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CHEQUE
CHEQUESBy
NEELESH
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Cheque As An Negotiable Instrument
The Negotiable Instruments Act, 1881 defines a cheque
as a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.
Actually, a cheque is an order by the account holder of
the bank directing his banker to pay on demand, the
specified amount, to or to the order of the person named
therein or to the bearer.
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Speciman of cheque
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Features of cheques
A cheque must be in writing and duly signed bythe drawer.
It contains an unconditional order.
It is issued on a specified banker only.
The amount specified is always certain and mustbe clearly mentioned both in figures and words.
The payee is always certain.
It is always payable on demand. The cheque must bear a date otherwise it is
invalid and shall not be honoured by the bank.
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Types of cheques
Open cheque - 1.cash receives on the counter
2.Can deposit on his own account
3.Can pass it to someone else
Crossed cheque-1.cash cant receive on counter
2.Credited on the account of payee
Bearer cheque - 1.payable to any person over thecounter
2. Requires no endorsement
Order cheque - 1.payable to perticular person only
2. The word order is written on the
cheque
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Types of crossing of cheques
General Crossing-only crossed lines are made
Special Crossing-crossed with the name of the person
Account Payee-for crediting the amount in the account ofthe payee
Not Negotiable Crossing-The words 'Not Negotiable'can be added to General as well as Special crossing and a
crossing with these words is known as Not Negotiable crossing.
2.it removes the most important characteristic of a negotiableinstrument i.e. the transferee of such a crossed cheque cannot
get a better title than that of the transferor (cannot become a
holder in due course) and cannot convey a better title to his
own transferee, though the instrument remains transferable.
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When the banker MAY dishonour
customers cheque
The banker does not have sufficient funds
The cheque is of doubtful legality
The cheque is mutilated or torn
The cheque is irrgular or materially altered
The cheque is post dated
The cheque is stale
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Customers signature do not agree with specimen
signature
The cheque is presented other than the one
branch where customer has account
The account is in the joint name and all of them
has not signed
Where the banker has a claim for a set off on the
funds of the customers and the cheque for anamount in excess of the balance over the claim
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When banker must dishonour
customers cheque
The instructions regarding stop paymentshould be honoured only if it is in writing,signed by the drawer, mentions the details ofthe cheque
Cheques presented after the death of thecustomer
Person being declared insolvent
Cheques drawn and received after the receiptof a notice of the customers insanity
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Garnishee order is absolute
Cheque presented after the receipt of a noticeof assignment of the customers credit balance
If banker thinks trustee is using amount for
personal useBanker receives notice to close the account
Banker is under an obligation to make
payment to the holder, if banker feels that theperson is not entitled to receive the paymentthereon he must refuse to pay
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