Payment and Collection of Cheques

A cheque can be drawn in different inks, handwritings or different scripts. Thus, a cheque presented with different ink, handwriting or script can be paid.

Language: The cheque should be written in Hindi, English or Regional language. Bank is within its powers to return a cheque written in a language other than the language of that region.

Signatures on Back: When a cheque is presented for payment signatures of the presenter are taken on the back as a witness of payment. If the presenter refuses to sign, the bank can take receipt on a separate paper.

Under what circumstances is abanker authorized to terminate the payment of cheque
CHEQUE

Date on Cheque

Ante dated cheque: A cheque dated prior to its date of presentation is called ante dated cheque. It is valid and can be paid.

Post dated cheque means a cheque which is dated subsequently to the date of presentation. It is valid but can be paid only on date mentioned on cheque . If it is paid before date on cheque, it is not a payment in due course.

Stale cheque: As per RBI guidelines issued under section 35A of B R Act, a cheque becomes stale after 3 months of its issue. These guidelines are effective for cheques issued on or after 1.4.12. The validity can be reduced by the drawer but it cannot be extended. On a cheque becoming stale, the cheque can be revalidated up to 3 months at a time.

Impossible Date: A cheque with impossible date like 31.11.12 should be paid on the last day of the month or within six months of the last day of the month.

Cheque dated prior to opening the account: A cheque dated prior to the date of opening the account or issue of cheque book can be paid if otherwise in order.

Amount of Cheque : The amount should be written both in words and figures.

  • If the amount written in words and figures differ, the amount written in words should be paid.
  • The amount written in words is called legal amount and amount written in figures is called courtesy amount.
  • If the balance in the account is just equal to the amount of the cheque, the cheque will be paid.
  • If the balance in the account is insufficient to pay the cheque, it should not be paid relying on the balance in some other account or transferring the amount from other account unless there is an arrangement to that effect.
  • Banking Hours: The payment of a cheque should be made only during banking hours otherwise it will not be a payment in due course. However, the payment of a reasonable amount can be made to drawer even after banking hours.
  • Mutilation: if there is any mutilation of cheque, it should be confirmed by drawer or by collecting banker

Alteration in Cheque

  • Material alteration: Any change in date, amount or name of payee is called material alteration.
  • The change from order to bearer, or cancellation of crossing or converting special crossing to general crossing is also material alteration.
  • However, bearer to order or crossing a cheque or converting general crossing to special crossing or completing an incomplete cheque is not material alteration.
  • If there is any material alteration on a cheque it can be paid only after confirmation from drawer under his full signatures.
  • In the case of joint accounts with “either or survivor” clause any of the account holders can confirm material alteration but in jointly operated accounts signatures of all are required.
  • CTS cheques with material alteration except in date will not be collected even if confirmed by drawer.

Cheque Crossings:

Crossing is of two types — General or special crossing.

General Crossing:

  • If there are two parallel transverse lines on the face of cheque it is called General Crossing. The parallel lines can be with words and company or & co or not contain any word.
  • Even if the name of a city is written between two parallel lines like “Indore”, it will continue to be a general crossing and the cheque can be paid to any bank. Such cheque dan be paid at any station to a bank and not necessarily at Indore.

Special Crossing:

  • If name of a bank is written on the face of a cheque’ with or without two parallel transverse lines it is called special crossing. Parallel line is not necessary. The name of a bank can be written anywhere on the face of a cheque.
  • Specailly crossed cheque can be paid only to the bank whose name is mentioned on the cheque or his authorized agent for collection.
  • The special crossing is in favour of a bank and not in favour of a particular branch. Therefore, if a cheque is favouring Canara Bank Patna, it can be paid to Canara Bank at any place.

Dishonour of Cheques due to Insufficient balance:

  • If any cheque drawn by a person is returned by the bank unpaid, either with the reason funds insufficient or exceeds arrangement or similar reason such person shall be deemed to have committed an offence.
  • As per judgements of the Supreme Court, the cheques which are dishonoured on account of stop payment by the drawer or Account being closed will attract penalty
  • in case of dishonour of cheque due to reasons stated above, punishment can be imprisonment up to two year, or maximum fine up to twice the amount of the cheque, or both.
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