What is a Cheque under Section 6?
A cheque is a particular kind of bill of exchange. It must be drawn on a specified banker and must not be expressed to be payable otherwise than on demand. The statutory definition also expressly includes the electronic image of a truncated cheque and a cheque in electronic form.
Section 6 - "Cheque"
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 this section, a cheque in electronic form means a cheque drawn in electronic form by using a 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.
A "truncated cheque" is a cheque truncated during the clearing cycle by the clearing house or by the paying or receiving bank immediately after generation of an electronic image for transmission, so that further physical movement of the written cheque is substituted by the electronic image.
Explanation II: "Clearing house" means a 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" have the meanings respectively assigned to them in the Information Technology Act, 2000.
Essential Elements of a Cheque
- Bill of exchange: a cheque is a species of bill of exchange and must satisfy the relevant legal characteristics of that instrument.
- Specified banker: unlike an ordinary bill of exchange, a cheque is drawn on a specified banker.
- Payable on demand: it must not be expressed to be payable otherwise than on demand.
- Electronic forms included: Section 6 expressly includes electronic cheques and electronic images of truncated cheques.
Cheque in Electronic Form
The present Section 6 recognises a cheque drawn electronically by using a computer resource and signed in a secure system using the forms of digital or electronic authentication specified in the provision. This extends the statutory concept of a cheque beyond a conventional paper instrument.
What is a Truncated Cheque?
Cheque truncation replaces the further physical movement of a cheque during the clearing process after an electronic image has been generated for transmission. The truncation may occur through the clearing house or through the paying or receiving bank as described in Section 6.
Meaning of Clearing House
For Section 6, a clearing house is one managed by the Reserve Bank of India or recognised as a clearing house by the Reserve Bank of India. This definition is relevant to the statutory concept of cheque truncation.
Related Legal Provisions
Section 5
Defines a bill of exchange. Section 6 builds on that definition by identifying the additional features that make such an instrument a cheque.
Section 7
Defines parties such as the drawer, drawee, acceptor and payee. In a cheque, the drawee is the specified banker on whom it is drawn.
Section 13
Defines "negotiable instrument" and includes a promissory note, bill of exchange or cheque payable either to order or to bearer.
Information Technology Act, 2000
Section 6 adopts the meanings of specified electronic and digital expressions from the Information Technology Act, 2000.
Official Legal Sources
The current statutory text should be verified from the Government of India legislative database. Reserve Bank of India materials may also be consulted for banking and cheque-clearing regulation.