Misuse of Section 138 to Coerce Party
Querist :
Anonymous
(Querist) 22 May 2011
This query is : Resolved
Dear Sir,
We run a company where we give post dated cheques as security cheques to our parties. The Pay Master is our End Client who gives these assignments to the parties with our company acting as a mediator.
The party undertakes to complete a particular assignment as per the Client's technical requirements. Since this a computer related work, we given multiple opportunities limited to three tries per assignment. Each assignment only if accepted within these three tries is paid as per the payment decided for the assignment.
In case a party fails to deliver the work as per the requirements inspite of three tries, the assignment is cancelled and no payment is made for the same.
One of our parties failed three times to deliver the assignment as per requirements. Hence, a payment was not due to them. Yet, they went ahead and deposited the security cheque issued by us without our explicit confirmation. Normally the Pay Master would pay them directly. But they went ahead and tried to encash our security cheque to coerce us for a payment for the work that was not due for payment.
We have read on this forum that there are certain clauses that can protect us from section 138 such as section 406, misuse of property (or such). Please advise us as this party is repeatedly trying to coerce us for payment and spoiling our name in our field of work.
Pls note: the cheque bounced and party filed a case of 138 against us. They are also planning to file a case of 420 against us. Please advise.
Please advise.
Querist :
Anonymous
(Querist) 22 May 2011
Pls note: the cheque bounced and party filed a case of 138 against us. They are also planning to file a case of 420 against us. Please advise.
Guest
(Expert) 22 May 2011
FILE A CRIMINAL COMPLAINT BEFORE THE CRIME BRANCH (COMMISSION/S.P.) WITH RELEVANT DETAILS OF TRANSACTIONS. THE POLICE WILL REGISTER THE CASE AND ENQUIRE THE MATTER AND GET YOURSELF SOLVED
Guest
(Expert) 22 May 2011
SO WHAT. SEND A REPLY SUITABLY AND AFTER CONVERT THE REPLY NOTICE INTO A CRIMINAL COMPLAINT AND PROCEED IN POLICE. THEN ONLY YOU GET OUT OF CLUCHES OF LEGAL PRESUMPTION UNDER 138 NI ACT. BECAUSE THE ACT COMBINES WITH CRIMINAL OFFENCE DEALT UNDER INDIAN PENAL CODE.
Advocate. Arunagiri
(Expert) 22 May 2011
420 ipc and 138 NI Act normally will not be entertained by the court.
M/s. Y-not legal services
(Expert) 23 May 2011
Don't worry.. They can't take two weapons in a single hand.. Law will not allow them to prosecued two types cases.. You have some scope for succeed your case.
Guest
(Expert) 23 May 2011
I may have to differ with the advice of the experts to some extent.
Your statement that the post dated cheques are given as security cheques also seems to be doubtful, as you do not seem to have given the full facts, if it is a case of freelance job assigned to the other party.To be frank, it does not seem to be a case of misuse of section 138 by the other party, rather it seems to be a case of violation of intellectual property right on your part.
However, unless you have the written agreement with the party about completion of three assignments, specific mention about the cheque to be treated as a security not to be presentd without your consent, claim of payment to be made separately after acceptance of the 3rd assignment, and with provision of presentation of the security cheque only on failure of payment on acceptance of the 3rd assignment, only in that case you can have the escape from the 138 NI case, otherwise not.
Further, for your information, even security cheques are encashed by the party concerned and have to be honoured by the drawer. You were supposed to claim refund of security (not the security cheque) after clearance of your own liability.
In freelance business, as it clearly seems to be of yours, normally people get the job done from freelancers and thereafter don't bother to make payment by saying that they are not satisfied with the work and sometimes the freelancers after having put in a lot of time and efforts remain unpaid. The hirer, of course uses the same material as his own in sheer violation of the intellectual property rights. In certain cases the job description is understated to get lesser quotes, and thereafter on getting the lesser quotes, the hirer expects the freelancer to do several other things also, which are not initially prescribed, in the same lesser price.
So, I don't think any wrong on the part of the freelancer to file a case under sec. 138 on dishonour of cheque. You may have to fulfill your liability. At the most you can appoint an arbitrator separately to judge whether the freelancer fulfilled your conditions or not.
