We worked on some business project in collaboration with third party. We signed an agreement and I have given him 5 blank cheques for their security purpose as the amount should be released from govt in our account only. The agreement have clause for that which mentioned (copied from agreement) that "Second Party ie (me) may give post dated cheques to the First Party as security deposit in regard to the payment which would become due, approved and dispatch by govt to the Second Party. These cheque /s can be present with the maximum amount involved in the default of payment made by the Second Party(me)."
As far as payment terms are concern, the statement of agreement is "The Second Party (me )will pay the consideration, for the services provided, to the First Party at the rate of 50% mutually agreed between both the parties out of the total cost, received from govt for the different rates and duration for the particular project, after TDS deduction by govt (Annexures added)."
I have made all the payment to second party as per terms and conditions. Now he is also asking same percentage from the TDS amount which we have received and refused to returns our cheques. We have requested to Bank to stop payment against cheque.
Can someone point out the legal issue involved in the above mentioned terms and conditions. what are the possible legal recourse with either of us should the matter go to the courts.
Thanks in advance