Before we talk about cheque bouncing (Section 138) or crossing and endorsements, we need to nail down what a cheque actually is under the law — because the definition has evolved significantly with digital banking.
A cheque is a special type of bill of exchange with three fixed features: (1) it must be drawn on a specified banker (not any person — it has to be a bank), (2) it is always payable on demand (you cannot post-date it to make it a time instrument — it remains a cheque), and (3) it must be unconditional. What makes Section 6 exam-worthy today is that it now covers two modern forms beyond the physical paper cheque.
The first is a cheque in electronic form — this is a cheque created digitally using a computer, signed with a digital signature or electronic signature (as defined under the IT Act, 2000). Think of it like a cheque that never existed on paper at all. The second is a truncated cheque — this one starts as a physical paper cheque, but during the clearing cycle, the bank (either the paying bank or the collecting bank) or the clearing house converts it into an electronic image and stops the physical paper from moving further. So the paper cheque gets "truncated" (cut short) in its journey. The clearing house itself is defined as one managed or recognised by the Reserve Bank of India. This is asked frequently as a 4-mark question — students are asked to define a truncated cheque or distinguish it from an e-cheque, so make sure you know both.
Key takeaway: a cheque is always a bill of exchange, always drawn on a banker, and always payable on demand. The electronic forms don't change these fundamentals — they only change the medium. Terms like asymmetric crypto system, digital signature, and electronic form borrow their meanings directly from the IT Act, 2000 — you don't need to define them independently for NI Act purposes.
📊 Worked example
Example 1 — Identify the type of cheque
Mr. Sharma writes a cheque for ₹2,50,000 to Ms. Iyer on 1st April 2026. He hands her the physical cheque. Ms. Iyer deposits it at her bank. The collecting bank (HDFC) scans the cheque at the branch counter, generates an electronic image, and sends only the image to the clearing house. The physical paper cheque never travels to SBI (the paying bank).
Question: What type of cheque is this under Section 6?
Working:
- Started as a physical cheque ✓
- During the clearing cycle, converted into an electronic image ✓
- Physical movement of the cheque was stopped ✓
- This fits the definition of a truncated cheque exactly.
Answer: This is a truncated cheque under Section 6, Explanation I(b).
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Example 2 — Is it a cheque or not?
Rajesh & Co. Pvt. Ltd. instructs its finance team to generate a payment instrument via their banking software. The instrument is drawn on Axis Bank, payable on demand to the supplier for ₹75,000, and is signed using the MD's registered digital signature under the IT Act, 2000. No paper is produced at any stage.
Question: Does this qualify as a "cheque" under Section 6?
Working:
- Drawn on a specified banker (Axis Bank) ✓
- Payable on demand ✓
- Created using a computer resource ✓
- Signed with a digital signature under IT Act, 2000 ✓
- Fits Section 6, Explanation I(a) definition.
Answer: Yes, this is a cheque in electronic form. All protections of the NI Act, including Section 138 (dishonour), apply to it.
⚠️ Common exam mistakes
- Students say a post-dated cheque is not a cheque — Wrong. A post-dated cheque is still a cheque under Section 6; it just cannot be presented before the date written on it. It does not become a "time instrument" or a usance bill of exchange.
- Confusing truncated cheque with e-cheque — A truncated cheque starts as paper and gets converted mid-clearing; an e-cheque never exists on paper. Examiners love this distinction — don't mix them up.
- Thinking truncation can only be done by the clearing house — Section 6 says truncation can be done by the clearing house or the paying bank or the collecting bank. Any of the three can do it.
- Forgetting the "specified banker" requirement — A cheque must be drawn on a bank, not on an individual or a company. If it's drawn on a person, it's a bill of exchange but not a cheque.
- Ignoring the IT Act, 2000 link — Terms like digital signature and electronic form are not defined in the NI Act itself. They are borrowed from the IT Act, 2000. If asked "as per which Act is digital signature defined for Section 6 purposes", the answer is the IT Act, 2000.
📖 Bare Act text — Section 6, Negotiable Instruments Act 1881
(click to expand)
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 the purposes of this section, the expressions— (a) "a cheque in the electronic form" means a cheque drawn in electronic form by using any 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; (b) "a truncated cheque" means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing. Explanation II.— For the purposes of this section, the expression "clearing house" means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India. Explanation III.—For the purposes of this section, the expressions "asymmetric crypto system", "computer resource", "digital signature", "electronic form" and "electronic signature" shall have the same meanings respectively assigned to them in the Information Technology Act, 2000(21 of 2000).
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