What are Different types of a Cheque | Banking Law

What is cheque -

            A cheque is an order to a bank to pay a stated sum from drawer's account, written on a specially printed form. There are three parties Drawer, Drawee and Payee. All the cheques are bills of exchange. But all the bills of exchange are nt cheques

             

Definition of Cheque -

           According to Section 6 of the Negotiable Instrument Act 1881, "A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand." A cheque is payable always on demand. Here drawer and payee may be the same person.

What are the different types of a cheque? 

Different types of cheque are as follows

1) Bearer cheque - 

      In such a cheque, the words 'or bearer'  are written with the name of the person. The bank makes the payment to a person who presents the cheque at the counter of the bank.  Bearer cheques are negotiated only by delivery of possession. Its endorsement is not required.

2)  Order cheque -

       In such a cheque, the words "or order" are written with the name of the specified person. The bank makes the payment to such specified person whose name is mentioned on the cheque. Such person may make further endorsement on such cheque.Endorsement and delivery of possession, both have required for negotiation of such a cheque.

3) Crossed cheque -

       A crossed cheque is one on which two parallel transverse lines with or without the words "& Co." are drawn. The payment of such a cheque can be obtained only through a banker. Thus crossing is a direction to the drawee banker to pay the amount of money on a crossed cheque through a banker so that the party who obtains the payment of the cheque can be easily traced.

See... Who may Cross a Cheque?

4) Open cheque -

    When two lines on the left hand upper corner of the cheque are not drawn, the cheque is known as an open cheque. Its Payment can be made at the counter of the bank.

5) Marked cheque -

      Often the cheques are marked which is a kind of certification given by the drawee Bank that the drawer has sufficient funds to provide payment for the cheque in question. The bank writes "good" across one corner of the cheque and puts its official stamp along with the signature. In such a way, the bank represent that at the time of marking, the drawer's account was in state of being capable of meeting the cheque. Thus marking of cheque adds its negotiability and credit.Cheque is marked in the following circumstances -

(a) At drawer's instance

(b)  At Holders instance

(c)  At collecting banker's instance

6) Not payable or bad cheque -

         Such cheque is not payable in spite of completion in all respects. A post dated cheque is not payable till the date mention on the cheque.

Circumstances-

• If there is no sufficient fund in the account of drawer of cheque. 
• If the account of the drawer of the cheque has been closed or the account of the drawer of the cheque has been seized. 
• If the drawer has issued the cheque in spite of his insolvency. 
• If the cheque has been cancelled illegally after issuance of its payment has been stopped illegally.

          If anybody issues a Cheque with the knowledge that the cheque will be dishonored, then it is punishable under Section 420 of the Indian Penal Code.
       

7) Antedated cheque -

        A drawer while drawing cheque gives the date in that cheque prior to the date on which it is drawn (prior to the date means backdate). It is called Ante-dated cheque. The banker can accept such cheque if it does not exceed 6 months period.

8) Post dated cheque -

            A drawer of a cheque gives the date in the cheque later or after the date on which it is drawn. It is known as a Post-dated cheque. The Banker must accept the Post-dated cheque only after the ostensible date given on the cheque. If he accepts before, he has to face many consequences.

9) Stale cheque /outdated Cheque -

     A cheque to be honored, it has to be presented within 6 months from the date of the cheque. If the cheque is presented for payment beyond the 6 months, it is said to be the Stale or Out-dated cheque. However, an Out-dated or Stale Cheque may be accepted by the banker for payment if the drawer/customer gives consent to make the payment. Such consent is subject to the period of limitation, which is 3 years. In other words, the drawer of the cheque has to give his consent within 3 years. The period of limitation is 6 years in England.

10) Mutilated cheque -

            A cheque which is cut into many pieces is called Mutilated Cheque. The drawer bank should see I honoring a cheque, whether it is Mutilated, canceled or torn. If the cheque is torn into two or many pieces, it should be returned with the remark 'mutilated cheque'. If he is satisfied that the Mutilated Cheque gets the original shape of the instrument, he may accept the cheque.
     

See also 

Essentials of a Cheque 

Difference between Promissory Note and Cheque

Difference Between Cheque and Bill of Exchange | Law of Contract