Cheque

As you know, ‘a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand’. Further the expression includes electronic image of truncated cheque and a cheque in the electronic form.

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




A ‘‘truncated cheque’’ means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the 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.

The cheque is, therefore, a kind of bill of exchange. It must be signed by the maker (drawer); must contain an unconditional order for payment of a certain sum of money, to or to the order of a specified person, or to the bearer; and must specify the banker (bank) upon whom it is drawn. Thus, the cheque should not have any condition attached for making the payment. An instrument in the form of a receipt ordering the bank to pay the sum mentioned ‘provided the receipt from at foot hereof is duly signed, stamped and dated’ is not a cheque as it imposes a condition on the order to pay. (More can be understood when a cheque is distinguished from a bill of exchange later in this unit.) However, banks by their own regulations honour a cheque only if the cheque form issued by banks themselves are used. Thus, there is very little discretion that the individual can exercise in writing the cheque.

A banker’s cheque (demand draft) is something unique since it is a cheque drawn by a bank payable by itself. A demand draft is almost similar to a cheque but the differences between the two are that i) the draft is drawn by one bank against another bank/bank’s own branch but not by private individuals, and ii) the draft cannot be so easily countermanded as a cheque, either by a person purchasing it or by the bank to which it is presented. It is more like an appropriation of what is treated as ready-money in the hands of the banker. Ordinarily the relationship between the holder of a demand draft and the issuing bank is that of a creditor and debtor. The issue of a demand draft by one office upon another of the same bank is only convenient method of remitting the amount covered by the draft.

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