Definition of a Cheque :

A cheque is defined in Sec 6 of NI Act as under :-

(i) A cheque is a bill of exchange drawn on a specified banker

(ii) Payable on demand

(iii) Drawn on a specified banker

(iv) Electronic image of a truncated cheque is recognized under law. The Information Technology Act, 2002 recognizes (a) digital signatures and (b) electronic transfer as well

A cheque is nothing but a bill of exchange with special features (i) It is always payable on demand ( A bill of exchange can be payable on demand/at sight and/or after a specific term called as usance bill) (ii) always drawn on a specified banker i.e., the drawee of a cheque is the banker on whom the cheque is drawn. The banker with whom the customer holds his/her account. This drawee bank is called the paying bank. The parties to a cheque are:

Apart from the above three parties, others involved in payment and collection of cheques are :

Endorser: The person who transfers his right to another person

Endorsee: The person to whom the right is transferred

Different types of cheques

(1) Open Cheque:

A cheque is classified as ‘Open’ when cash payment is allowed across the counter of the bank.

(2) Bearer Cheque:

A cheque which is payable to any person who holds and presents it for payment at the bank counter is called a ‘Bearer cheque’. A bearer cheque can be transferred by mere delivery without any endorsement.

(3) Order Cheque:

An order cheque is a cheque which is payable to a particular person. In case of order cheque, the word ‘bearer’ might have been cancelled and the word ‘order’ is written. The payee can transfer an order cheque by endorsement to another person by signing his name on the back of the cheque