Section 138 of nia
Hirdayanath M Kamble
(Querist) 13 February 2013
This query is : Resolved
Dear Experts,
Can a employer take a blank cheque from an employee at the time of appointment, equal to gross 6 month pay, insert a clause in the service agreement of continuous service of 2 year to be guaranteed by the employee, and in event of their resignation or absconding present the cheque , get it bounced and file a complaint under section 138 of NIA.
Anirudh
(Expert) 13 February 2013
Dear Hriday,
It would have been nice had you asked this query prior to issuing the blank cheque. I would have definitely provided you way out.
Now, in the instant case, you have an agreement in place according to which you were to compensate your employer with 6 months gross pay in the event of your leaving the employment prior to expiry of 2 years tenure. The contract conditions stand clearly breached. You are liable to pay the 6 months gross pay as per the conditions. Now the employer has the cheque issued by you with your own signature. He only puts in the date as may suit him and gets it deposited. He will surely claim that you have issued the cheque in discharge of your liability to pay the 6 months gross pay. When the cheque gets bounced, he will prefer a claim u/s.1 38 N.I.Act. Then it is for you to defend yourself. It will be very difficult for you to prove that you issued a blank cheque at the time of entering the appointment (unless you have any proof of that or that the Agreement itself says so).
Guest
(Expert) 13 February 2013
Is it your own personal case or asking on behalf of the organisationm as a law officer of the company?
R.K Nanda
(Expert) 13 February 2013
reply to Dhingraji question.
Hirdayanath M Kamble
(Querist) 13 February 2013
Dear Experts,
It is not a personal issue / case,just want to have a clear legal stand on the issue as the legal officer of the company,as it is myself who shall be responsible for the legal tussle afterwards, also it would suite myself to-understand as to what are the legal implication.
Hirdayanath M Kamble
(Querist) 13 February 2013
i understand the consideration part is missing, also one of the parties to the contract has a authority over the drawer of the cheque, kindly advise.
ajay sethi
(Expert) 13 February 2013
blank chequ is no cheque . if date and amounts have been filled in by employer it amounts to material alteration of cheque and no case under section 138 NI is maintanable unless employee has authroised you to fill in the details .
Anirudh
(Expert) 13 February 2013
It is the breach of contract. Once there is a valid contract (which itself pre-supposes existence of consideration), there is no separate requirement for any consideration when there is breach of contract.
But If I am for the employee, I will be able to successfully defend him, in spite of such cheques.
Hirdayanath M Kamble
(Querist) 13 February 2013
Dear Anirudh, the presumption of a consideration cannot be the existence of a contract, as it is that not anything written and signed by two individuals necessary become a contract, there has to be a consideration specifically mentioned in the contract, being gainfully employed cannot be a contract be a presumption to the service agreement signed , if yes then it would run against the fundamental right of earning a livelihood , kindly advise.
Anirudh
(Expert) 13 February 2013
In your original post you said that "insert a clause in the service agreement of continuous service of 2 year to be guaranteed by the employee".
Do you mean to say that the service agreement which you mentioned is not without any consideration and therefore it is not a valid contract?
Guest
(Expert) 13 February 2013
In my opinion, any blank cheque from an employee at the time of appointment can be considered as a case of cheating & fraud with the employee in the absence of any mention of the blank cheque as an instrument to secure implementation of the agreement in case the employee does not come forward to honour his formally agreed commitment, as included in the agreement, on resignation or in case of his absconding.
When a legal document in the shape of an agreement is in existence that should be got implemented only after observing due legal process, not by illegal means. The employer should legally get the agreement executed through court of law, if the agreement is not honoured on notices etc., by the employee.
The should not assume that the agreement is or would be breached. If the other party (employee) is of a firm determination, he can legally force the employer to pay very dearly for his deceiptful act and shortcut approach.
Sudhir Kumar, Advocate
(Expert) 13 February 2013
you entered into agreement whose breach was secured by a blank cheuq. So face 138
Raj Kumar Makkad
(Expert) 13 February 2013
Continuation of service up to 2 years is a condition and in case of its violation attracts 6 months pay which is part of contact so the consideration is violation and cheque given thereto if bounced attracts 138 NI Act.
The employer shall show as if the cheque was issued by employee in liue of 6 months compensatory pay.
R Trivedi
(Expert) 13 February 2013
It is well settled that the cheque must have been issued in order to clear subsisting liability as on the date of cheque issue.
So in such case, at the time of issue of cheque, no liability is present, apparently cheque is taken as the security in case employee leaves the stipulated period of 2 years.
Since in any case this cheque is supposed to be returned to employee in case he stays put for two years and hence it must find a mention in the contract agreement. This will prove that it was a security cheque given in advance without any subsisting liability on the date of contract. matter must end with this as far a S.138 is concerned.
Sudhir Kumar, Advocate
(Expert) 14 February 2013
security cheuqe is used by employer to secure contractual damages. Action is per-se valid.
R Trivedi
(Expert) 15 February 2013
Yes, action by the employer is valid, he has to explore the legal options available to him for the time and money spent on the employee for his training, if employee leaves before the specified bond period.
But the violation of Bond terms & conditions cannot make the employee, an accused in criminal case, civil remedies are available. S.138 is for cheque issued for subsisting debt or liability.
