A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. It is an unconditional order in writing ,drawn by a customer on his bank, requesting the specifying bank to pay on demand a certain sum of money to a person named in the cheque or to the bearer or to the order of a stated person.
A cheque being a bill of exchange must have following features
- A cheque must be drawn upon a specified banker
- A cheque must be payable on demand
- A cheque must be signed by the drawer
- A cheque must be an unconditional order to pay a certain amount of money
- A cheque must be dated
Types of Cheque:
1.Open cheque: A cheque is called open when it is possible to get cash over the counter at the bank. The holder of an open cheque can do the following
- Receive its payment over the counter at the bank
- Deposit the cheque in his own account
- Pass it to some one else by signing on the back of a cheque.
2. Crossed cheque: Since open cheque is subject to risk of theft, it is dangerous to issue such cheques. This risk can be avoided by issuing other types of cheque called crossed cheque. The payment of such cheque is not made over the counter at the bank. It is only credited to the bank account of the payee. Crossed cheque is crossed by drawing two transverse parallel lines across the cheque, with or without the writing ‘Account payee’ or ‘Not Negotiable’. These lines are drawn on the upper left hand corner of the cheque.
3. Bearer cheque: A cheque which is payable to any person who presents it for payment at bank counter is called ‘Bearer cheque’. A bearer cheque can be transferred by mere delivery and requires no endorsement.
4. Order cheque: An order cheque is one which is payable to a particular person. In such a cheque the word ‘bearer’ may be cut out or cancelled and the word ‘order’ may be written. The payee can transfer an order cheque to someone else by signing his or her name on the back of it.