The definition and use of cheques are covered by The Bills of Exchange Act 1882, and the Cheques Acts of 1957 and 1992. The Bills of Exchange Act 1882 defines a cheque as a written order from an account holder instructing their bank to pay a specified sum of money to one or more named beneficiaries on demand. Ever since their inception, it has been the case that cheques are not a promise to pay by the bank, but a request to the bank that it pays, out of the funds deposited by the customer, an amount to a third party.

This means that the bank will only honour the cheque if the account holder has sufficient funds to meet it or it can be covered by an agreed overdraft or another line of credit. Cheques are not legal tender and never have been. Even today, if you owe someone money, they are not obliged to accept a cheque. A creditor is entitled to be paid in legal tender and can refuse payment in any other form.


A cheque is an order to a bank to pay a stated sum from the drawer's account, written on a specially printed form. There are three parties: Drawer, Drawee and Payee. All the cheques are bills of exchange. But all the bills of exchange are cheques

Section 6 of the Negotiable Instrument Act 1881 defines A Cheque, According to Section 6 "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 payable always on demand. Here the drawer and payee may be the same person.

Essentials of a Cheque:-

(1) It must be in writing. It cannot be oral.

(2) There must be an order to pay the amount

(3) Such order for payment must be unconditional.

(4) Drawee must be a certain Bank

(5) The amount to pay must be fixed/certain.

(6) Payee must be certain

(7) A cheque is payable on demand only

(8) It must be signed by the drawer. An account holder of the bank can draw the cheque.