Page 163 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes cheque. Such a cheque is payable to the person specified in that as the payee, or to anyone
else to whom it is endorsed.
3. Uncrossed/Open Cheque: A cheque is called an “open cheque” when it is not crossed. It is
also known as an “uncrossed cheque”. The payment of such a cheque can be obtained at the
counter of the bank. It can be an order cheque or a bearer one.

4. Crossed Cheque: Crossing of cheque means drawing two parallel lines on the face of the
cheque with or without additional words like “& CO.” or “Account Payee” or “Not
Negotiable”. A crossed cheque can only be credited to the payee’s account.
5. Anti-dated Cheque: If a cheque is presented to the bank after the date that is mentioned on
it, it is called as “anti-dated cheque”. Such a cheque is valid up to 6 months from the date
of the cheque.
6. Post-dated Cheque: If a cheque bears a date which is yet to come, then it is known as
post-dated cheque. A post dated cheque cannot be honoured earlier than the date on the
cheque.
7. Stale Cheque: If a cheque is presented for payment after six months from the date of the
cheque it is called stale cheque. A stale cheque is not honoured by the bank.

10.1.5 Dishonour of Cheques

According to Section 138 of the Negotiable Instruments Act, 1881:
“Dishonour of cheque for insufficiency etc., of funds in the account.—Where any cheque drawn
by a person on an account maintained by him with the banker for payment of any amount of
money to another person from out of that account for the discharge, in whole or in part, of any
debt or other liability, is returned by the bank unpaid, either because of the amount of money
standing to the credit of that account is insufficient to honour the cheque or that it exceeds the
amount arranged to be paid from that account by an arrangement made with that bank, such
person shall be deemed to have committed an offence and shall, be deemed to have committed
an offence and shall, without prejudice to any other provision of this Act, be punished with
imprisonment for a term which may extend to one year, or with fine which may extend to twice
the amount of the cheque, or with both.”

Reasons for Dishonour of Cheques

Following are the various reasons for dishonour of cheques:
Insufficient fund: When the amount written on a cheque is more than what the drawer has
in his account in the bank.

The death of the drawer: If the bank receives information of the death of its customer, the
bank won’t honour any cheque presented on the account of the dead customer, until
further notice.

Irregular signature: If the signature on the cheque differs from the specimen signature in
the bank.
Non-existing account: Sometimes, scammers who have no bank account but possess false
cheque books may issue cheque to those whom they have conned.
Bankruptcy: If one is judged by a law court to be unable to pay his debts in full, the bank
will dishonour any cheque presented on behalf of that customer.

Frozen account: If court orders or a military government rules that some people’s account
be frozen, the bank must definitely dishonour all checks bearing the account’s numbers.

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