Is It Legal for Employers to Request a Blank Cheque as Security Before Hiring?

Please tell me, can an employer take a blank cheque from an employee before joining as security? What is the legal validity of this action? How does the law view this act - is it considered an offence? Please provide detailed information.

Skariah:confused:

Thank you, Mr. Stephen.

I would like to understand how the law applies in terms of attracting liability, including the specific act and section involved. Is it permissible to acquire a blank cheque as security, especially when the employee handles cash?

Dear Skariah,

Giving a blank cheque attracts provisions of Section 138 of the Negotiable Instruments Act and Order XXXVII of the Civil Procedure Code, meaning that some admitted debt is due and payable. In the instant case at hand, the blank cheque is being given (presumably in good faith or otherwise under duress) for which no cause has arisen as yet.

I hope this is enough to satisfy your query.

Can anybody tell me what kind of documents the employer has to execute when he wants to appoint a staff member who will be responsible for cash collection, deposit, and custody of cash for 2 or more days? If not a blank cheque, then an agreement or a surety bond? Please let me know if you are in that field. How can the interest of the institution be protected?

Regards,
Skariah

Dear Skariah,

Not only an employer, nobody can take a blank, undated cheque from anyone. It is against Indian law.

Dear Skariah,

In response to your query, if the staff appointed will be handling cash collection, deposits, and cash in their custody to protect the institution's interests, they may be required to provide a surety bond from a guarantor. Alternatively, the institution can request the employee to furnish an indemnity bond, with the provision that it should not be enforced for any bona fide acts done in good faith. I hope this addresses your query. Lastly, please do not consider causing any disturbances; this is a learning exercise for all of us.

Dear Mr. Deepak and Mr. Mahesh,

Thank you. In that case, I would like to forward an agreement. Please let me know whether this agreement will stand in the court of law. If you think it is okay, please inform me. If not, what else should I add to make it perfect?

Please see the attachment.

Regards,
Skariah

Dear Skariah,

Oops, I skipped mentioning that to make the Agreement perfect, let it be registered with the local sub-registrar office. Alternatively, let the same be printed on a Stamp paper of Rs.100/- duly notarized.

This agreement cannot be enforced unless you prove the employee guilty of misappropriation. You have to explain what misappropriation is, who has the authority to decide misappropriation, etc., in the document.

I need some views on the list of documents that can legally be taken from an employee while joining. Can a blank and signed check without a date be demanded as security from an employee before joining?

The legality of accepting a blank cheque from an employee

The question of "can" or "cannot" is not relevant here. The real question is: if an employee gives a blank cheque, why can't an employer accept it? The law does not specify whether someone should or should not give or take a blank cheque, not just in the case of an employee. The law only recognizes the validity of a transaction if it is made legally against any legal liability and for any legally valid purpose. Therefore, it is up to the drawer of the cheque to be cautious about issuing a cheque for any future transaction if it is not issued against any current and real liability.

So, it is up to the employee not to give a blank cheque if they feel it could be misused. Once a blank cheque is given, it provides the employer with an opportunity to use or misuse it in any manner they choose. However, if any dispute arises later due to dishonor or any illegal transaction, the employer is responsible for proving the validity of the transaction, regardless of whether they took a blank cheque or a fully filled cheque.

Regarding the legality of demanding a blank check as security

Regarding your question, "Whether a blank and signed check without a date can be demanded as security from an employee before joining," there is no restriction on making verbal demands. However, the employee must ensure not to accept any verbal demands from the employer. All aspects of the employee-employer relationship should be documented, whether through an offer letter, appointment letter, or a written agreement.

When a blank check is requested from an employee as per the offer/appointment letter or agreement, it becomes void in terms of the law. The employer can request security in the form of cash, a check/draft (properly completed in all aspects), or a bank guarantee. If the validity date of the check or draft is approaching expiration, the employer can request the employee to replace the old/stale check with a new check/bank draft. A bank guarantee is much safer in the interest of both the employer and the employee, with lower chances of illegal use compared to other methods.

Please let me know if you need further clarification or assistance.