A
check is a bill of exchange drawn on a particular banking payable on demand. So
a cheque is an unconditional order in writing, signed by a drawer, drawn upon a
specified banker directing him to pay on demand a certain sum of money to or to
the order of a certain person or to the bearer of the instrument.
A
cheque is always payable on demand. If it is a post date, it is payable on the date
mentioned in it, but not before that date.
The
person who draws the cheque is a drawer and the bank on which cheque is drawn
is the drawee and to whom the payment is to be paid is payee. If no payee is
mentioned in the cheque, the bank must pay the bearer of the cheque. So it has
also three parties, the drawer, the drawee and the payee.
Order cheque
A
cheque is payable to order, which is expressed to be so payable or which is
expressed to the payable to a particular person and does not contain words
prohibiting transfer. Thus the word “or order” may or may not be added after
the name of the payee.
Bearer cheque
A
cheque is payable to bearer which is expressed to be so payable or on which the
only or last endorsement is and endorsement in bank it should be particularly
noted that a cheque once a bearer cheque is always a bearer cheque because
(85/2), provides that where a chequ8e is originally expressed to be payable to
bearer, it is payable to the bearer thereof notwithstanding any endorsement
whether in full or in blank appearing thereon and notwithstanding that any such
endorsement purports (means) to restrict or exclude further negotiation.
The
words “or Bearer” may be changed into “or order” by any holder of a cheque
without signing the alteration, but the words “or order” can be changed into “or
Bearer” only by the drawer with this signature.
Marked Cheque
When
a cheque is marked or certified by the drawee bank to the effect that it would
be honored on the day of presentment for payment, it is known as a marked
cheque. A certification or making of a cheque with the words “good for payment
on..? is not to acceptance, and the drawee bank is not liable to pay the amount
of the cheque.
A cheque is dishonored in the following cases
When
the drawee refuses to pay the cheque being duly presented for payment. When a
cheque is dishonored, the holder of the cheque should inform the drawer and all
the previous endorsers immediately after the cheque is dishonored to enforce
payment. While refusing such payment the bank generally notes down the reason
for dishonoring the cheque on a separate form.
Reasons dishonored cheque
i. When
the drawer’s signature differs from the signature preserved in the bank’s book
or a signature card.
ii.
When the funds of the drawer are insufficient.
iii.
When the cheque is state or post dated and is presented before due date or
without signature.
iv.
When the amount within figures and words differs.
v.
When the payment is stopped by the drawer.
vi.
When the cheque is mutilated
vii.dishonored in the following cases
When any alteration in the cheque is not properly signed by the drawer.
viii.
When the bank receives the news of drawer’s death or bankruptcy or hanacy
(madness)
ix.
When the cheque is outdated.
x.
when there is any irregularity or ambiguity on the very face of the cheque.
If
the bank dishonors any cheque without showing any cause, it has to compensate
for all losses caused by the dishonor of the cheque. So the banker must take
care before holder of the cheque must give notice to the drawer and all the
endorses immediately to enforce payment.
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