A cheque is classified into different types and classes which are explained below.
There are two types of cheques:
- Open Cheques
- Crossed Cheques
1. Open Cheques:
An open cheque is one that is presented and paid by the banker over the bank’s counter in a direct way.
Types of Open Cheques :
- Bearer Cheques
- Order Cheques
I) Bearer Cheques: A bearer cheque is one that is payable to any payee who presents it for payment over the counter of the bank. In other words, it is payable by the banker to the person named on the cheque or any other bearer.
Bearer cheques are freely transferable from one person to another by simple delivery.
Bearer cheque does not need an endorsement for their negotiation. In the case of the bearer, the cheque is lost or stolen, the banker shall not be responsible for the payment made to an unauthorized person.
II) Order Cheques: An order cheque is one that is payable to the person named in the cheque by the drawer or to the order of the payee.
In other words, it is payable only to the payee or to any person who receives it from him. For example, “pay to Raj Kapoor” or order is an order cheque.
This cheque is payable by the banker to either Raj Kapur or to any person whom he orders the payment of the cheque.
Thus, order cheque may be transferred from one person to another by making endorsements on the cheque. Order cheque is paid by the banker only when he is satisfied with the identity of the payee.
What is Crossed Cheque?
A crossed cheque is one which bears two parallel transverse lines across the face of the cheque with or without any words.
In other words, a cheque may be crossed by drawing two parallel lines on the face of the cheque. The crossing is introduced in England when cheques were sent from one bank to another.
The crossing of a cheque may be defined as an instruction from the drawer of the cheque to the banker that he is only to pay the cheque provided certain conditions are fulfilled.
The crossing is a unique feature associated with a cheque affecting to a certain extent the obligation of the paying banker and also it’s negotiating character.
Different Types of Crossed Cheques:
- General Crossing
- Special crossing
- Account Payee Crossing
- Not negotiable crossing
1. General Crossing: A general crossing is a crossing where a cheque simply bears two parallel lines with or without any words and without any specification for payment.
Sec 123 of the negotiable instruments act 1881 defines general crossing as follows, “where a cheque bears across it’s facing an addition of the words, and company” or any abbreviations thereof, between two parallel transverse lines or of two parallel transverse lines simply either words or without the words, Not Negotiable that addition shall be deemed crossing and the cheque shall be deemed to be crossed generally.
The essential requirements of general crossing are drawing of two lines :
- On the face of the cheque
- Parallel to each other and
- In cross direction
2. Special Crossing: A special crossing is a crossing where a cheque bears across its face the name of a banker.
Sec 124 of the negotiable instruments act 1881, defines special crossing as follows, ” where a cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable”, the addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially and to be crossed to the banker.
In case of special crossing two parallel transverse lines are not necessary, but the name of a bank should be written on the face of the cheque.
The name of the banker on the cheque must appear otherwise than as a drawer, payee, drawer or endorser of the cheques to continue special crossing.
3. Account Payee Crossing : Account payee crossing is a crossing where a cheque bears across it’s facing the words such as “Account payee” or “payee’s account only” along with general or special crossings.
It may be noted here that the words “Account payee” or payee’s account are not recognized by the negotiable instruments Act like, but are being used due to the practice prevalent in the business community.
5. Not-Negotiable Crossing: A not negotiable crossing is a crossing where cheques bear across its face the words “Not Negotiable” along with general or special crossings.
According to section 123 and 124 of the Negotiable instruments act, 1881, cheques may be crossed either generally or especially with the words “not negotiable”.
What is the Date Of Cheques?
A cheque must be bear a date without which it is incomplete. The date of the cheques is important because the order of the customer to the banker given through the cheque becomes legally effective on the date mentioned on the cheques.
The date on the cheque should be complete I.E it must include the year, name of the month and the number of the day e.g 13/08/2019.
Date of cheques may be classified into three types :
- Post-dated cheque
- Ante dated cheque
- Stale cheque
1) Post Dated Cheque: A post-dated cheque is a cheque which bears a date later than the one on which the cheque is actually drawn.
For example, if a cheque drawn on January 10, 2010, bears the date of the 30th of January, 2010 it is a post-dated cheque.
Post-dated cheques are issued by the drawer to delay payment for some time. Such a cheque though valid becomes effective only on the date mentioned on the cheque and the banker should, therefore, honour it only on or after the date mentioned on the cheque.
2) Ante Dated Cheques: An Ante Dated cheque is a cheque which bears a date earlier than the one in which the cheque is actually drawn.
For example, if a cheque issued on the 30th of January 2010 bears the date of 10th January 2010, it is an antedated cheque.
Such a cheque is a valid cheque and the banker shall have no objection in making payment of such cheques.
3) Stale Cheque: In case the adequate cheque is not presented for payment within a reasonable period after the date of its issue, it is termed as stale cheque. It is a cheque that has been in circulation for an unreasonably long period.
Generally, a cheque is considered stale when it has not presented for payment within 3 months of its issue. When such a cheque is presented for payment, the banker returns it with the remark “Out of date”.
What are Mutilated Cheques?
The mutilated cheque is a cheque which is torn into two or more pieces. The banker should see that the cheque is not mutilated, torn or cancelled before honouring the cheque.
A cheque which is torn in such a way that the intention to cancel it is apparent, should be returned without payment. Generally, such a cheque is returned with the remark ‘Mutilated Cheque’.
In case of a cheque is torn accidentally and the drawer confirms it by affixing his signature, the banker may pay the cheque.
Moreover, a cheque that is torn at the corner is normally paid by the banker unless it appears that the portion torn off could bear the crossing.
What is the Marking of cheques?
Marking of cheque refers to the practice of declaring that the cheque is good for payment. It is a sort of certificate issued by the drawee banker certifying that there is a sufficient amount in the account of the drawer of the cheque and that the cheque will not be dishonoured due to lack of funds.