Hi all, I need advice urgently. I accepted an appointment letter from X school as a teacher. They asked me for a post-dated cheque since I had my original documents with the college, and to give the appointment letter, they needed security in the form of a cheque. However, due to personal reasons, I am not joining the school and have given notice well before the joining date. I requested the cheque back, but the school is now threatening to submit the cheque to the bank and charge me ₹30k, filing a legal case if the cheque gets dishonored. I have not started the job yet; it was supposed to start next month on the 15th of May. I am very worried about what to do. Please advise if I can cancel the cheque or what other recourse I have, as the board member of the school keeps calling and threatening me that he will sue me for a cheque bounce case if I don't pay up.
From India, Bengaluru
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From India, Bengaluru
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Hi, Security cheques were collected by the school as security (if you leave them without notice after joining them - to safeguard their interest). You had just accepted the appointment order but didn't join them, so primarily there is no Employee-Employer relationship between you and the school, and hence there is no breach of any agreed terms and conditions. In the absence of the same, school management has no legal rights to deposit the cheques with their bank.
On the safer hand, you may issue stop payment advice for those cheques to your bank (if not done already). Also, it is strange to observe why you had issued cheques to the school before joining them.
Terms and Conditions
What were the terms and conditions of the appointment order you signed? Also, did they take any signature in any declaration or white paper along with the cheques? Please exercise utmost caution before issuing cheques without knowing the consequences.
It looks like more of threatening tactics. As there is no question of any loss to the school management because of your refusal to join them, they cannot justify the recovery of money from your end. Be firm and face them.
From India, Madras
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1015On the safer hand, you may issue stop payment advice for those cheques to your bank (if not done already). Also, it is strange to observe why you had issued cheques to the school before joining them.
Terms and Conditions
What were the terms and conditions of the appointment order you signed? Also, did they take any signature in any declaration or white paper along with the cheques? Please exercise utmost caution before issuing cheques without knowing the consequences.
It looks like more of threatening tactics. As there is no question of any loss to the school management because of your refusal to join them, they cannot justify the recovery of money from your end. Be firm and face them.
From India, Madras
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Thank you for your response; I greatly appreciate it. The reason we gave the cheque was for school, stating that since we could not provide our original documents like mark sheets and degree certificates, they needed to safeguard their interest. We informed them that we are not joining a month in advance, but they are not ready to listen. They say that since we are not joining, they are at a loss as they don't have a teacher now. We told them that since we are not joining, the terms will not stand, but they are saying that a bounced cheque is a criminal offense, and they would have their legal team pursue this. We are not financially sound to pursue a court case and certainly not looking to be arrested, so we seek advice on how to proceed.
From India, Bengaluru
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From India, Bengaluru
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The relationship between the employer and employee has not commenced.
To my understanding, any checks that are issued to discharge an existing liability are only covered under Section 138 of the Negotiable Instruments Act. No liability has been incurred by you. You had already declined to join due to whatever reasons.
Even retention of original documents like a degree certificate is an irregular technique followed by many employers. Just write to the school to return your check. If they decline, send a stop payment to the bank concerned.
From India, Pune
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To my understanding, any checks that are issued to discharge an existing liability are only covered under Section 138 of the Negotiable Instruments Act. No liability has been incurred by you. You had already declined to join due to whatever reasons.
Even retention of original documents like a degree certificate is an irregular technique followed by many employers. Just write to the school to return your check. If they decline, send a stop payment to the bank concerned.
From India, Pune
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Legal Implications of Cheque Dishonor in Employment Context
Even if the cheque is presented and dishonored, the school cannot take any legal action (Section 138 of the Negotiable Instruments Act) because if they proceed legally, the school will have to appear in court (criminal) to explain how they acquired the cheque. A cheque is a negotiable instrument issued to a payee only when there is a consideration involved. If the school has provided a service, sold an item, or done some work for you (the candidate who has not yet become an employee), they can present to the court that the cheque was given to them as consideration for those services. In this case, there is no consideration involved. The school cannot claim that the cheque was taken as security because that would be illegal.
Arguments Against Cheque as Security
On the other hand, a candidate or an employee could argue that they were requested to issue a cheque to secure a job, but later realized that the institution was not the right place for them to work as a teacher. Would an institution or school, typically regarded as a temple of knowledge or a noble profession, threaten an employee in such a manner? Certainly not. Hence, irrespective of the actions the school wishes to take, you can also seek assistance from the Education Officer in this matter.
From India, Kannur
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Even if the cheque is presented and dishonored, the school cannot take any legal action (Section 138 of the Negotiable Instruments Act) because if they proceed legally, the school will have to appear in court (criminal) to explain how they acquired the cheque. A cheque is a negotiable instrument issued to a payee only when there is a consideration involved. If the school has provided a service, sold an item, or done some work for you (the candidate who has not yet become an employee), they can present to the court that the cheque was given to them as consideration for those services. In this case, there is no consideration involved. The school cannot claim that the cheque was taken as security because that would be illegal.
Arguments Against Cheque as Security
On the other hand, a candidate or an employee could argue that they were requested to issue a cheque to secure a job, but later realized that the institution was not the right place for them to work as a teacher. Would an institution or school, typically regarded as a temple of knowledge or a noble profession, threaten an employee in such a manner? Certainly not. Hence, irrespective of the actions the school wishes to take, you can also seek assistance from the Education Officer in this matter.
From India, Kannur
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Legal implications of a post-dated or undated cheque
Is it a post-dated or undated, signed but blank cheque?
The legal position is that, in case of dishonor of the cheque, the payee can proceed against the drawee under the provisions of Section 138 of the Negotiable Instruments Act if the cheque had been issued in discharge of a legally enforceable debt.
In the instant case, there has been no such debt or liability. Hence, you may instruct the bank to stop payment and simultaneously issue a notice (preferably, through an advocate) to the school detailing the circumstances under which the post-dated or undated cheque has been issued and because of the changed circumstances, a stop-payment instruction has been issued to the bank.
Pre-emptive action, as above, would ensure that the matter would not reach the court.
From India, Kochi
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Is it a post-dated or undated, signed but blank cheque?
The legal position is that, in case of dishonor of the cheque, the payee can proceed against the drawee under the provisions of Section 138 of the Negotiable Instruments Act if the cheque had been issued in discharge of a legally enforceable debt.
In the instant case, there has been no such debt or liability. Hence, you may instruct the bank to stop payment and simultaneously issue a notice (preferably, through an advocate) to the school detailing the circumstances under which the post-dated or undated cheque has been issued and because of the changed circumstances, a stop-payment instruction has been issued to the bank.
Pre-emptive action, as above, would ensure that the matter would not reach the court.
From India, Kochi
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In addition to the above, you should file an FIR against he school for harassment, and specifically add the names of the persons who have called you and threatened you
From India, Mumbai
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From India, Mumbai
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"In addition to the above, you should file an FIR against the school for harassment, and specifically add the names of the persons who have called you and threatened you."
The learned member has given a correct suggestion. Many employees engage in irregular acts because the organization has instructed them to make threatening phone calls. Security checks, original degrees, etc., should not be handed over to potential employers and locked up. Employers can request to see the original documents for verification purposes and return them promptly.
From India, Pune
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The learned member has given a correct suggestion. Many employees engage in irregular acts because the organization has instructed them to make threatening phone calls. Security checks, original degrees, etc., should not be handed over to potential employers and locked up. Employers can request to see the original documents for verification purposes and return them promptly.
From India, Pune
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Dear Sharath R,
There is nothing to worry about; the post-dated cheque cannot be presented before the date mentioned on the cheque for encashment. Further, as per the rules, you can issue a "Stop Payment Notice" to your bank to stop payment, which is very much within your reach and should be done immediately.
The school cannot move legally against you or demand damages. The cheque is nothing but a guarantee and not bond money. In one condition, the school can claim if there is a specific period during which the person doesn't work.
All the above suggestions are based on the information provided in the post.
From India, Mumbai
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There is nothing to worry about; the post-dated cheque cannot be presented before the date mentioned on the cheque for encashment. Further, as per the rules, you can issue a "Stop Payment Notice" to your bank to stop payment, which is very much within your reach and should be done immediately.
The school cannot move legally against you or demand damages. The cheque is nothing but a guarantee and not bond money. In one condition, the school can claim if there is a specific period during which the person doesn't work.
All the above suggestions are based on the information provided in the post.
From India, Mumbai
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It is quite illegal, first of all, to take possession of employees' original certificates under a selfish pretext. You have informed them prior about your decision of not joining them.
There is no employer-employee or any other business/personal relationship between you and the school. Foremost is that you issue a cheque stop payment instruction to your bank, very carefully quoting your cheque number, payee details (School name), date, etc. By doing so, you are absolved of any repercussions arising out of the cheque dishonor or cheque bounce, whatever name the school uses to threaten. And after instructing your bank, please just ignore the issue.
From India, New Delhi
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There is no employer-employee or any other business/personal relationship between you and the school. Foremost is that you issue a cheque stop payment instruction to your bank, very carefully quoting your cheque number, payee details (School name), date, etc. By doing so, you are absolved of any repercussions arising out of the cheque dishonor or cheque bounce, whatever name the school uses to threaten. And after instructing your bank, please just ignore the issue.
From India, New Delhi
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I hope members here are aware that stop payment amounts to bouncing of a cheque under NI Act? The defence against sec 138 is that there was no debt payable and no consideration for the cheque
From India, Mumbai
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From India, Mumbai
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Understanding Section 138 of the Negotiable Instruments Act, 1881
Yes, stop payment instructions regarding cheque amounts can lead to bouncing, and the payer can initiate criminal action under the provisions of Section 138 of the Negotiable Instruments Act, 1881.
Dishonour of Cheque for Insufficiency of Funds
Section 138 states that when a cheque drawn by a person on an account maintained with a banker is returned unpaid due to insufficient funds or exceeding the arranged amount, the drawer is deemed to have committed an offense. The punishment may include imprisonment for up to two years, a fine up to twice the cheque amount, or both.
Conditions for Section 138 to Apply
This section applies only if:
(a) The cheque is presented within six months from the date it is drawn or within its validity period, whichever is earlier.
(b) The payee or holder demands payment by giving written notice to the drawer within thirty days of receiving information about the cheque being unpaid.
(c) The drawer fails to pay the amount within fifteen days of receiving the notice.
Explanation of "Debt or Other Liability"
For this section, "debt or other liability" refers to a legally enforceable debt or liability.
Defense Against Section 138
A defense can be claimed if the cheque was not drawn against any debt or liability. However, establishing such a defense is challenging due to Section 139.
Presumption in Favor of the Holder
Section 139 presumes that the holder received the cheque for discharging a debt or liability unless proven otherwise. This allows an unscrupulous person to initiate criminal action with a signed, possibly undated or postdated, but blank cheque. The process involves a private complaint supported by an affidavit, without police investigation. Once the court takes cognizance, the drawer becomes an accused, facing trial and related procedures.
Pre-emptive Actions and Legal Advice
To prevent such situations, it is crucial for the querist to issue stop-payment instructions and inform the school, preferably through an advocate. This action would provide a proper ground to respond to the mandatory notice under the proviso to Section 138, preventing the school from pursuing action under the NI Act Section 138.
From India, Kochi
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Yes, stop payment instructions regarding cheque amounts can lead to bouncing, and the payer can initiate criminal action under the provisions of Section 138 of the Negotiable Instruments Act, 1881.
Dishonour of Cheque for Insufficiency of Funds
Section 138 states that when a cheque drawn by a person on an account maintained with a banker is returned unpaid due to insufficient funds or exceeding the arranged amount, the drawer is deemed to have committed an offense. The punishment may include imprisonment for up to two years, a fine up to twice the cheque amount, or both.
Conditions for Section 138 to Apply
This section applies only if:
(a) The cheque is presented within six months from the date it is drawn or within its validity period, whichever is earlier.
(b) The payee or holder demands payment by giving written notice to the drawer within thirty days of receiving information about the cheque being unpaid.
(c) The drawer fails to pay the amount within fifteen days of receiving the notice.
Explanation of "Debt or Other Liability"
For this section, "debt or other liability" refers to a legally enforceable debt or liability.
Defense Against Section 138
A defense can be claimed if the cheque was not drawn against any debt or liability. However, establishing such a defense is challenging due to Section 139.
Presumption in Favor of the Holder
Section 139 presumes that the holder received the cheque for discharging a debt or liability unless proven otherwise. This allows an unscrupulous person to initiate criminal action with a signed, possibly undated or postdated, but blank cheque. The process involves a private complaint supported by an affidavit, without police investigation. Once the court takes cognizance, the drawer becomes an accused, facing trial and related procedures.
Pre-emptive Actions and Legal Advice
To prevent such situations, it is crucial for the querist to issue stop-payment instructions and inform the school, preferably through an advocate. This action would provide a proper ground to respond to the mandatory notice under the proviso to Section 138, preventing the school from pursuing action under the NI Act Section 138.
From India, Kochi
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Legal Clarification on Negative Covenants in Employment Agreements.pdf