USE CHEQUES CAREFULLY AS A CONVENIENT TOOL- alterations are not good and will not generally be allowed.

[C.A. DEV KUMAR KOTHARI]

Cheque is a friendly tool

Cheque is a friendly tool provided by bank to its account holders. Cheque can be used to withdraw cash from account, to pay money to other parties by way of several type of cheques e.g. a bearer cheque (against which cash can be withdrawn), a simply crossed cheque, an a/c payee cheque, a specially crossed cheque, a specially crossed a/c payee cheque etc. With cheque facility one need not to handle cash very much. Instead of paying in case cheques can be issued.

Cheque

For the purpose of this write-up the term "cheques" shall include only a physical cheque issued by any account holder on his bank. And it will not include other cheques like a demand drafts, or bankers cheques, pay orders or pay-link cheques or e cheques as popularly known in the banking sector. While making payment some times and in some situations the requirement can be that the cheque should be be crossed by writing A/C Payees or A/c Payees only in two parallel lines across the cheques. This is to ensure that the proceeds shall be deposited only in the account of the person whose name is written as payee of the cheques.

Alterations in cheque

Alterations in cheque can be required to make corrections of mistakes. At present correction can be made in any information written on cheque if it is duly authorized by the issuer. The banker will honor the cheque if the alterations are authenticated by counter signature of the authorized person who can operate the concerned bank account. Even alternation in nature of cancellations of A/c payee have come to notice, but it has to be honored by bank, if it is countersigned. In case of doubt, the bank can hold the cheque and make immediate enquiry from the account holder. However, in view of constraints of time and possibility of counter claims, as per practice, if an alternation is authorized by counter sign and the cheque is otherwise correctly written and signed and there is balance in account, the cheque is cleared.

Carelessness in writing cheques

Carelessness in writing cheques is noticed due to reasons of casual and carelessness while writing cheques. Other reason is that generally some cheques are issued without any charges so if ther is no charge, one think of writing another cheque so carelessness take place. When charges are levied, corrections in cheque are authenticated by counter signature to save cost of another cheque.

Cheque writing should be very carefully exercise, however, we find carelessness in the same. Now time has come to be careful because from 1st july, 2010 alterations in cheques will not be allowed so the cheque writing will not be so easy and casual anymore.

Good practice of cheque writing will be required Generally habit of casually writing is prevalent. Some corrections in hand written maters are bound to take place when the matter written is lengthy. However, in case of cheque limited information is required to be filled in. The information to be filled in a cheque are as follows (in preferable seriatim order)

(a) Date on cheque.

(b) Name of payee in cheqeue. (some time bank and a/c no. of payee is also mentioned)

(c) Amount in figures (should be written before in words to avoid mistake).

(d) Amount in words.

(e) Stamp or writing as to A/c payee.

(f) Signature of person authorized in bank with rubber stamp, if any.

Thus, we find that cheque writing does not require thinking process, the matters to be mentioned on cheque are generally pre decided and recorded in the counter foil of cheque book or bank book or supporting documents. Inspite of the same we find that at many times we commit mistakes in writing cheques and then we as a matter of right correct them , palce signature for authentication and issue the said cheque to the payee.Habit of over writing the cheques in terms of name or amount in words or amount in figures or date, all is done very casually only because banks has to allow such corrected and authorized mistakes.

Personal banking and mistake in cheques

The problem of mistakes and corrections on cheques is more in case of personal cheques. In case of a business person he has trained clerks who commit lesser mistakes while writing cheques. However, when cheques are written personally be persons who do not have good clerical hand, there are more mistakes- for the reason that he is not an expert clerk, and there is no fear of getting hauled up by person who will sign the cheque.

Guidelines by RBI in relation to corrections in cheques

The Reserve Bank of India (RBI) issued guidelines about cheques for increasing security features in cheque forms, paper to be used, printing of cheques, numbering and recording of numbers for control purpose etc.However, for the first time RBI has also placed on strict restrictions on alterations on cheques.

Relevant portion of circular RBI/2009-10/323 DPSS.CO.CHD.No. 1832/ 04.07.05 /2009-10

February 22, 2010 reads as follows

Prohibiting alterations / corrections on cheques

No changes / corrections should be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee's name, courtesy amount (amount in figures) or legal amount (amount in words), etc., fresh cheque forms should be used by customers. This would help banks to identify and control fraudulent alterations.  
Based on the above guidelines Banks clearing teams can return cheques which have any alteration in the

* Payee Name

* Amount in numbers

* Amount in words

The only alteration which is allowed is the alteration in the date.

In view of the above guideline, changes in name, amount in figures and amount in words, cancellation of "or bearer". Marking for crossings etc. will not be eligible for correction. Correction permissible will only be in date.

The care is in interest of the account holder

The care in writing cheque is in interest of account holder. A neat and clean cheque written with good handwriting and without correction is also important as it creates an image about the organization/ person who is issuing cheque. A cheque bearing many corrections, shows nature of carelessness in concerned persons. A counter signature on cheque can be used to make another correction for improper use of cheque. Therefore, the guidelines issued by RBI must be accepted by heart by account holders as this is in their interest. Therefore, there should not be any complaint or issue raising tendency that whether the RBI circular is correct, legal or binding etc.

So be careful in writing of cheques. A cheque now issued can also be returned if the cheque bear some corrections, over writings and is presented for payment / clearing after the cut- off date.

Other care required and desirable changes in habit

A returned cheque can be a serious reason of embarrassment, impairment of goodwill and can cause problem to the person to whom you gave cheques. Therefore, more care is required while issuing cheques.

(a) Keep cheque books with cheques marked A/C payee separately.

(b) Keep separate cheque book for cash withdrawals, if cash withdrawals are through cheques and numerous.

(c) Use e-cheques and on line payments as far as possible to avoid mistakes and contingency of cheque being returned due to clerical mistake.

(d) Write cheques with a little more care. One should not be extra careful and worried, because that can increase chances of mistakes.

(e) Write cheques in normal writing in normal flow and manner. Writing cheques slowly and in bold letters can cause more mistakes.