Uses of a Cheque

1. If payment is made by means of a crossed cheque, receipt need not be obtained.

2. It is also convenient to receive money.

3. Payment can be made to a particular person by drawing up crossed “Account payee” cheques.

4. The cheque is ‘near money’ and hence is endorsable from one person to another to settle the effects.

5. It minimizes the operation of legal tender money and the bankers can operate with a less amount of cash reserves.

6. No need of counting cash while making payment.

7. If a crossed cheque is lost, only a piece of paper is lost, i.e., the amount remains intact.

8. If payments are made by cheques an automatic record of the account is also maintained in the banker’s books.

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Types of Cheques

Cheques are of the following types:

1. Order Cheque: A cheque which is payable to a particular person or his order is called an order cheque.

2. Bearer Cheque: A cheque which is payable to a person whosoever bears, is called bearer cheque.

3. Blank Cheque: A cheque on which the drawer puts his signature and leaves all other columns blank is called a blank cheque.

4. Stale Cheque: The cheque which is more than six months old is a stale cheque.

5. Multilated Cheque: If a cheque is torn into two or more pieces, it is termed as mutilated cheque.

6. Post Dated Cheque: If a cheque bears a date later than the date of issue, it is termed as post dated cheque.

7. Open Cheque: A cheque which has not been crossed is called an open cheque. Even if a cheque is crossed and subsequently the drawer has cancelled the crossing at the request of the payee and affixes his full signature with the words “crossing cancelled pay cash”, it becomes an open cheque.

8. Crossed Cheque: A cheque which carries too parallel transverse lines across the face of the cheque with or without the words “I and co”, is said to be crossed.

9. Gift Cheques: Gift cheques are used for offering presentations on occasions like birthday, weddings and such other situations. It is available in various denominations.

10. Traveller’s Cheques: It is an instrument issued by a bank for remittance of money from one place to another.

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Meaning of cheque

A cheque is a negotiable instrument governed by the provisions in the Negotiable Instrument Act. It is an unconditional order, drawn on a specified banker, signed by the drawer, directing the banker, to pay on demand, a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.

Under Section 6 of the Negotiable Instruments Act, 1881, a cheque is defined as a “bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.” To understand this definition, it is necessary to know the definition of a bill of exchange.

According to Section 5 of the Indian Negotiable Instruments Act, 1881: “A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.”

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