Whenever the cheque is dishonoured, the drawee bank instantly issues a ‘Cheque Return Memo’ to the payee banker specifying the reasons for dishonour. The payee banker provides the memo and the dishonoured cheque to the payee. The payee has an option to resubmit the cheque within three months of the date specified on the cheque after fulfilling the reason for the dishonour of cheque To get a more clear understanding of the major reasons for dishonour of a cheque, you can watch the video below: The Negotiable Instrument Act, 1881 is applicable for the cases related to dishonour of cheques. In accordance with section 138 of this act, dishonour of cheque is a criminal offence and is punishable with monetary penalty or imprisonment up to 2 years or both.
A postdated check offers the promise of controlling the uncontrollable: As time marches forward, you may wonder what the date on a check really does. Whether you received a postdated check or you’re thinking of writing one, it’s important to know how they work — and that they often don’t work the way you might expect. A postdated check is a check with a future date written on it. For example, assume that today is January 1 st and you’re writing a check.
In general, you’d put the current date (January 1 st) on the check. But you could just as easily write next week’s date on the check and say you wrote it January 8 th. In other words, you could postdate the check. • No fraud allowed: There’s no law making postdated checks illegal. It is illegal to write a check when you know you don’t have the funds to cover it, but things get a little fuzzy – and details depend on state law – when you postdate a check (assuming it is accepted as payment).
It’s also illegal to defraud somebody who sells you something by pretending to pay but never actually paying (or having the intention to do so). • Not a written agreement: Just because it's legal doesn't mean things will work out the way you intended: The date that you choose to use is not part of a legally binding agreement between you and the person you wrote the check to.
In most cases, the recipient can deposit the check at any time. Unless you set things up correctly with your bank, the bank is free to pay funds out of your account before the date shown on your check.
• Ask first: What’s more, a postdated check might not be an acceptable form of payment. You’re allowed to try to pay with a postdated check, and businesses are allowed to reject those payments because you haven’t really made a free-and-clear payment.
If you plan to write a postdated check, ask for permission before doing so. If your payment is rejected, you might be unable to buy a product or service that you wanted, you might have to pay late-payment fees, or there might be other consequences. For example, the IRS generally doesn’t accept postdated checks, so you may face tax penalties and interest if your payment fails.
Likewise, some universities won’t accept those checks, so complications with enrollment (among other things) are a possibility. In most cases, you can deposit or cash a postdated check early.
Debt collectors and other businesses may be prohibited from processing a check before the date on the check, but most individuals are free to take postdated checks to the bank immediately.
That said, if you agreed to wait before cashing a check, it might be illegal to do otherwise. It’s wise to communicate with whoever wrote the check – there’s probably a reason it’s postdated. If the account does not have sufficient funds, the check might bounce, and you might have to pay fees to your bank. You can try to get those fees reimbursed by the check writer, but collecting from somebody who’s already low on funds can be time-consuming and expensive (possibly requiring that you take legal action).
Find out if the check was intentionally postdated, and figure out a solution. Cashing a postdated check might be a challenge. Because there’s a possibility that the check won’t clear, you might have better luck depositing those checks.
That allows your bank to on the funds instead of handing over cash immediately. If you really want to cash a postdated check for the full amount, take it to the bank that issued the check — where the check writer has a checking account.
• Confirm with your bank: Just writing a future date doesn’t guarantee anything. To really prevent the funds from being paid out of your account before the date you choose, contact your bank before you write the check. Ask what you need to do to ensure that the check is not processed before you’re ready — especially if you don’t trust the payee.
Typically, you’ll have to provide written instructions, and your bank can tell you exactly how to do that. Ask about any fees involved, and expect to pay $30 or so. • Submit a written request: To formalize your request, you may need to provide written instructions to your bank. The requirements depend on your state and your bank, so learn the rules before you write a postdated check. Oral instructions might be valid for 14 days, and you may be able to extend your bank’s monitoring time for up to six months with written instructions.
• Communication saves money: It’s also a good idea to communicate with whoever you give the check to. Make sure they know that the check is postdated, and verify that this is acceptable.
If they deposit the check early and it bounces, your bank will charge you an (or overdraft charges, depending on your account).
The payee’s bank will also charge fees, and you might be required to pay fees or other penalties for paying with a bad check (late fees are also a possibility if your payment isn’t processed on time). • Who pays if there’s a problem?
A rejected payment (or an unexpected withdrawal from your checking account) can cause numerous problems. If you provide instructions to your bank and they pay funds from your account, your bank should be required to cover any overdraft charges that result, and you may have further recourse against your bank for other expenses you face.
If you have the option, it is best to avoid writing postdated checks. The only way to guarantee that they’ll actually work is to pay extra fees to your bank. If you’re unwilling or unable to pay your bank to monitor your account, you’re at the mercy of whoever you give the check to. Even if your payee is honest, they may make the honest mistake of forgetting (and leaving you with bad check fees).
• If you’re postdating a check for timing or convenience reasons (like you’ll be out of town and unable to pay when you usually do), schedule the payment through your bank’s service.
• If you need a few extra days for funds to clear in your account, ask your payee for an alternate payment date. Some billers are happy to arrange a payment date that works well with your income (they’ll make your due date a few days after your typically comes in). • Sign up for automatic electronic payments — but only if you trust the payee.
Dishonest or disorganized businesses may make withdrawals from your account before you’re ready.
best post dated cheque meaning in gujarati - 12 Common Reasons you must know for Dishonour of Cheque
Ordinarily, the payee of a cheque is entitled to encash at the counter of the paying banker by presenting it within the specified banking hours.
In case of a bearer cheque, the paying banker does not need to go into an elaborate exercise with regard to the identity of the holder of the cheque. An order cheque is also paid by the paying banker on being apparently satisfied about the true identity of the presenter of the cheque. To ensure that the cheque is not encashed by a wrong person, by concealing his identity, there has developed a practice called ‘crossing of a cheque’. The practice has been given legal coverage in the Negotiable Instrument Act, 1881.
When cheque is crossed it in effects means a request-more appropriately, an instruction by the client not to pay the cheque directly over the counter but to a banker only for crediting the payees account with the bank. A cheque bearing such an instruction is called a ‘crossed cheque’. The crossing of a cheque is intended to ensure that its payment is made to the right payee.
Section 123 to 131 of the Negotiable Instrument Act contain provisions relating to crossing. According to section 131-A, these sections are also applicable in case of drafts. Thus not only cheques but bank drafts also may be crossed. a) Meaning: According to section-123 of NI Act, where a cheque bears across its face an addition of the words “and company” or any abbreviation thereof between two parallel transverse lines or two parallel transverse lines simply, either with or without the words “not negotiable” that addition shall be deemed a crossing & the cheque shall be deemed to be crossed generally.
ii. The direction is that, the paying banker should not pay the cheque at the counter. It should be paid only to a fellow banker. In other words, payment is made through an account and not at the counter. Sec.126 of the NI Act clearly lays down that, “Where a cheque is crossed generally, the banker on whom it is drawn, shall not pay it otherwise than to a banker”.
iv. The main intention of crossing a cheque is to give protection to it. When a cheque is crossed generally, a person who is not entitled to receive its payment, is prevented from getting that cheque cashed at the counter of the paying banker. But, it gives only a limited protection, in the sense, that if the thief is not the customer of the paying banker, he can encash that cheque through his banker, by forging the signature of the payee. However, it can be detected.
To avoid this danger, special crossing was introduced. a) Meaning: A special crossing implies the specification of the name of a banker on the face of the cheque. Sec.124 of N.I. Act 1881 reads. “Where a cheque bears across its face an addition of the name of a banker, either with or without the words “Not Negotiable” that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially, and to be crossed to that banker”.
i. It is also a direction to the paying banker. The direction, is the, that paying banker should pay the cheque only to the banker, whose name appears in the crossing or to his agent. Sec.126 the NI Act clearly lays down that “where a cheque is crossed specially the banker on whom it is drawn, shall not pay it, otherwise than to the banker to whom it is crossed or his agent for collection. iii. A special crossing gives more protection to the cheque than a general crossing.
It makes a cheque still safer because a person, who does not have a real claim for it, would find it difficult to obtain payment. In special crossing, the cheque is specially crossed to the payee’s banker. Hence, the banker, in whose favour the cheque has been crossed, knows the payee and his specimen signature well.
So, he will not collect if for any person other than the payee. If there is any forgery, it can be easily detected by the banker. But, we can not say that, it gives full protection in the sense, that, an unscrupulous person, who has an account in the same bank but at a different branch, can encash it by forging the signature of the payee.
It can also be detected. General Crossing Special Crossing 1. Drawing of two parallel transverse lines is a must. 1. Drawing of two parallel transverse lines is not essential. 2. Inclusion of the name of a banker is not essential. 2. Inclusion of the name of a banker is essential. 3. In General Crossing paying banker to honor the cheque from any bank A/C.
3. In Special Crossing paying banker to honor the cheque only when it is presented through the bank mentioned in the crossing and no other bank.
4. General Crossing can be converted into a Special Crossing. 4. Special Crossing can never be converted to General Crossing. 5. In case of General Crossing the words “And Company” or “& Company” or “Not Negotiable” between the transverse lines to highlight the crossing does not carry special significance. 5. In case of Special Crossing the name of a banker may be written within two parallel transverse lines or with the words “And Company” or “Account Payee Only” or “Not Negotiable” the inclusion of these words has become customary.
If the crossing on a cheque is cancelled, it is called opening of the crossing. The cheque thereafter becomes an open cheque. Only the drawer of the cheque is entitled to open the crossing of the cheque by writing the words “Pay Cash” and canceling the crossing along with his full signature.
His initials are not sufficient for this purpose. The paying banker must be very careful in ascertaining the validity or genuineness of the drawer’s signature opening the crossing. If drawer’s signature (already on the cheque) is forged by the holder in order to open the crossing and the payment is obtained at the counter, the banker will remain liable to the true owner of the cheque. The banker is under an obligation to pay the cheque according to the direction of the drawer conveyed through the crossing on the cheque.
A negotiable instrument may be transferred by negotiation. (i) Negotiation can be effected by mere delivery if the instrument is a bearer one. (ii) By endorsement and delivery in case it is an order instrument. An order instrument means instrument payable to a specified person or to the order of that specified person. If an instrument payable to order is transferred without endorsement, it is merely assigned and the holder thereof is not entitled to the rights of a holder in due course.
An endorsement is the mode of negotiating a negotiable instrument. A negotiable instrument payable otherwise than to a bearer can be negotiated only by endorsement and delivery. An endorsement, according to sec. 15 of the NI Act is “when the maker or holder of a negotiable instrument signs the same, otherwise than as such marker. For the purpose of negotiation on the back or face thereof or on a slip of paper annexed thereto, he is said to endorse the same and is called the endorser.
The person to whom the instrument is endorsed is called the endorsee. “The word endorsement is said to have been derived from Latin ‘en’ means ‘upon’ and ‘dorsum’ meaning ‘the back’. Thus usually the endorsement is on the back of the instrument though it may be even on the face of it. Where no space is left on the instrument, the endorsement may be made on a slip of paper attached to it. This attached slip of paper is called ‘Allonge’. 2.
The endorsement must be of the entire instrument. A partial endorsement, that is to say, an endorsement, which purports to transfer to the endorsee a part only of the amount payable, or which purports to transfer the instrument to two or more endorsees severally (i.e.
separately), does not operate as a negotiation of the instrument. An endorsement is restrictive when it prohibits further negotiation of a negotiable instrument. Sec. 50 of the NI Act 1881states. “The endorsement may, by express words, restrict of exclude the right to negotiable or pay constitute the endorsee an agent to endorse the instrument or to receive its contents for the endorser or for some other specified person.” If the endorser of a negotiable instrument, by express words in the endorsement, makes his liability or the right of the endorsee to receive the amount due thereon, dependent on the happening of a specified event, although such event may never happen, such endorsement is called a conditional endorsement (Section 52 of NI Act).
Such an endorser gets the following rights: A crossed cheque or an account payee cheque: It is written in the same as that of bearer cheque but issuer specifically specifies it as account payee on the left hand top corner or simply crosses it twice with two parallel lines on the right hand top corner.
The bearer of the cheque presenting it to the bank should have an account in the branch to which the written sum is deposited. It is safest type of cheques. Nice article! Most people no longer go through their banks to order online checks because the check costs are far too expensive. Most of the time the banks simply order the checks for you through other check printers and mark up the price even further. Now you will be able to order bank checks yourself directly online.
Thank you website owner for this article! This is amazing and informative for the students of Baking and Finance. It helped me a lot. I want to recommend some other articles relating to Negotiable Instruments specially and and I hope these will help students of Banking and Finance. Thanks once again for this article.. There are variety of cheques available that include Order Cheque, Bearer Cheque, Crossed Cheque, Anti-Dated Cheque, Post-Dated Cheque, Uncrossed Cheque etc.
Cheques are usually provided by a bank to an individual having an account associated with them. Fortunately, today with the advancement in technology, now person can design their own cheque book with the help of sites like and promote their identity everywhere. This is something which we can’t even imagine few years back. is 'not to exceed rs.x amount' written on cheque valid?
eg. i give a crossed cheque to my lic agent in favour of lic of india without amount mentioned. Can i write say something like ' not to exceed Rs.200,000' on the cheque. my agent can check the exact amount due and fill it which i roughly believe is less than rs.2 lakhs.
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WHAT IS POST DATED CHEQUE.