Section 138 of the Negotiable instruments Act
I am Shashank, speaking from Bangalore. I had incorporated a company on March 4th with my co founder Syed. Both of us are directors of the company.
After a couple of months, he decided to leave the company in pursuit of MS. He gave me his resignation from the board (I haven't processed it as I have been in Hyderabad since then. I told him I'd pay him his share of (incorporation costs + broker charges = 12,000) (we used a broker to find a office) and he'd resign and let me bring my friend on the board. So, I gave him a post dated cheque.
But I decided to not pursue the business anymore and settled on a fellowship programme at IIT. So when the time came, I stopped the cheque. Technically he is still a director.
Now he has sent a notice under Section 138 of the Negotiable instruments Act that I am liable for 12,000. Kindly advise.
Asked 2 years ago in Civil Law from Bangalore, Karnataka
Stopping the cheque is equivalent to cheque getting dishnoured due to insufficiency of funds in the account. If the demand notice has been received then you have an opportunity of paying him within 30 days the amount covered by the cheque, failing which he will be free to file a criminal case for cheque bounce against you which carries an imprisonment of up to 2 years.
Yes I realise that. But my question is, how will this be considered as legally enforceable debt or liability? It was an offer from my side to give him is cost of incorporation (As co founder he should bear the cost too) in return for me taking control of the company. But I have not pursued the business and he is still director and part of the company. Why should I pay him? If he decides to leave, shouldn't he bear the cost of the loss?
Asked 2 years ago
There is a presumption that the cheque had been issued for a legally enforceable debt. Pay the amount as the cost of litigation is likely to be more than the cheque amount itself.
You should tell him about this before issuing a cheque, now it is you duty to pay him or fight the case and proved before the court that there is no legal liability upon you.
your second mistake is that you did not inform to registrar regarding his resignation and due to your malafide intention you presume him as a director till today.
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Advocate, New Delhi
1) it is in your interest to make payment of Rs 12000 as cheque has been dishonoured on presentation
2) cheque bouncing cases take 5 years to be disposed of
3) you woukd end up spending more money in litigation fees