Bill of Exchange

Vs

Cheque
Prepared By
Abhishek Gupta MBA (Sem III)

Bill of Exchange
An instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a certain person, or to the bearer of the instrument.
-Section 5 of the Negotiable Instruments Act, 1881

 Suppose Rajiv has given a loan of Rupees Ten Thousand to Sameer, which Sameer has to return. Now, Rajiv also has to give some money to Tarun. In this case, Rajiv can make a document directing Sameer to make payment up to Rupees Ten Thousand to Tarun on demand or after expiry of a specified period. This document is called a Bill of Exchange, which can be transferred to some other persons name by Tarun. Specimen of a Bill of Exchange

Cheque
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. If you have a savings bank account or current account in a bank, you can issue a cheque in your own name or in favor of others, thereby directing the bank to pay the specified amount to the person named in the cheque.

Specimen of a Cheque

Bill of Exchange Vs Cheque

A cheque differs from a bill of exchange in the following respects: 1. Drawee: A cheque is always drawn on a bank or a banker while a bill of exchange can be drawn on any person including a banker. 2. Acceptance: A cheque does not require any acceptance while a bill must be accepted before the drawee can be made liable upon it. 3. Payment: A cheque is payable immediately on demand without any days of grace, but a bill of exchange is normally entitled to three days of grace unless it is payable on demand. 4. Crossing: A cheque may be crossed but there is no such provision in the case of a bill of exchange.

Bill of Exchange Vs Cheque (contd)

5. Notice of dishonor: When a cheque is not met, notice of dishonor is not necessary. Want of assets in the hands of the banker is sufficient notice. It is necessary to give a notice of dishonor in order to make the drawer of a bill liable. 6. Payable to bearer on demand: A cheque can be drawn payable to bearer on demand. But a bill of exchange cannot be so drawn. 7. Stamp: A bill of exchange must be stamped, whereas a cheque does not require any stamp. 8. Countermanding payment: A cheque may be revoked by countermand of payment. The payment of a bill, however cannot be countermanded.

Bill of Exchange Vs Cheque (contd)

9. Noting and protesting: A cheque is not noted or

protested for dishonor and is generally inland. 10. Presentment: A bill of exchange must be duly presented for payment otherwise the drawer will be discharged. The drawer of a cheque is not discharged by failure of the holder to present it in due time unless the drawer has sustained damage by the delay. 11. Protection: A banker is given statutory protection with regard to payment of cheques in certain circumstances. No such protection is available to the drawee or acceptor of a bill of exchange.