must contain all the characteristics of a bill of exchange.

Characteristics of a Cheque

The essentials characteristics of a cheque can be summarized as under:

  1. It must be in writing.
  2. It must contain an express order to pay.
  3. The order to pay must be definite and unconditional.
  4. It must be signed by the drawer.
  5. The sum contained in the order must be certain.
  6. The order must be to pay money only.
  7. Drawer, drawee and payee must be certain.
  8. It is always drawn upon a specified banker.
  9. It is always payable on demand.

Parties of Cheque

Basically, there are three parties to a cheque:

  • Drawer: The person, who draws or makes the cheque i.e. signs and orders the bank to pay the sum.

  • Drawee: The bank on whom, the cheque is drawn or who is directed to pay the specified sum written on the cheque.

  • Payee: A person to whom money is to be paid.

Truncated Cheque

A truncated cheque means a cheque which is truncated during the course of a clearing cycle either by the clearing house or bank whether paying or receiving payment immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

Cheque in electronic form

A cheque in electronic form means a cheque which contains the exact mirror image of paper cheque and is generated, written and signed in secure system, ensuring the minimum safety standards with the use of digital signature (with or without biometric signature) and asymmetric crypto system.

Presentment of truncated cheque

In case of and reasonable suspicion about the genuineness of the electronic image of a truncated cheque (e.g., suspicion as to fraud, forgery, tampering or destruction of the instrument), the paying banker is entitled to demand any further information regarding the truncated cheque. The payee banker can also demand the presentment of truncated cheque itself for verification.


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Business Law Book References

  1. Goel, P. K. (2006). “Business Law for Managers” Wiley
  2. Sheth, T. (2017). “Business Law” (2ed.) Pearson.
  3. Kuchhal. M.C. & Prakash. “Business Legislation for Management” (2ed.) Vikas Publishing.

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