Section 6 of Negotiable Instruments Act 1881 states that “A cheque is a bill of exchange drawn on a specified banker, and not expressed to be payable otherwise than on demand”.
A cheque is bill of exchange that has 2 more qualifications, specifically,
(i) It is constantly drawn on a specified banker
(ii) It is always payable on demand. As a result, all cheques are bills of exchange, but all bills are not cheques. A cheque must satisfy all the prerequisites of a bill of exchange; i.e., it must be signed by the drawer, & must enclose an unconditional order on a specified banker to pay a definite sum of money to or to the order of assured person or to the bearer of cheque. It does not entail acceptance.
Difference between Bills of Exchange & Cheque
- A bill of exchange is typically drawn on some firm or person, while a cheque is always drawn on bank.
- It is necessary that a bill of exchange ought to be accepted before its payment can be claimed. A cheque does not necessitate any such acceptance.
- A cheque can only be drawn payable on demand; but a bill can also be drawn payable on demand, or on the termination of a certain period after sight or date.
- A grace of 3 days is allowed in case of time bills whereas no grace is given in case of cheque.
- The drawer of bill is released from his liability, if it not presented for payment, but drawer of a cheque is discharged provided that he suffers any damage by holdup in presenting the cheque for payment.
- Notice of dishonor of a bill is essential, but no such notice is needed in case of cheque.
- A cheque may be crossed, nevertheless not needed in the case of bill.
- A bill of exchange must be appropriately stamped, whereas a cheque does not need any stamp.
- A cheque drawn to bearer payable on demand shall be valid although a bill payable on demand can never be drawn to bearer
Unlike cheques, the payment of bill can’t be counter-manded by the drawer.