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Preeti Jain (company secretary)     03 September 2014

Third party payment

Dear All,


Please guide as to the legal provisions regarding acceptance of payment from third party in a real estate transaction.


Whether a company in real estate business is criminally liable if it has accepted payment from a third party on behalf of a customer and later on that customer makes the default in payment to the third party?


Kindly suggest


Thanks in advance


 10 Replies

Hardeep (Business)     03 September 2014

Commercial matters are normally in the domain of civil liabilities, not criminal except for established fraudulent conduct, cheque bouncing etc.

If there is clear evidence  that payment was received from the third party on behalf of the customer and was so properly authorized then the matter is now between the two. If involved as the Defendant, the Company should cite this evidence.

Preeti Jain (company secretary)     03 September 2014

Thanks for the instant reply.


But in my case the company received the payment from third party without any authorisation and now the third party made complaint under section 406, 420, 504, 506 and 34 IPC.


Kindly suggest

With Best Regards

Adv. Nikhil Seth (legal consultant (9867264707))     03 September 2014

Sections levied on you are as per IPC provisions.

In your case onus is on you to prove that it was in good faith and you had no role to play in that . Burden of proof lies on you to prove that you aare innocent.





Chetan Joshi (Advisory/Advocacy)     03 September 2014



If I were you, I would dig into the contract of my company with the customer and will take it under the ambit of interpretations (Express or Implied)


406 Has precisely been made out because there existed a contract.


The company is being correctly prosecuted.




Chetan Joshi

Hardeep (Business)     04 September 2014

Having no authorization from anyone, the Company is on a weak footing .S 506 specifically is on criminal intimidation. 

A prima facie case has been made out. So the burden of proof now shifts to the Company to rebut the allegations.

Ashok, Advocate (Lawyer at Delhi)     04 September 2014

You have not provided the full details of the third-party payment mentioned by you. In the absence of the following details, it may not be possible to give you proper guidance:


1.         What is the form of the third-party payment? Is it by cheque?

2.         If it is by cheque, whose signature appears on the cheque? Is it of the third-party?

3.         If the signature is of the third-party, is the signature genuine or forged? What is the stand of the third-party in this regard?

4.         In whose name the cheque was drawn, i.e., is it in the name of your company? In whose handwriting, the details mentioned in the cheque are written? Are these in the handwriting of the third-party or of your customer?

5.         If the cheque was in the name of your company, was it an “account payee” cheque?

6.         Does the third-party accept that the cheque was genuinely issued in the name of your company?

7.         If so, what is the stand of the third-party as to how come it came to issue the cheque in the name of your company? What was the consideration for doing so?

8.         If it was issued by the third-party specifically with the knowledge that the cheque was being issued in the name of your company for making payment on behalf of your customer, i.e., to meet the liabilities of your customer, in that case it may not be possible to attribute any criminal liability on your company. Of course, if under any rules/regulations, if there is a restriction on accepting any third-party payment for a real estate transaction, your company may be liable for violation of such rules/regulations, however the criminal liability is an entirely different matter altogether.

9.         If the cheque has been issued by the third-party genuinely in the name of your company but on behalf of your customer, in that case any subsequent dispute would be between your customer and the third-party in case of non-payment by your customer to the third-party and your company may not be liable for the same (except, of course, if your company itself has accepted any liability in case of such default by your customer, then it will be a different thing).


10.       However, if the third-party had given the cheque to your customer for some other purpose and your customer has misused that cheque for making payment to your company (more so, if the name of the payee of the cheque was left blank) and if the third-party was not aware that the cheque was being issued in your company’s name, in that case your customer may be responsible for a fraudulent transaction, and depending upon the level of complicity of your company, it may also be liable for such fraudulent transaction. However, even in such a case, if it is found that your company was not aware of any fraud or wrongdoing being committed by your customer and has genuinely accepted the third-party payment without any criminal intent, in that case no offence is made out against your company.

1 Like

Hardeep (Business)     04 September 2014

Mr. Ashok lays out the different scenarios well.

But as the OP say a complaint under the different IPC sections cited has been made. If so, is it not now required for the Company to rebut that  ? And how can the Company do that ?

Further even if the Party Name in the cheque is left blank by the drawer and later filled in by somebody else the drawer is still liable for payment of the same ( Moideen v Johnny - blank cheque issued as security - drawer liable ) , AFAIK. Pl correct if wrong.

Preeti Jain (company secretary)     05 September 2014



Mentioned below are the details which are relevant to this case:


1.       * Payment by third party is by cheque.

2.       * Signature of third party is appearing on the cheque.

3.       * The signature of third party is genuine as it is accepted by the third party in her statement.

4.       * The cheque was drawn in the name of my company in handwriting of third party.

5.       * The cheque was account payee cheque.

6.       * The cheque was genuinely issued in the name of my company as accepted by third party.

7.    * The third party is stating that the cheque was issued to meet the financial requirements of her  husband’s friend with her full knowledge and at the time of payment she had full faith in that customer. She was fully aware that the cheque was being issued in the name of the company.

8.     *  Now the customer is making default in repayment of the amount taken from the third party and that third party is raising a claim towards customer and my company.

9.      * My company has not accepted any liability in case of any dispute between customer and third party regarding payment.


Kindly suggest accordingly


Thanks & Regards

Ashok, Advocate (Lawyer at Delhi)     05 September 2014

In the light of the detailed facts mentioned by you, I am of the considered opinion that NO criminal liability can be attributed to your company. 

Preeti Jain (company secretary)     05 September 2014

Thank you all to be a part of my discussion.

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