Question

Explain the following term/concept:
Stop payment of cheque

Answer 1

(1) Businessmen and commercial organisations issue cheques to various parties in settlement of their dues or bills. These cheques may be sent by post or may be collected by hand delivery. Sometimes cheques may be lost during transit or misplaced and so cannot be traced. It is possible that the finder of such a cheque may fraudulently encase it from the bank.
(2) If any cheque issued by the company is lost or misplaced, the Company Secretary must inform the bank immediately by telephone about the loss of cheque with a request to stop payment on such lost cheque. Subsequently, he is required to write a letter to the bank giving details of the lost cheque such as cheque number, date of issue, amount of cheque, name of the party in whose favour cheque is drawn, etc. This helps the bank to stop or deny the payment on the lost cheque.