What is Cheque Leaf and How to Cancel & Write: Meaning & Filling
The Cheque leaf is a basic and primary instrument for every account holder. The moment one opens a bank account, the bank provides every holder with a chequebook. This chequebook is a compilation of instruments referred to as cheque or cheque leaf. This cheque leaf is used to make payments to various individuals, Institutions and organizations.
What is a Cheque Leaf?
A cheque leaf issued by an account holder authorises the bank to pay a certain and specific sum of money to the person named in the cheque. It is a perfect substitute for cash. It simply does away with the need to carry bundles of cash from one place to another. Hence, it is a secure and effective means to settle transactions between two parties. The payments made through the issuance of cheque leaves are audited and accounted for. Cheque leaf meaning is mostly known to all.
Characteristics of Cheque
Every cheque leaf has certain characteristics. Let us discuss them and understand the true essence of this instrument.
These cheques are written instruments. No money can be exchanged orally. The details of the payee, amount, and signatures of the payer are written or printed.
Signed and executed
Each cheque leaf has to be signed by the account holder or the payee for its execution. The banker officially verifies the signatures before clearing the cheque.
Every cheque is used to transfer a specified amount to the payee. The amount is mentioned both in words and numbers. It is followed by the word 'only' to avoid unauthorized alteration.
Payable on demand
Every cheque is an unconditional order to the banker by the account holder to pay a certain sum of money to the payee. The banker cannot transfer the amount until and unless it has been demanded by the payer to do so.
Parties to the cheque leaves
There are three parties involved in the issuance of cheque leaves. The first is the issuer or payer. He is the account holder who writes the cheque. The payee is the second party whose name the cheque has been issued. The last party is the bank or the financial institution, which the payer authorizes to credit the payee's account by the amount specified in the cheque leaf.
Why are cheque leaves considered the safest form of payment?
Unlike cash, cheque leaves are very safe and secure forms of payment. The bank records all the transactions executed with cheques in its books of accounts. It debits the payer's account and credits the payee's account post-clearance. It reduces the instances of embezzlement and fraud. It even helps to curb the supply of black money in the economy. This is one of the main reasons why cheques enjoy a greater acceptance in the financial ecosystem.
Issuance of cheques offers a satisfactory redressal to the payee. Once the payer issues the cheque, he is obligated to maintain a balance in his account equivalent to at least the amount specified in the cheque. If he fails to comply with this requirement, the bank dishonors his cheque and proceeds against such account holders. Under section 138 of the Negotiable Instruments Act, of 1881, any person liable for the dishonor of a cheque can be fined twice the amount and imprisoned for two years.
Types of cheques
There are different types of cheques that are issued. All of them have different formats and serve different purposes. Let us understand the differences in the types of cheques one by one.
This is the type of cheque where the payee is none other than the payer, i.e the account holder himself. It is mainly used to withdraw money from bank accounts.
This is the type of cheque that bears a crossing on the top of the left-hand side. It directs the bank to encash the cheque only when it is presented by the person whose name appears on the cheque. The cheque can be generally crossed or specially crossed. General crossing honors the cheque to the payee, while the other hand, special crossing honors the cheque to the payee through his specified bank account.
This is the uncrossed cheque. It is a very convenient mode of executing transactions. One does not require any endorsement, and the possession of the cheque leaf is all that one needs. Any person having a bearer cheque can encash the same on the counter by its mere delivery. The bank does not undertake a detailed inquiry to confirm the person's whereabouts.
What is the maturity date of a cheque leaf?
Every cheque leaf is adequately dated. The amount gets credited to the payee's account on such a date. It can be honored on the current date or a future date. The latter of these cheque leaves are referred to as post-dated cheques. They are satisfied on a future date mentioned on the cheque. The banker will be liable to the parties if it honors the cheque before such date.
However, every cheque must be produced by the holder for clearance on the maturity date. The instrument continues to be valid until the expiry of three months from the date of issuance. After that, the cheque leaf will become void and would not be considered for payment if produced after three months.
How to cancel a cheque leaf?
It is very easy to cancel an issued cheque leaf. Two parallel lines have to be stricken against the top left-hand side of the cheque leaf. One is next required to write ‘cancelled’ in between these two parallel lines.
Cheque leaf is the most hassle-free manner to settle transactions. It avoids confusion and inconvenience to the parties. It is easy to track the payments and maintain the books of accounts. One can use these instruments for multiple purposes. One must be very careful and particular while drafting these instruments. A single mistake can land a person in issues and discrepancies. A cheque book is issued to the customer once he opens his account. These instruments have revolutionized the payment mechanism.
No matter, digitalization has reduced the dependence on cheques. However, many parties continue to rely on this method for making and receiving payments. It is authenticated and warranted against all the possible risks. That is why cheque leaves are widely acceptable.