A cheque is a bill of exchange drawn upon a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

1. Cheques
Legal Environment of Business

2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Definition
• A cheque is a bill of
exchange drawn upon a
specified banker and not
expressed to be payable
otherwise than on demand
and it includes the
electronic image of a
truncated cheque and a
cheque in the electronic
form.

4. Definition
• All cheques are bills of
exchange but all bills of
exchange are not cheques.

5. Types of cheques
• Open cheques – A cheque
which can be presented by
the payee for payment at
the counter of the bank of
which they are drawn, are
called open cheques.

6. Types of cheques
• Crossed cheques –
Crossing a cheque means
putting two parallel lines
across the face of the
cheque. The payment of
such a cheque cannot be
obtained at the counter of
the bank. Such cheques
must be collected through
a banker.

7. Modes of crossing a cheque
• General crossing.
• Special crossing.
• Restrictive crossing.
• Not negotiable crossing.

8. General crossing
• When a cheque bears across
its face an addition of (i) the
words “And company” or (ii)
any abbreviation between
two parallel traverse lines
simply either with or without
the word negotiable or (iii)
two parallel traverse lines
simply either with or without
the words not negotiable
that addition shall be
deemed a crossing, it is a
general crossing.

9. General crossing
• The two traverse parallel
lines across the face of the
cheque are essential for
general crossing. Effect of
such crossing is that the
holder or payee cannot get
the payment over the
counter of the bank but
through bank only.

10. General crossing

11. Special crossing
• When a cheque bears across its
face an addition of name of a
bank either with or without the
words ‘ not negotiable’, the
cheque is deemed to be crossed
specially. A cheque cannot be
crossed more than once
specially. A special crossing
makes the cheque more safer
than a general crossing because
the payee or holder cannot
receive payment except through
the banker named in the cheque.

12. Special crossing

13. Restrictive crossing
• It includes words like A/C
payee, Account Payee only,
A/c Ashok only etc between
traverse parallel lines. The
effect of the restrictive
crossing is that it directs the
collecting banker that the
proceeds of the cheques are
to be credited only to the
account of the payee named
in the cheque or between
the traverse lines.

14. Restrictive crossing

15. Not negotiable crossing
• A cheque may be crossed
with the words ‘not
negotiable’ on it. The effect
of the words ‘ not
negotiable’ on a crossed
cheque is that cheque
cannot be negotiable.

16. Difference between bill of exchange and
cheque
• A bill of exchange may be
drawn on any person
including a banker. But a
cheque is always drawn on
a bank or banker.
• A bill must be accepted
before the drawee can be
called upon to make
payment upon it. A cheque
does not require
acceptance.

17. Difference between bill of exchange and
cheque
• A bill is entitled to 3 days of
grace. A cheque is not
entitled to any days of
grace.
• A cheque may be crossed.
But there is no such
provision for a bill of
exchange.
• A bill requires stamp except
in certain cases. A cheque
requires no stamp.