Can Employers Legally Take Undated Cheques? Seeking Advice on My Case

Legal Implications of Undated Cheques at Appointment

Can an employer take an undated cheque from an employee at the time of appointment? I joined a company in 2009. The company took an undated cheque for three months' salary from me. In 2012, I resigned, but they didn't allow me to serve the notice period and deposited my cheque in the bank, which bounced due to insufficient funds. Now, the company has filed a legal case against me.

Please guide me on whether I should give them the notice period salary amount or fight the case.

Regards.

Please answer the following questions:

Terms and Conditions of Employment

Is there any rule or T&C in your employment letter that states you must provide an "Undated Cheque/Blank Cheque" to the employer at the time of joining?

Notice and Legal Documentation

Did you receive any copy of a notice from your employer regarding this matter? Did you get any copy of the legal notice that they have filed against you?

Resignation and Notice Period

What was the reason for your resignation or breach of employment? Why were you not allowed to serve the notice period if you were ready? What was the amount of the cheque?

Your query is lacking in many aspects, and the answers to the above questions can enable us to provide you with an appropriate response.

Regards

Further to the citation by Anil ji, here are a couple more points which I'd like to emphasize:

Company has taken an undated cheque for my three-month salary.

The company does not have the right to coerce any candidate or employee to provide a post-dated cheque. Therefore, it should be a term clearly stated in the organization's policies, which should be read and understood. (Check your appointment letter for any such clause)

- Were you pressured to provide an undated check?
- Were you aware that providing a cheque could lead to legal issues?
- If not, why did you provide it in the first place?

They didn't allow me to serve the notice period and deposited my cheque in the bank.

This statement seems mysterious. If you resigned, informed your employer, and they still did not allow you to serve the notice period, then:

- How did you leave? Did you abscond?
- Do you have any correspondence (like a letter or email) as proof of your resignation?

I hope we are not operating in the dark. Therefore, it is important to gather enough data to provide you with expert advice. Thank you!

Regards.

Further to what Anil Arora and Sharmila Das have mentioned, please also clarify if the PDC was taken in lieu of any bond period. If yes, what was the period? You mentioned you joined in 2009 and quit in 2012—please confirm/clarify the months too.

Additionally, since you resigned, please confirm if you received the relieving/experience letter(s). Or was it that the company deposited the PDC straightaway?

All the best.

Regards,
TS

Such practices show that the employer is not confident. In any case, the employee need not worry about the employer filing a case against the employee for cheque bouncing simply because there is no consideration for the cheque. Such transactions are void in law.

Current Cheque Format Changes

For the current period, from 1st April, the format of the cheque is changing. All cheques are numbered. The number can show when the cheque was issued, and it will be stale after 3 months. Such a cheque cannot be enforced for recovery.

I wonder if this really happens. Can an employer take a bond but ask for an advanced cheque for 3 years in advance?

Regards,
Vibhakar Ramtirthkar.

Moral of the Story

If you are forced to give undated cheques, the first thing to do is go to your bank and issue stop payment orders against it—pure and simple. Then, if the company does bank the cheques, it will not be considered a criminal offence. The date of the stop payment will also show how old the cheques are, which will help in case they do file a case.

Employer Demands Undated Cheque as Security

The company held my appointment letter and asked me to give an undated cheque equivalent to three months' salary. They only provided my appointment letter after I submitted the undated cheque. This cheque was taken from me as security. The company is located in Okhla Ph-2, New Delhi, and deals in mobile payment services.

I request all viewers not to give any cheques to employers. In my case, I have been fighting with the employer for the last three years in Delhi court. The employer deposited my cheque without informing me, which later bounced. Consequently, the employer filed a case against me. I am suffering even though I have no legal liability due to the company.

Can someone from the same company come forward to help me in this regard? My number is [Phone Number Removed For Privacy Reasons].

Regards,

Understanding the Presumption of a Valid Debt Under Section 138

A valid debt is presumed when a case is filed under Section 138. The law is pretty clear on that; otherwise, a cheque will have no sanctity. It is a rebuttable assumption. The onus is on the drawer to prove that the cheque was not given for consideration and was obtained under fraud or coercion, etc. Stop payment instructions to the bank do not absolve anyone from liability. The law is pretty clear on that too.

An undated cheque or a cheque with no amount filled in later could provide a way out; however, the burden of proof still lies with the drawer. A prima facie case is established, and the court will consider all this evidence only at the evidence stage.

The cheque was taken as security in 2010 and presented in 2012. Can we go to a handwriting expert to check the ink of the cheque or handwriting, etc.? Can we request the court to do this exercise? The cheque was undated when it was submitted to the employer, and the date was filled in later by the employer according to his convenience.

Understanding the Purpose of an Undated Cheque

The purpose of an "undated cheque" is exactly that—to be able to put the date at a later period so that it is not "stale." The employer was within his full rights to put the relevant date. The only thing the court will now look at is whether there was any debt existing at the time of presentation to the bank. If the court decides there is no debt, the bouncing of the cheque is not a criminal offence. The company can still proceed with a civil trial if it has any grounds for the same. If the court decides there was a debt and the cheque was presented to clear the same, it amounts to a criminal offence to bounce the cheque for want of funds.

But how can a company take an undated check at the time of appointment? No training was given to me. It was taken by holding my appointment letter.

Understanding the Legal Implications of Undated Cheques

That is a question you should have asked when you gave undated cheques to the company. The de-facto situation now is that they have a cheque on which the date appears to be current, and it has bounced due to non-availability of funds, which is a criminal offense. They have filed a case against you under Sec 138 of the Negotiable Instruments Act.

It has been repeatedly discussed on this forum, and the consensus is that it's unwise to give a blank cheque or a security cheque to the company. However, employees often do so because they want the job and don't think ahead. You can always use these arguments in court. But as I said, it's for the court to decide whether or not there is a debt you owe to the company.

Company has already filed a case under Section 138 as the OP says.

Section 138: Dishonour of Cheque for Insufficiency, etc., of Funds in the Account

138 Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years or with a fine which may extend to twice the amount of the cheque, or with both.

It is now for the Court to decide how sound your case is and what penalties to impose. You would have received a notice from the company earlier demanding payment, and now that a case has been filed, a notice/summons from the court also, enclosing the written statement of the company which should set out clearly why they are claiming this amount.

If you can rebut their claims in writing, with strong evidence to back it up rather than just statements, you may have a case. Otherwise, you have no case, in my humble opinion.

I suggest you take the advice of a lawyer now.

Hi,

So, if a person opts to stop the payment option and the cheque becomes void, then the company cannot take any action?

Thank you.

A cheque stopped for payment is equivalent to bouncing of the cheque. Therefore, whether there were sufficient funds in the account is immaterial. The matter is still covered under Sec. 138.

You cannot issue a cheque for a debt and then issue a stop payment.

Hi Aarush Bhatt,

What is the current status of your court case regarding the dishonour of a cheque or the settlement with your employer?