Dear All, We hired an employee and got negative feedback on employment verification. Got to know later that he was terminated from 4 companies before us due to the same reason.
He agrees that he will not repeat the mistakes he has done in past. He further added that if no one will give the chance how he will be able to prove himself.
We are thinking of taking a blank security deposit cheque. Can anyone guide us on the format and if it is legal?

From India, Ahmedabad
Dinesh Divekar
Business Mentor, Consultant And Trainer
Sr.manager - Hr&admin
+1 Other

Mere collection of security cheque alone will not hold good. It should be with a backdrop of Indemnity Bond. Also please take a self declaration from the candidate towards of deposit of cheques into employer account in case of violation of agreed terms between the parties.

From India, Madras
Hi Vmlakshminarayanan, Do you have any sample doc? Thanks, Mansi
From India, Ahmedabad
Much drafts available on line. You may customize as per your requirement.
Please refer the following draft also. You may customize as per your Organization requirement.
This indemnity is made and executed on this_______ day of _______20__ by Shri/Smt. __________________________________ S/o/ D/o/ W/o Shri __________________________ a permanent resident of________________________________________________ ____________ __________________ hereinafter called "Employee", IN FAVOUR OF' _______________(provide employer details, company incorporations details with address) hereinafter called "Employer ".
The terms 'Employee',' and the 'Employer ' unless repugnant to the context shall mean and include their heirs, legal, representatives, successors, executors and administrators.
WHEREAS the Employee has been selected for appointment as ____in the service of the Employer.
WHEREAS an Offer of Appointment containing the terms and conditions of appointment has already been issued by the Employer to the Employee vide letter dated ___________20__.
WHEREAS one of the conditions of the appointment is that the Employees shall serve the Employer for a minimum period of___ years from the date of joining the Employer and has to furnish an Indemnity Bond of Rs.1,00,000/- (Rs. One Lac only) to the Employer.
NOW THIS INDENTURE WITNESSED as under: 1.In compliance of the aforesaid terms & conditions in the Offer of Appointment, subject to which the Employer has agreed to give appointment to the Employee, the Employee hereby undertakes to serve the Employer for a minimum period of ___ years from the date of joining and will not leave the services of the Employer without rendering service for a period of ___ years.
In case of breach of the terms of this indemnity by the Employee and failure to indemnify the Employer , the Employee is liable to pay the aforesaid amount of Rs.1,00,000/- (Rs. OneLac only) to Employer immediately.
The Employee further agrees and undertakes that in case he/she commits breach of the above condition and resigns or leaves/abandon the service and/or neglects in performance of the duties assigned to him/her leading to termination of his/her service as per rules/regulations shall pay Rs.1,00,000/- (Rs. One Lac only) with the interest thereon @ 12% per annum from the date of breach of the above till the payment is made as liquidated damages.
The employee agrees that assessment of liquidated damages as assessed at Rs.1,00,000/- (Rs. One Lac only) is just & reasonable, which he agree to pay severally to the employer .
Not-withstanding anything contained herein above, furnishing of this indemnity will not confer any right in favour of the Employee to continue in the service of the Employer for the aforesaid term of three years, and the Employer shall always have the right to take appropriate action, as deemed fit, against the Employee as per terms of the appointment letter and/or the rules and regulations of the employer as applicable, in case of commission of any misconduct by the Employee.
The amount specified above shall constitute a debt owing to the Employer and shall be recoverable from the Employee severally, with interest thereon at the rate specified above till the date of payment.
This bond and the rights and obligations shall in all respect be governed by the laws of Union of India. For breach of any right or obligations of whatsoever nature arising out of the bond or employment shall be deemed to have arisen within the territorial jurisdiction of ____ courts only.
IN WITNESS whereof, the EMPLOYEE have put his signature in the presence of the witnesses on this ___ day of _____ 20__ at _________.

From India, Madras
Dear Mansi,
You have written that you have received negative feedback from the past employer of an employee who was recruited recently. But then what is the issue? What exactly has been written in the feedback? Did he commit any fraud? In what department was he working and will be working in the same department? Will he be dealing with suppliers, customers etc and if yes, then does it involve financial transactions?
Though you have not written directly, yet it implies that you wanted to take some security deposit from the employee. This could be your indemnity against the fraud that he might commit. In case if he commits some fraud, he forfeits the amount deposited. Is my interpretation correct?
For Mr V. M. Lakshminarayanan: - In my above paragraphs, I have explained the purpose why the company wants a security deposit from the newly recruited employee. On this, you have suggested that the company should not just receive the cheque from the employee but it has to be backed by the legal agreement also. It was a good suggestion.
Nevertheless, in your second post, you have provided the draft of the indemnity letter. However, certain paragraphs of the draft are not applicable to the case at hand. The security deposit is not for serving for some minimum number of years.
Secondly, your draft says that in case of the breach of the conditions of the employment, the employee is liable to pay Rs 1,00,000/- However, the originator of the post has asked the validity of taking a blank cheque from the employee.
Going further, your draft does not say anything about returning the security deposit to the employee. What if the employee serves honestly for 'x' number of years? How long the company should hold the cheque?
For Mansi: - You want a blank cheque from the employee as indemnity. However, what if the employee gives a blank cheque, signs the indemnity bond also but issues stop payment instructions to the bank? Therefore, if you wish to hire this employee then better hire services of a professional lawyer and get the agreement. Let employee pay the lawyer's charges.
An alternative to getting into receipt of blank cheque and signing of bond etc is to pay just the minimum wages to the employee for the next 'x' number of months. The difference between salary any other candidate would have received and minimum wages that you will pay to this employee would be indemnity. For example, if the minimum wages are Rs 12,000/- and any other employee would have received Rs 25,000/- for this position then Rs 25,000 - 12,000 = Rs 13,000/- would be the indemnity per month. This can go on for 8-10 months and thereafter you can start paying him Rs 25,000/- However, you need to issue well-drafted appointment letter for this. There should not be any room for ambiguity. You need to mention clearly under what conditions an employee is eligible to get back the difference and when he will get.
Dinesh Divekar

From India, Bangalore
Mr.Dinesh Divekar,
In my initial reply I have suggested to go for a Indemnity Bond with self declaration. However since the Member Mansi requested for a sample I have provided a Template for his reference. In my reply to him I have clearly advised him to 'customize' the template as per his requirement since I am not aware of the background of the candidate he is hiring. He need to edit the clauses of the bond including amount mentioned.
The concept is the security cheques is going to be primary and Indemnity Bond is additional support to employer which will act as moral threat to the employee.
With regard to return of cheque / cancellation of agreement this has to be mentioned in the appointment order.
In your reply to Member Mansi, you have mentioned about " stop payment instructions" option of the employee. In my initial reply I have advised to collect a self declaration from the employee. The purpose of self declaration is that the employee confirm the issue of cheque to the employer for security purpose and also agree to the deposit of cheque into employer bank account in case of violation of stipulated terms.
So even if the employee advise bank with stop payment instructions, once the cheque is bounced, once the Employer receives the Cheque Return Memo from his bank the employer can file a criminal case for dishonour of cheque according to Section 138 of The Negotiable Instruments Act, 1881 which is applicable for the cases of dishonour of cheque.
Leaving the legality part aside, in my experience, I have seen in many cases the employee tend to fulfill the agreement terms primarily or approach Employer for negotiating compensation part in case if he /she not able to honour the terms of the agreement. So the employer has the advantage of using the agreement /cheuqes to use as a moral threat.
I have not brief much about the security cheques/indemnity bond to the member due to lack to time with an assumption that member will be having some idea about this.

From India, Madras
I just want to see this matter in different view.
Is this person is last person to perform your company's this particular profile?
Can't You recruit any other better person with good background.
Is Management aware of all this?
You are thinking in view of monetary damaged he may create
But did you think, If his act not going to hurt Company goodwill? that this company has these type of employees only.
Are you going to have ample time in future; So, if he commits same mistake in your company , you can run to do all these legal actions etc. What about your and Organization time's value you may have to spend to run after this.
If he done anything wrong in future then.
anyhow you have to recruit new person train him. What about that process's time value and recruitment cost?Are you prepared for that?
Aren't your decision making will be questionable in future if anything goes wrong
Aren't you will be suspect having your bias or some hidden motive to recruit this person,in future?
Please think on this also and prepare for this.

From India, Mumbai
Hi Mansi
Before I comment on the advisability of procuring a Security Cheque, I wish to make one observation. It is rather strange that you are taking someone who has such a dubious track record of employment. I assume that you have a strong compulsion to recruit someone who has managed to secure not one or two but four negative stamps. In the normal course, one could surely do without such an employee. Having given you this unsolicited advice let me turn to your query.
The purpose of taking a security cheque is to enable you to drag the delinquent employee to a criminal court rather than try him under civil jurisdiction for the obvious reason of delays and procrastinations. Now let us look at your proposal closely. In case the employee turns out to be a good citizen and a responsible employee it would be hunky dory, and all is well. Let us assume the worst, for that is the reason you are taking a security cheque, just in case.
If the employee turns out to be a rogue, you will have to dispense with his services and terminate his employment by giving him the requisite notice. You would present his cheque and if it gets honoured, you are still ok with the situation. If the employee does not honour the cheque, then what happens? You will have to proceed against him under Section 138 of the Negotiable Instruments Act. The employee’s one and only defence would be that the cheque was only a “security” cheque and there is no crystallised liability to pay a dime to you. The proposed Indemnity Bond supports that premise. It is here that your situation would become a bit dicey. The court may not allow you to proceed against the employee under Sec 138 of NI Act on the ground that this provision can be invoked only in cases where there is lawful crystallised liability on the part of the accused against which a cheque has been issued. The cheque should be for a debt in presenti.
In Sudheer Kumar Bhalla vs Jagdish Chandra Bhalla and others 2009, SCC Supreme Court held that criminal liability of accused under the provision of section 138 NI Act is attracted only on account of dishonour of cheque issued in discharge of liability or debt but not on account of issuance of security cheque. There are a number of decisions both in favour and against this view depending on facts and circumstances of the cases. Then the issue is back to the civil court where you can proceed against the employee for breach of contract and for liquidated damages as envisaged in the Indemnity Bond. Do you want to do that with all the attendant delays?
Lest I be misunderstood I wish to make one point clear. I do not want to stand the in the way of someone getting his rightful employment. For all that you know, the person concerned may be a reformed individual today deserving that job which he has applied for. That is a call you must make. My reply is purely technical/legal in nature based on the facts presented.

From India, Nasik
Thank you all for these valuable inputs. This person is recruited in an IT development. He has been rejected from 4 companies before us. Management is aware of the adverse report and the rejections as well.
Here is the comment from the previous employer:
Skill limited to Wordpress only, Lack of team leading skill, Not proper or Fit for Senior Role, Less punctual and was taking his work very lightly and company projects for granted. We lost one big client because of his attitude and punctuality.
He is accepting the mistake and assuring that he won't repeat it again. It's not that we won't get any other employee but management wants to give him a chance.
I thought taking a security deposit cheque might be a good idea. Open for any other suggestions too.

From India, Ahmedabad
Dear Mansi,
By hiring this type of person, your management is taking a calculated risk. Nevertheless, this taking the security cheque and to make a legal agreement for accepting the cheque is a messy business. As written earlier, you better hire him for minimum wages like Rs 12-15K. Let him work for one year or so. Next year, review his salary depending on the performance but that time bring the salary that is consistent with the designation.
My suggestion of paying minimum wages may sound funny or ridiculous. But then the candidate needs to be told that there has to be a trade-off and he must accept it. For him continuity of the employment is important.
Dinesh Divekar

From India, Bangalore

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