Although a cheque is a bill of exchange and there is too much of similarity between the two, yet there are the following points of difference between a bill and a cheque;
1. A bill of exchange may be drawn on any person. A cheque is always drawn on a specified banker with whom the drawer has deposited money. ‘A bill’ can be drawn even on a bank.
2. Certain types of bills of exchange must be accepted before they are presented for payment. In case of a cheque, acceptance is not at all necessary.
3. A bill of exchange has to be stamped according to the Indian Stamp Act. Stamp is not at all necessary on a cheque.
4. A bill of exchange may be payable on demand or after a certain period. A cheque is always payable on demand.
5. A bill of exchange cannot be made payable to bearer on demand. A cheque can be made payable on demand.
6. In a bill three days of grace are allowed to the acceptor for payment. In case of a cheque, no such grace period is allowed and it is payable immediately on demand, of course, during working hours of the bank.
7. In case a bill of exchange is not presented for payment, the drawer is discharged from his liability. Failure to present the cheque discharges the drawer, only when he has suffered any loss due to the failure of the holder to present the cheque for payment within a reasonable time of its issue. In such a case the loss is limited to the loss suffered by the drawer due to non – presentment.
A has 500 rupees in his bank. A draws a cheque of Rs. 300 to B. The bank fails before B presents the cheque. A is discharged but B can prove against the bank for the amount of the cheque.
8. A bill of exchange cannot be crossed. A cheque can be crossed to make it safe.
9. Payment of a bill cannot be stopped, i.e. countermanded. The payment of a cheque can always be stopped.
Bank Draft of Demand Draft :
A bank draft or a demand draft, is a bill of exchange drawn by one bank on its own branch or any other bank. The essential features of a bank draft are:
1. It is always drawn by a bank upon its own branch or another bank.
2. It is always payable on demand and it cannot be made payable to bearer.
3. Ordinarily, payment of ^demand draft cannot be stopped or countermanded. It is because of this reason that payment is demanded through a bank draft.