Cheque
According to Negotiable instruments Act, 2034 chapter 1 section 2(h), a cheque is a bill of exchange drawn on a certain bank payable on demand.
In general, a cheque is a legal document issued by a bank to its clients or a customer who orders a bank to specific amount in written in a cheque to the person, on whose name a cheque was issued.
A cheque has 3 parties involved in the financial transactions i.e. Drawer, Payee, and Drawee. All cheques are bill of exchange but not all bill of exchange are cheques.
Features of cheque
It can be transfer from one person to another person easily.
A cheque must be in writing by means of pen, printed or pencil.
A cheque must be sign by the account holders for the validation purpose.
A Date must mention on the cheque.
It must be drawn on the bank where drawer has an account.
The payment must be made to the certain person or self.
The amount specified on the cheque should be clearly mentioned in figure and word.
The payee of cheque is always certain.
It must contain an unconditional order to pay the amount.
A cheque is normally valid for the 6 months from the date it was issued.
Importance of cheque
Cheque provides easier and safer medium to hold or carry bulk amount of cash.
Transfer of money from one parson to another person is quite easier with the use of cheque.
Cheque is preferred by an entity while conducting financial transactions.
It keeps and provides the complete record of financial transaction such as who receive the payment and when did.
It also can be use as an evidence for the future needs
Less number of money is required for the printing as it avoids the use of cash for the transactions.
It can be traced if it lost or can stop the payment for lost cheque. It controls unnecessary spending habits of the general public.
Types of cheques
Bearer cheque: Bearer cheque is a type of cheque in which a bearer is authorized to ask the bank for encashment. No identification is required for this kind of cheque therefore it is risky if it lost. The word “Or Bearer” printed on such cheque.
Order cheque: A type of cheque on which the word “Or Order” is written. Such cheque is encashment by the bank to only the payee whose name is written on the cheque. The payee’s identity maybe cross checked by the bank before enchasing the sum of money.
Crossed cheque: In this type of cheque, cash is not withdrawn but transferred from the drawer’s account to the payee’s account. Any third party can submit such cheque. In the case of crossed cheque, a drawer must draw two lines at the left top of the cheque.
Open cheque: When a cheque is not crossed, it is known as an “Open cheque” or “Uncrossed cheque”. An open cheque maybe a bearer cheque or an order cheque.
Account payee cheque: In this type of cheque, the amount shall be transfer directly to payee’s account number and unlike crossed cheque; third party is not required to submit such cheque.
Anti dated cheque: A cheque on which drawer mentioned the date earlier than the date on when it is presented to the bank.
Post dated cheque: A cheque on which drawer mentioned the date future date which is yet to come.
Mutilated cheque: A cheque is torn into two or more pieces and presented for the payment. The bank will not make a payment unless the drawer confirm such cheque.
Stale cheque: A cheque which is presented at the bank after 180 days from the date of issuance of such cheque. Duration for such cheque may vary from the countries to countries.
Self cheque: A cheque on which Drawer’s name is written instead of Payee’s name to withdraw cash is called self cheque.
Traveler’s cheque: Such cheques are issued when a person is travelling abroad where Nepalese currency is not used.
Blank cheque: A cheque which has a drawer’s signature and all the others fields are left empty, then such types of cheque is called Blank cheque.
Cheque Vs Bill of Exchange
Basis of Comparison Cheque Bill of Exchange
Drawee Only a banker can be a Drawee Anyone can be a Drawee including a banker
Acceptance A cheque required no acceptance Drawee is liable only after the acceptance
Validity Valid till 3 months from the date of No validity of Bill of Exchange issue
Notice In case of dishonor, no notice of Notice of dishonor is to be given to all dishonor is necessary the parties liable to pay
Crossing A cheque maybe crossed It can never be crossed
Stamp Cheque requires no stamp It must be properly stamped
Digital Signature can be happened via digital Signature cannot happen with digital
signature signature signature
Issuance and It can be presented again if a cheque It can be presented only once and presentation is dishonored and can be issue later cannot be issued for a later date.
