PIS2463 LEGAL ASPECT IN BANKING ANDFINANCETHIYANESHWARI A/P K. MURUGESU4183007951MADAM LAILI BT ISADISCUSS AND ELABORATE THE OPERATIONOF CHEQUE AS NEGOTIABLE INSTRUMENTUNDER THE PURVIEW OF CONVENTIONALAND ISLAMIC BANK
ChequeCheque is an order to a bank to pay a stated sum from the drawer's account, written on aspecially printed form. It is a dated and signed document that orders a bank to pay a specificamount of money from a person's account to the person in whose name the cheque has beenissued. A cheque is a bill of exchange drawn on a bank and payable on demand. It is drawnup by the drawer and made payable to the payee. It has the same general characteristics but islimited to situations in which the drawee is a bank and payment can be demandedimmediately.Function of Cheque in generalCommonly, when a certified cheque is drawn, the bank operating the account verifies thereare currently sufficient funds in the drawer's account to honour the cheque. Those funds arethen set aside in the bank's internal account until the cheque is cashed or returned by thepayee. It should be noted that the definition of bank for the purposes of the act has beenbroadened to include other institutions, such as credit unions and some trust companies. Sincea cheque is payable on demand, its primary purpose is to exchange funds conveniently ratherthan to function as an instrument of credit. It is an instrument in writing, containingunconditional order, signed by the maker (depositor), directing a certain banker to pay acertain sum of money to the bearer of that instrument. Some other instruments have acquiredthe character of negotiability by customs or usage of trade.
Negotiable InstrumentMonetary instruments facilitate trade and commerce. A formal legal document whichcontains a legal obligation to pay money and which possesses the attributes of negotiability.A written instrument, signed by the maker or drawer of the instrument that contains anunconditional promise or order to pay an exact sum of money on demand or at an exactfuture time, or to a specific person, or to order, or to its bearer. Negotiable instruments aretransferable in nature, allowing the holder to take the funds as cash or use them in a mannerappropriate for the transaction or according to their preference. Negotiable instrument is asubstitute for money or serves as an extension of credit. A negotiable instrument is adocument guaranteeing the payment of a specific amount of money, either on demand, or ata set time, whose payer is usually named on the document.Types of Negotiable Instrument1.Bill of Exchange2.Cheques3.Promissory Notes4.Banker’s draft, bank notes5.Treasury bills6.Share warrants7.Dividend warrants8.Debentures9.Traveller’s cheques10. Banker’s acceptance
11. Negotiable certificate of depositCheque a Negotiable InstrumentA cheque is a negotiable instrument instructing a financial institution to pay a specific amount