The Checked out document are saved in SharePoint Draft folder. This setting can be done from Save Options from the Office Clients as shown.
Now we can go to any document library and Check Out the the document it will ask whether we want to use "Use My Local Draft Folder".
We need to check this option to make the document available in SharePoint Draft Location after Checking Out. Now this document is availably locally and we can edit as and when needed while not connected. Now once we are connected to the Sharepoint we can Check In the document from the SharePoint Document Library and latest document from the SharePoint Draft folder is updated in the site. With this we are saved from the hassels of removing the old version and uploading the new updated version. Once the document is checked in the document is not available in the draft location.