The offence of dishonour of cheque is made out only if the cheque had been issued for the discharge of any debt or other liability. If the cheque had been issued as a “security”, and if such cheque bounces, no offence is made out under Section 138 of the Negotiable Instruments Act.
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I am a channel partner of a LED company. Normally The despatch the material on behalf of our signed and stamped purchase order. recently we signed a rate contact (LOI) for a project. I sent LOI to The LED company and specifically mentioned in email as well as LOI that material should be despatch only after my requirements and confirmation. But to they sent the material in two lots. I received the material off first lot after there verbal commitment. And when the second lot is come then I refuse to receive the same. But after 3 months they resend the material of second lot and they sent a email that we The material is liquidate and I received the payment from customer then I do the payment for the same. but after two days deposit two checks (security check) in Bank and both are bounce. Now The company is threatening me for legal action. please suggest me what I can do now.
Asked 5 years ago in Business Law
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12 Answers
You should return the second material as you had specifically requested company not to dispatch the same
2) of any legal notice is received dny your liability to make payment
3) take the plea that there is no debt due and payable
4) cheque was given as security only
5) in case any false case is filed of cheque bouncing apply for and obtain bail
Sir if the company send you legal notice for debt reply same or before there notice send them a legal notice stating that they have illegaly used your cheques given towards security, the payment as promised was to be made after the lot was sold to the customer. but company without confirmation sent the goods and further illegally used the cheques.
Further ask them to pay damages and take there lot back.
if the notice is already being sent to you, you have to contest same on the ground that at relevant time there is no legally payable debt.
When you sign contract and given cheques for security is any where mentioned in contract that cheques are for security
No need to worry because company resended 2lot you ,when once you refuse to take why they sended again
Issue legal notice and also you contest there is no debt payable legally and use of cheques given for security
specifically mentioned in email as well as LOI that material should be despatch only after my requirements and confirmation and sended without confirmation is illegal
Hello,
let me know the ground on which the cheque got bounced
regards
Earlier company despatch material only after my stamped and signed purchase order. Company give us 30 or 45 days credit time, and for this credit time they take 5 nos.blank check and when the credit time is over they deposit the check and we cleared them. But this time they sent the material without my confirmation even after I mentioned in LOI. For this time before they deposit the check, I withdraw the whole amount from my account and check get bounced. Company threatening me that even you don't give Purchase order, you received the material so you must do the payment and on this basis they threatening me for legal action. Till now I don't receive any notice but I come to know from my internal source they take same action and within 2 or 3 day's I got the same. So I want to know that can I take legal action for miss use of my check (420), harsment, Manhani etc. Please suggest.
Asked 5 years ago
1) you should return the goods as they were delivered without any purchase order
2) in the event any legal notice is issued of dishonour of cheque contact a local lawyer and reply to legal notice
Yes you send them a legal notice for wrongly supplying the consignment and misusing the cheque as against the agreement made. Further can ask them to take back there goods as no purchase order in that respect for given, or no order was called for. Under these circumstances company will not take any action and will try to settle.
Basically, you need to assert that the bounced cheques were issued only as a security and hence no legal action against you in lieu of the dishonour of the said cheques is maintainable.
Send them an email, stating all what you have stated here in your queries and specifically mention that the bounced cheques were not in towards to repayment of an admitted existing liability.
At this stage, all what you can do is sending them an email/letter.
Later once they issue a demand notice/legal notice threatening action against you under sec 138 NI Act, send a reply to them through your lawyer.
any case under 138 can not be filed without sending a legal notice.
As soon as you get a legal notice, you tender a reply to them saying that there is no legally enforceable debt and that you have by fraud presented the cheque.
Regards
Do you have evidence for refusing the material or for the assurance from that company to send the money after selling the product?
You will be receiving the legal demand notice from them towards the bounced cheque.
You can give a suitable reply denying their allegations and send back their material stating the facts about this with an intimation to them through mail.
The records that are created now in this regard will help you defend your interests in the court of law during the trial process.
You cannot take any action for misuse of cheque because yoiu have issued the cheque for security purpose and since the emergency situation arose, he utilised the cheque.
However you can deny the allegations stating that you never indented the material nor there is any purchase order from your side hence the material sent by them was a volunteer act which is not binding on you and you are ready and willing to return the material.
You have to defend yourself somehow by adopting such tactics only.