Cheque: Meaning, Essentials, Electronic and Truncated Cheques (Section 6)

The cheque is the instrument most people actually use, and the one that generates most litigation under the Act. In law it is simply a special kind of bill of exchange: one drawn on a banker and payable on demand. Since 2002 the definition has also covered the electronic image of a truncated cheque and the cheque in electronic form. This note explains the definition, the essentials and kinds of cheque, the modern clearing system, and the rules on post-dated and stale cheques.

1. The Statutory Definition

Section 6, Negotiable Instruments Act, 1881

A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

Explanation I. For the purposes of this section, the expressions (a) "a cheque in the electronic form" means a cheque drawn in electronic form by using any computer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or with electronic signature, as the case may be; (b) "a truncated cheque" means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

Explanation II. For the purposes of this section, the expression "clearing house" means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.

Explanation III. The expressions "asymmetric crypto system", "computer resource", "digital signature", "electronic form" and "electronic signature" shall have the same meanings respectively assigned to them in the Information Technology Act, 2000.

The electronic and truncated cheque provisions were inserted by the 2002 amendment. The 2015 amendment recast the definition of a cheque in electronic form, which had earlier required an "exact mirror image of a paper cheque", and added the alternative of an electronic signature.

2. The Essentials

A bill of exchange: every cheque must satisfy Section 5: a written, signed, unconditional order to pay a certain sum of money to a certain person or his order, or to bearer.
Drawn on a specified banker: the drawee must be a banker (Section 3). An order on anyone else is a bill, not a cheque.
Payable on demand only: a cheque cannot be made payable after a period; it needs no acceptance and has no days of grace. Section 19 confirms that a cheque is payable on demand.
Drawn on an account: in practice the drawer must have an account with the banker, and the banker's duty to pay arises from the banker and customer relationship, not from the cheque itself (Topic 33).

⚠ Note

The drawee bank is not liable to the holder on a cheque, because a bank never accepts a cheque. If the bank wrongfully refuses to pay, its liability is to its customer, the drawer, for breach of contract (Topic 37). The holder's remedy is against the drawer and indorsers.

3. Kinds of Cheque

Bearer cheque: payable to bearer; transferable by delivery. Section 31 of the RBI Act does not prohibit cheques payable to bearer on demand.
Order cheque: payable to a named person or his order; transferable by indorsement and delivery.
Crossed cheque: bearing two parallel lines, with or without words, so that it is paid only through a banker (Sections 123 to 131A; Topic 34). An "account payee" crossing directs collection only for the payee's account.
Post-dated cheque: bearing a future date; it cannot be paid before that date (Section 4 below).
Ante-dated cheque: bearing a past date; valid, but its validity period runs from the date on it.
Stale cheque: presented after its period of validity; banks refuse payment (Section 5 below).
Electronic image of a truncated cheque and cheque in electronic form: the two electronic categories recognised by Section 6.

4. Post-dated Cheques

📖 Anil Kumar Sawhney v. Gulshan Rai (Supreme Court, 1993)

Held: A post-dated cheque is a bill of exchange until the date written on it, and becomes a cheque on that date. The period within which a cheque must be presented for the purpose of Section 138 runs from the date on the cheque, not from the date it was handed over.

Post-dated cheques are widely given for loan instalments and as security. Whether the dishonour of a post-dated or "security" cheque is an offence under Section 138 depends on whether a legally enforceable debt existed on the date of presentation (Topic 43).

5. Period of Validity

The Act does not fix a validity period for cheques; the banker's authority to pay comes from the customer's mandate and banking practice. The Reserve Bank of India directed banks, with effect from 1 April 2012, not to pay cheques, drafts, pay orders and bankers' cheques presented more than three months from their date. Section 138 requires presentation within six months or within the period of its validity, whichever is earlier, so the three-month period now governs criminal liability (Topic 42).

6. Truncation and Clearing

Cheque truncation stops the physical movement of the paper cheque at the presenting bank; an image and data are sent through the clearing house instead. The Reserve Bank introduced the Cheque Truncation System (CTS) in the National Capital Region in 2008 and extended it across all bank branches by 2021. Related measures include:

CTS-2010 standard: uniform cheque security features required for cheques to be cleared through CTS.
Positive Pay System: from 1 January 2021, the drawer may confirm key details of high-value cheques to the bank in advance, and banks verify them before payment.
Continuous clearing: from 4 October 2025, cheques are scanned, presented and passed continuously during the day with settlement on realisation, instead of in fixed batches. The second phase, with a short deadline for drawee banks to confirm, was postponed by the Reserve Bank in December 2025 until further notice.

Sections 64 and 81, as amended in 2002, allow presentment of the electronic image of a truncated cheque and require the clearing house or bank to retain the paper cheque (Topic 26). True cheques in electronic form, drawn wholly by computer, are recognised by law but are not in general use in India; electronic payments run instead through systems under the Payment and Settlement Systems Act, 2007 (Topic 52).

⚠ Key point

A cheque is a bill of exchange drawn on a specified banker and payable only on demand, and includes the electronic image of a truncated cheque and a cheque in electronic form (Section 6, as amended in 2002 and 2015). It needs no acceptance and has no days of grace, and the drawee bank is not liable to the holder. A post-dated cheque is a bill until its date (Anil Kumar Sawhney). Under RBI directions, cheques are valid for three months, which limits the presentation period under Section 138. Clearing now runs through the Cheque Truncation System with continuous clearing since October 2025.

7. Related Topics and Provisions

Comparison of note, bill and cheque; drafts (Topic 9)
Crossing of cheques (Topic 34)
Ingredients of the Section 138 offence (Topic 42)
Electronic payments and the CTS (Topic 52)