Difference between cheque and bank draft and others

abhijit majumder (Querist) 08 April 2020 This query is : Resolved
Dear Professional Friends
Section 131A of Negotiable Instruments Act states all the provisions of Chapter XIV of N.I Act will be applicable to
Bank Drafts also.
My query is what is the difference between Cheque and Bank Draft?

Section 138 of NI Act inter alia states a cheque should be deposited within 3 months from the date of its draw.
Is this limitation is applicable to Draft also?

My third query is :
25. When day of maturity is a holiday.—When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day.

What is the meaning of " next preceding business day"

Regards
Abhijit Majumder

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Rajendra K Goyal (Expert) 08 April 2020
You asked:
what is the difference between Cheque and Bank Draft?
Reply:
Few differences between a Cheque and Demand Draft:
1. Issuing authority: Cheque is issued by the customer, whereas Demand draft is issued by the bank.
2. Amount: In cheque payment is made after presenting the cheque to the bank, while in DD is given after making payment to the bank.
3. Bouncing: A demand draft cannot be dishonoured as the money is already paid to the bank, while in the case of a cheque, it can bounce due to instructions to stop payment by the drawer or due to insufficient funds in the account.
4. Stop Payment: Payment of cheque can be stopped by the drawee, whereas payment cannot be stopped in DD.
5. Payee: A cheque can be paid to bearer or order. While DD is paid to a person on order.
6. Payee and drawer: In cheque drawer and payee are different persons. In DD, both parties are banks.
7. Fund Transfer: A cheque needs signature to transfer amount, While DD does not require signature to transfer funds.
8. A cheque book is available only to the account holder, while a DD can be executed both by account holders as well as non-account holders.
9. In a cheque transaction, there are three parties involved: the drawee, drawer, and payee, while in a demand draft, only two parties are involved: drawer and payee.

Rajendra K Goyal (Expert) 08 April 2020
You asked:
Section 138 of NI Act inter alia states a cheque should be deposited within 3 months from the date of its draw. Is this limitation is applicable to Draft also?
Reply:
Yes, demand draft is to be deposited in 3 months to the payee Branch for payment. Bank has received the amount in advance for the demand Draft hence, on request Bank revalidate the Bank draft for further period. Payment of Bank draft can be received by the purchaser of the Bank draft by cancellation of the original Bank draft even after 3 months.

You asked:
My third query is : 25. When day of maturity is a holiday.—When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day. What is the meaning of " next preceding business day"
Reply:
Next working day.

Rajendra K Goyal (Expert) 08 April 2020
Query repeated at:
https://www.lawyersclubindia.com/experts/Difference-between-cheque-and-bank-draft-and-others-718016.asp

Please avoid repetition.

KISHAN DUTT KALASKAR (Expert) 08 April 2020
Dear Sir,
Dear Sir,
My answers are as follows:
Section 138 of NI Act inter alia states a cheque should be deposited within 3 months from the date of its draw. Is this limitation is applicable to Draft also?
Ans: No, even after three months the banker may accept the draft even after 3 months if valid reasons are shown.
My third query is : 25. When day of maturity is a holiday.—When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day. What is the meaning of " next preceding business day"
Ans: It means Next banking working day.

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,In a demand draft there is guaranteed payment by the banker and there is no question of it bouncing. The biggest difference between a cheque and a DD is that the payment is always honoured.

Here are few other differences between cheque and DD:The cheque is issued by the customer, whereas Demand draft is issued by the bank.
In cheque payment is made after presenting the cheque to the bank, while in DD is given after making payment to the bank.
A cheque can bounce due to insufficient balance. DD cannot be dishonored as the amount is paid beforehand.
Payment of cheque can be stopped by the drawee, whereas payment cannot be stopped in DD.
A cheque can be paid to bearer or order. While DD is paid to a person on order.
In cheque drawer and payee are different persons. In DD, both parties are banks.
A cheque needs signature to transfer amount, While DD does not require signature to transfer funds.
However, banks do charge certain amount depending on the amount on Demand draft. Outstation cheque are also charged.

Raj Kumar Makkad (Expert) 08 April 2020
I think due reply has already been provided and there shall not be any use to repeat the wise replies already offered by both the experts.

Raj Kumar Makkad (Expert) 08 April 2020
Though you have repeated the same query either not trusting over the replies of both the senior experts or due to lack of knowledge is best known to you.

Rajendra K Goyal (Expert) 09 April 2020
Query is repeated, however, reply has been posted for this query only. left other query unreplied.

P. Venu (Expert) 09 April 2020
What are the facts? What is the context?

Raj Kumar Makkad (Expert) 09 April 2020
This is nothing but an academic query having no locus of the author.

Rajendra K Goyal (Expert) 10 April 2020
An academic query, which is repeated also. author is requested to avoid.

T. Kalaiselvan, Advocate (Expert) 11 April 2020
The query has been very well and properly addressed by experts above.
There is no need to repeat the same answers

Dr J C Vashista (Expert) 14 April 2020
Very well explained and replied by expert Mr. Rajendra K Goyal which has been endorsed by other experts and I concur the same.
Is it fair on the part of author to repeat same query time and again ? If you have lot of time to pass do not spend it taxing the experts as the reply shall not change. Repetition of same story is absurd and ridiculous.
However, if you are not satisfied with earlier response it would be better to consult a local prudent lawyer for professional guidance if the story is true.

Rajendra K Goyal (Expert) 14 April 2020
Thanks Expert Sh. J.C. Vashishta ji for your comments.

Raj Kumar Makkad (Expert) 14 April 2020
Author do not care for the repetition because we alll are ready to address each and every query just for gaining more and more marks. It permotes them to repeat their similar act again and again.

Rajendra K Goyal (Expert) 15 April 2020
Not able to understand, what more numbers would do for an expert who has spared time, knowledge for giving any reply specially when he is not going to gain anything from it.

In the reply possibility of repetition of a few words / points is always there.

Guest (Expert) 15 April 2020
Dear abhijit majumder,

If you are a practising Company Secretary, as your profile reveals, you could well have posted a real problem, if your office has faced any, instead of posting an academic type of query.

However, in simpel words, a cheque is issued by an account holder, which can be realized by the payee within the prescribed validity period of the instrument, as per law. After that the cheque becomes invalid.

Contrarily a bank draft is issued by a banker (not account holder) in the name of the payee, as per particulars provided by the applicant in the prescribed form. But in that case the banker realizes the amount of the draft.in advance from the accplicant by debiting the amount of the draft in to the applicant's account.

The validity limit to draft would apply, as like the cheque for the purpose of realization by the payee.

So, in the former case (cheque) the debit appears in the drawer's account only when the payee withdraws the amount, while in the case of a draft since the bank has already debited the amount to drawer's account, the transaction of the draft would appear directly in the banker's account.

Guest (Expert) 15 April 2020
The next precding business day denotes, next working day of the bank after the holiday.