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Cheque as a Security for Job in India

Job Security Cheque

At the outset only it is illegal as law is silent on this but prior to giving of Cheque, if you sign a service agreement that covers liquidated damages then company may put force behind it for the realization of Cheque. Such service agreement generally shows employee at the receiving end and while leaving the company, the employee must either fulfill the exit criteria or return the benefit accrued politely or else legal action ensues. It can be in form of training, concession; special facilities being given to you and other inputs spend by employer equip you with desired skills for the job.

But as a lawyer, I truly fail to understand how can cheques be used by employers to recover the amount in lieu of notice period. To the most, a complaint can be given to Labour Court or a Civil case for recovery but Cheque Bounce case is very rare.

Yes, if the appointment letter covers the cost of training being provided to you, then yes they can recover if you don’t fulfill the criteria. Indian Contract Act would be applicable to such scenarios.

The Supreme Court held that whether a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If, on the date on which the cheque is issued, liability or debt existed or the amount is legally recoverable, Section 138 of the act will be attracted (Sampelly Satyanarayana Rao v Indian Renewable Energy Development Agency Limited)

Cheques which are issued to discharge an existing liability are only covered under Section 138 of the act. Even the cheque towards advance payment if dishonoured, will not attract criminal liability under Section 138 of the act but the parties may be liable for breach of contract when the contract provides that the purchaser must pay in advance.

Your employment contract must explicitly cover that employer is taking “undated cheques” from you and in case of breach will recover. Even the employee also has recourse to stop such practices by asking bank to stop payment on these cheques. As per Negotiable Instruments Act, 1881 mandate, the life of a cheque is for 3 months and after that it is invalid.

In India, fixed term jobs are governed by the Contract Labour (Regulation And Abolition) Act, 1970.

So you can choose the job quietly without making any fuss and once you leave your job after any given months, the cheque won’t remain valid. If still you are in trouble, then dial 9988817966 and I would surely assist you. That’s what we lawyers and advocates in Chandigarh, Panchkula, Mohali are here for. 

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