Cheque is a negotiable instrument. Normally, cheques are issued either for the reason of statutory requirement or for the reason of securing proof of payment. Crossed and account payee cheques are not negotiable by any person other than the payee. It has to be deposited into his bank account. In legal parlance, author of the cheque is called ‘drawer’, the person in whose favour it is drawn is called ‘payee’ and the bank who is directed to pay the amount is called ‘drawee’. It is always safe to issue crossed “Account Payee Only” cheques in order to avoid its misuse. Blank cheques are not safe. It is better to date the cheque invariably. A cheque is valid for payment only for six months from the date mentioned in the cheque. After the period of six months, such a cheque is called ‘stale cheque’.
A cheque becomes due for payment on the date mentioned on it. Before issuing a cheque author of the cheque should ensure that he has sufficient funds in his account. Lest, it would bounce with remarks ‘insufficient funds’. Bouncing in common parlance is referred to dishonour of cheques.
Bouncing of a ball is a fun but bouncing of a cheque is a criminal offence. The Negotiable Instruments Act, 1881 is applicable for the cases of dishonour of cheque. This Act has been amended many times since 1881 and I am going to discuss the provisions of this Act as it stands today.
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