Cheque: A ‘Cheque’ is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand (NI Act - Section – 6)
A cheque is an instrument in writing containing an unconditional order, signed by the maker (Drawer) , directing the Bank (Drawee) to pay on demand or at a fixed or determinable future time, a certain sum of money only to, or to the order of, a certain person (Payee) or to the bearer of the instrument
There are three parties: Drawer, Drawee, and Payee.
Drawer: Means who draws (who makes or writes the cheque, mainly the A/C holder) Drawee: The bank (who pays the money)
Payee: To whom the amount will be paid
Essential characteristics of Cheque:
1. It must be writing on specified form
2. it must bear date
3. the drawer, drawee and payee must be certain
4. the amount should be certain
5. it must be signed by the drawer (maker)
6. it is payable on demand
7. it should be drawn on banker
Bill of Exchange: A bill of exchange, is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. (Negotiable Instruments Act, 1881 S.5)
Parties: Drawer, Drawee, acceptor, payee, indorser, indorsee, holder, drawee in case of need, acceptor for honor.
Essential characteristics of bill of exchange:
1. It must be writing with date
2. it must be signed by the drawer (maker)
3. the drawer, drawee and payee must be certain
4. the amount should be certain
5. it should be properly stamped
6. it must contain unconditional order
7. the order should be pay only money