Dear All,
We hired an employee and received negative feedback on employment verification. Later, we found out that he had been terminated from four companies before us for the same reason. He acknowledges that he will not repeat the mistakes he has made in the past. Additionally, he expressed his concern that if no one gives him a chance, how will he be able to prove himself.
We are considering requesting a blank security deposit check. Could anyone provide guidance on the format and confirm its legality?
Thank you.
From India, Ahmedabad
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5We hired an employee and received negative feedback on employment verification. Later, we found out that he had been terminated from four companies before us for the same reason. He acknowledges that he will not repeat the mistakes he has made in the past. Additionally, he expressed his concern that if no one gives him a chance, how will he be able to prove himself.
We are considering requesting a blank security deposit check. Could anyone provide guidance on the format and confirm its legality?
Thank you.
From India, Ahmedabad
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Hi,
Merely collecting a security cheque alone will not suffice. It should be accompanied by an Indemnity Bond. Additionally, please obtain a self-declaration from the candidate regarding the deposit of cheques into the employer's account in case of a violation of the agreed terms between the parties.
From India, Madras
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Merely collecting a security cheque alone will not suffice. It should be accompanied by an Indemnity Bond. Additionally, please obtain a self-declaration from the candidate regarding the deposit of cheques into the employer's account in case of a violation of the agreed terms between the parties.
From India, Madras
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Hi Vmlakshminarayanan, Do you have any sample doc? Thanks, Mansi
From India, Ahmedabad
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From India, Ahmedabad
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Hi,
There are many drafts available online. You may customize them as per your requirements. Please refer to the following draft as well, and customize it according to your organization's needs.
INDEMNITY BOND
This indemnity is made and executed on this _____ day of ______20__ by Shri/Smt. __________________________________ S/o/ D/o/ W/o Shri __________________________, a permanent resident of________________________________________________ ____________ __________________ hereinafter called "Employee", IN FAVOUR OF _______________(provide employer details, company incorporations details with address) hereinafter called "Employer".
The terms 'Employee' and 'Employer,' unless repugnant to the context, shall mean and include their heirs, legal representatives, successors, executors, and administrators.
WHEREAS the Employee has been selected for appointment as ____ in the service of the Employer.
WHEREAS an Offer of Appointment containing the terms and conditions of appointment has already been issued by the Employer to the Employee vide letter dated __________20__.
WHEREAS one of the conditions of the appointment is that the Employee shall serve the Employer for a minimum period of ___ years from the date of joining the Employer and has to furnish an Indemnity Bond of Rs.1,00,000/- (Rs. One Lac only) to the Employer.
NOW THIS INDENTURE WITNESSES as under: 1. In compliance with the aforesaid terms & conditions in the Offer of Appointment, subject to which the Employer has agreed to give appointment to the Employee, the Employee hereby undertakes to serve the Employer for a minimum period of ___ years from the date of joining and will not leave the services of the Employer without rendering service for a period of ___ years.
In case of breach of the terms of this indemnity by the Employee and failure to indemnify the Employer, the Employee is liable to pay the aforesaid amount of Rs.1,00,000/- (Rs. One Lac only) to the Employer immediately.
The Employee further agrees and undertakes that in case he/she commits a breach of the above condition and resigns or leaves/abandons the service and/or neglects in the performance of the duties assigned to him/her leading to the termination of his/her service as per rules/regulations, shall pay Rs.1,00,000/- (Rs. One Lac only) with the interest thereon @ 12% per annum from the date of breach of the above till the payment is made as liquidated damages.
The Employee agrees that the assessment of liquidated damages as assessed at Rs.1,00,000/- (Rs. One Lac only) is just & reasonable, which he agrees to pay severally to the employer.
Notwithstanding anything contained herein above, furnishing of this indemnity will not confer any right in favor of the Employee to continue in the service of the Employer for the aforesaid term of three years, and the Employer shall always have the right to take appropriate action, as deemed fit, against the Employee as per the terms of the appointment letter and/or the rules and regulations of the employer as applicable, in case of the commission of any misconduct by the Employee.
The amount specified above shall constitute a debt owing to the Employer and shall be recoverable from the Employee severally, with interest thereon at the rate specified above till the date of payment. This bond and the rights and obligations shall in all respects be governed by the laws of the Union of India. For the breach of any right or obligations of whatsoever nature arising out of the bond or employment shall be deemed to have arisen within the territorial jurisdiction of ____ courts only.
IN WITNESS whereof, the EMPLOYEE has put his signature in the presence of the witnesses on this ___ day of _____ 20__ at _________. EMPLOYEE
1. WITNESS: NAME & ADDRESS 2. WITNESS: NAME & ADDRESS
From India, Madras
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There are many drafts available online. You may customize them as per your requirements. Please refer to the following draft as well, and customize it according to your organization's needs.
INDEMNITY BOND
This indemnity is made and executed on this _____ day of ______20__ by Shri/Smt. __________________________________ S/o/ D/o/ W/o Shri __________________________, a permanent resident of________________________________________________ ____________ __________________ hereinafter called "Employee", IN FAVOUR OF _______________(provide employer details, company incorporations details with address) hereinafter called "Employer".
The terms 'Employee' and 'Employer,' unless repugnant to the context, shall mean and include their heirs, legal representatives, successors, executors, and administrators.
WHEREAS the Employee has been selected for appointment as ____ in the service of the Employer.
WHEREAS an Offer of Appointment containing the terms and conditions of appointment has already been issued by the Employer to the Employee vide letter dated __________20__.
WHEREAS one of the conditions of the appointment is that the Employee shall serve the Employer for a minimum period of ___ years from the date of joining the Employer and has to furnish an Indemnity Bond of Rs.1,00,000/- (Rs. One Lac only) to the Employer.
NOW THIS INDENTURE WITNESSES as under: 1. In compliance with the aforesaid terms & conditions in the Offer of Appointment, subject to which the Employer has agreed to give appointment to the Employee, the Employee hereby undertakes to serve the Employer for a minimum period of ___ years from the date of joining and will not leave the services of the Employer without rendering service for a period of ___ years.
In case of breach of the terms of this indemnity by the Employee and failure to indemnify the Employer, the Employee is liable to pay the aforesaid amount of Rs.1,00,000/- (Rs. One Lac only) to the Employer immediately.
The Employee further agrees and undertakes that in case he/she commits a breach of the above condition and resigns or leaves/abandons the service and/or neglects in the performance of the duties assigned to him/her leading to the termination of his/her service as per rules/regulations, shall pay Rs.1,00,000/- (Rs. One Lac only) with the interest thereon @ 12% per annum from the date of breach of the above till the payment is made as liquidated damages.
The Employee agrees that the assessment of liquidated damages as assessed at Rs.1,00,000/- (Rs. One Lac only) is just & reasonable, which he agrees to pay severally to the employer.
Notwithstanding anything contained herein above, furnishing of this indemnity will not confer any right in favor of the Employee to continue in the service of the Employer for the aforesaid term of three years, and the Employer shall always have the right to take appropriate action, as deemed fit, against the Employee as per the terms of the appointment letter and/or the rules and regulations of the employer as applicable, in case of the commission of any misconduct by the Employee.
The amount specified above shall constitute a debt owing to the Employer and shall be recoverable from the Employee severally, with interest thereon at the rate specified above till the date of payment. This bond and the rights and obligations shall in all respects be governed by the laws of the Union of India. For the breach of any right or obligations of whatsoever nature arising out of the bond or employment shall be deemed to have arisen within the territorial jurisdiction of ____ courts only.
IN WITNESS whereof, the EMPLOYEE has put his signature in the presence of the witnesses on this ___ day of _____ 20__ at _________. EMPLOYEE
1. WITNESS: NAME & ADDRESS 2. WITNESS: NAME & ADDRESS
From India, Madras
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Dear Mansi,
You mentioned receiving negative feedback from a recent recruit's former employer. What specifically was mentioned in the feedback? Was there any mention of fraud? Which department did the employee work in, and will they continue in the same role? Will their responsibilities involve dealing with suppliers or customers, possibly including financial transactions?
Though not explicitly stated, it seems you were considering requesting a security deposit from the employee. Is this to safeguard against potential fraud? If so, would the deposit be forfeited in case of misconduct?
Regarding Mr V. M. Lakshminarayanan's input, it was suggested that any cheque received should be supported by a legal agreement, which is a valid point. However, some aspects of the indemnity letter draft may not be relevant to this situation. The issue of holding a blank cheque from the employee needs further clarification.
For Mansi: If considering a blank cheque and indemnity bond, what measures are in place if the employee stops payment on the cheque? Perhaps engaging a legal professional to draft a comprehensive agreement would be beneficial, with the employee covering the legal fees.
An alternative proposal is to pay the employee minimum wages for a set period, with the salary difference acting as indemnity. Clear terms should be outlined in the appointment letter to avoid any misunderstandings.
Thank you,
Dinesh Divekar
From India, Bangalore
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You mentioned receiving negative feedback from a recent recruit's former employer. What specifically was mentioned in the feedback? Was there any mention of fraud? Which department did the employee work in, and will they continue in the same role? Will their responsibilities involve dealing with suppliers or customers, possibly including financial transactions?
Though not explicitly stated, it seems you were considering requesting a security deposit from the employee. Is this to safeguard against potential fraud? If so, would the deposit be forfeited in case of misconduct?
Regarding Mr V. M. Lakshminarayanan's input, it was suggested that any cheque received should be supported by a legal agreement, which is a valid point. However, some aspects of the indemnity letter draft may not be relevant to this situation. The issue of holding a blank cheque from the employee needs further clarification.
For Mansi: If considering a blank cheque and indemnity bond, what measures are in place if the employee stops payment on the cheque? Perhaps engaging a legal professional to draft a comprehensive agreement would be beneficial, with the employee covering the legal fees.
An alternative proposal is to pay the employee minimum wages for a set period, with the salary difference acting as indemnity. Clear terms should be outlined in the appointment letter to avoid any misunderstandings.
Thank you,
Dinesh Divekar
From India, Bangalore
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Mr. Dinesh Divekar,
In my initial reply, I have suggested going for an Indemnity Bond with self-declaration. However, since Member Mansi requested a sample, I have provided a template for his reference. In my reply to him, I have clearly advised him to 'customize' the template as per his requirements since I am not aware of the background of the candidate he is hiring. He needs to edit the clauses of the bond, including the mentioned amount. The concept is that security cheques are primary, and the Indemnity Bond is additional support to the employer, which will act as a moral threat to the employee.
Regarding the return of the cheque/cancellation of the agreement, this has to be mentioned in the appointment order. In your reply to Member Mansi, you mentioned the "stop payment instructions" option for the employee. In my initial reply, I advised collecting a self-declaration from the employee. The purpose of the self-declaration is for the employee to confirm issuing the cheque to the employer for security purposes and agreeing to the deposit of the cheque into the employer's bank account in case of a violation of stipulated terms.
So, even if the employee advises the bank with stop payment instructions, once the cheque is bounced, and the Employer receives the Cheque Return Memo from his bank, the employer can file a criminal case for the dishonor of the cheque according to Section 138 of The Negotiable Instruments Act, 1881, which is applicable to cases of dishonored cheques.
Leaving the legality part aside, based on my experience, I have seen in many cases that the employee tends to fulfill the agreement terms primarily or approach the employer for negotiating compensation if they are unable to honor the terms of the agreement. Therefore, the employer has the advantage of using the agreement/cheques as a moral threat.
I have not elaborated much on the security cheques/indemnity bond to the member due to a lack of time, assuming that the member will have some idea about this.
Thanks
From India, Madras
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In my initial reply, I have suggested going for an Indemnity Bond with self-declaration. However, since Member Mansi requested a sample, I have provided a template for his reference. In my reply to him, I have clearly advised him to 'customize' the template as per his requirements since I am not aware of the background of the candidate he is hiring. He needs to edit the clauses of the bond, including the mentioned amount. The concept is that security cheques are primary, and the Indemnity Bond is additional support to the employer, which will act as a moral threat to the employee.
Regarding the return of the cheque/cancellation of the agreement, this has to be mentioned in the appointment order. In your reply to Member Mansi, you mentioned the "stop payment instructions" option for the employee. In my initial reply, I advised collecting a self-declaration from the employee. The purpose of the self-declaration is for the employee to confirm issuing the cheque to the employer for security purposes and agreeing to the deposit of the cheque into the employer's bank account in case of a violation of stipulated terms.
So, even if the employee advises the bank with stop payment instructions, once the cheque is bounced, and the Employer receives the Cheque Return Memo from his bank, the employer can file a criminal case for the dishonor of the cheque according to Section 138 of The Negotiable Instruments Act, 1881, which is applicable to cases of dishonored cheques.
Leaving the legality part aside, based on my experience, I have seen in many cases that the employee tends to fulfill the agreement terms primarily or approach the employer for negotiating compensation if they are unable to honor the terms of the agreement. Therefore, the employer has the advantage of using the agreement/cheques as a moral threat.
I have not elaborated much on the security cheques/indemnity bond to the member due to a lack of time, assuming that the member will have some idea about this.
Thanks
From India, Madras
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Hello,
I just want to see this matter in a different view. Is this person the last person to perform your company's particular profile? Can't you recruit any other better person with a good background? Is management aware of all this? You are thinking in view of the monetary damage he may create. But did you think, if his act is not going to hurt the company's goodwill, that this company has only these types of employees?
Are you going to have ample time in the future? So, if he commits the same mistake in your company, you can run to do all these legal actions, etc. What about your and the organization's time value you may have to spend to run after this? If he does anything wrong in the future, then anyhow, you have to recruit a new person, train him. What about that process's time value and recruitment cost? Are you prepared for that?
Won't your decision-making be questionable in the future if anything goes wrong? Won't you be suspected of having your bias or some hidden motive to recruit this person in the future? Please think about this and prepare for it.
From India, Mumbai
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I just want to see this matter in a different view. Is this person the last person to perform your company's particular profile? Can't you recruit any other better person with a good background? Is management aware of all this? You are thinking in view of the monetary damage he may create. But did you think, if his act is not going to hurt the company's goodwill, that this company has only these types of employees?
Are you going to have ample time in the future? So, if he commits the same mistake in your company, you can run to do all these legal actions, etc. What about your and the organization's time value you may have to spend to run after this? If he does anything wrong in the future, then anyhow, you have to recruit a new person, train him. What about that process's time value and recruitment cost? Are you prepared for that?
Won't your decision-making be questionable in the future if anything goes wrong? Won't you be suspected of having your bias or some hidden motive to recruit this person in the future? Please think about this and prepare for it.
From India, Mumbai
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Hi Mansi
Before I comment on the advisability of procuring a Security Cheque, I wish to make one observation. It is rather strange that you are taking someone who has such a dubious track record of employment. I assume that you have a strong compulsion to recruit someone who has managed to secure not one or two but four negative stamps. In the normal course, one could surely do without such an employee. Having given you this unsolicited advice let me turn to your query.
The purpose of taking a security cheque is to enable you to drag the delinquent employee to a criminal court rather than try him under civil jurisdiction for the obvious reason of delays and procrastinations. Now let us look at your proposal closely. In case the employee turns out to be a good citizen and a responsible employee it would be hunky dory, and all is well. Let us assume the worst, for that is the reason you are taking a security cheque, just in case.
If the employee turns out to be a rogue, you will have to dispense with his services and terminate his employment by giving him the requisite notice. You would present his cheque and if it gets honoured, you are still ok with the situation. If the employee does not honour the cheque, then what happens? You will have to proceed against him under Section 138 of the Negotiable Instruments Act. The employee’s one and only defence would be that the cheque was only a “security” cheque and there is no crystallised liability to pay a dime to you. The proposed Indemnity Bond supports that premise. It is here that your situation would become a bit dicey. The court may not allow you to proceed against the employee under Sec 138 of NI Act on the ground that this provision can be invoked only in cases where there is lawful crystallised liability on the part of the accused against which a cheque has been issued. The cheque should be for a debt in presenti.
In Sudheer Kumar Bhalla vs Jagdish Chandra Bhalla and others 2009, SCC Supreme Court held that criminal liability of accused under the provision of section 138 NI Act is attracted only on account of dishonour of cheque issued in discharge of liability or debt but not on account of issuance of security cheque. There are a number of decisions both in favour and against this view depending on facts and circumstances of the cases. Then the issue is back to the civil court where you can proceed against the employee for breach of contract and for liquidated damages as envisaged in the Indemnity Bond. Do you want to do that with all the attendant delays?
Lest I be misunderstood I wish to make one point clear. I do not want to stand the in the way of someone getting his rightful employment. For all that you know, the person concerned may be a reformed individual today deserving that job which he has applied for. That is a call you must make. My reply is purely technical/legal in nature based on the facts presented.
From India, Nasik
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Before I comment on the advisability of procuring a Security Cheque, I wish to make one observation. It is rather strange that you are taking someone who has such a dubious track record of employment. I assume that you have a strong compulsion to recruit someone who has managed to secure not one or two but four negative stamps. In the normal course, one could surely do without such an employee. Having given you this unsolicited advice let me turn to your query.
The purpose of taking a security cheque is to enable you to drag the delinquent employee to a criminal court rather than try him under civil jurisdiction for the obvious reason of delays and procrastinations. Now let us look at your proposal closely. In case the employee turns out to be a good citizen and a responsible employee it would be hunky dory, and all is well. Let us assume the worst, for that is the reason you are taking a security cheque, just in case.
If the employee turns out to be a rogue, you will have to dispense with his services and terminate his employment by giving him the requisite notice. You would present his cheque and if it gets honoured, you are still ok with the situation. If the employee does not honour the cheque, then what happens? You will have to proceed against him under Section 138 of the Negotiable Instruments Act. The employee’s one and only defence would be that the cheque was only a “security” cheque and there is no crystallised liability to pay a dime to you. The proposed Indemnity Bond supports that premise. It is here that your situation would become a bit dicey. The court may not allow you to proceed against the employee under Sec 138 of NI Act on the ground that this provision can be invoked only in cases where there is lawful crystallised liability on the part of the accused against which a cheque has been issued. The cheque should be for a debt in presenti.
In Sudheer Kumar Bhalla vs Jagdish Chandra Bhalla and others 2009, SCC Supreme Court held that criminal liability of accused under the provision of section 138 NI Act is attracted only on account of dishonour of cheque issued in discharge of liability or debt but not on account of issuance of security cheque. There are a number of decisions both in favour and against this view depending on facts and circumstances of the cases. Then the issue is back to the civil court where you can proceed against the employee for breach of contract and for liquidated damages as envisaged in the Indemnity Bond. Do you want to do that with all the attendant delays?
Lest I be misunderstood I wish to make one point clear. I do not want to stand the in the way of someone getting his rightful employment. For all that you know, the person concerned may be a reformed individual today deserving that job which he has applied for. That is a call you must make. My reply is purely technical/legal in nature based on the facts presented.
From India, Nasik
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Thank you all for these valuable inputs. This person is recruited in an IT development. He has been rejected from 4 companies before us. Management is aware of the adverse report and the rejections as well.
Here is the comment from the previous employer:
Skill limited to Wordpress only, lack of team-leading skill, not proper or fit for a senior role, less punctual, and was taking his work very lightly and company projects for granted. We lost one big client because of his attitude and punctuality. He is accepting the mistake and assuring that he won't repeat it again. It's not that we won't get any other employee, but management wants to give him a chance.
I thought taking a security deposit check might be a good idea. Open for any other suggestions too.
Thanks,
Mansi
From India, Ahmedabad
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Here is the comment from the previous employer:
Skill limited to Wordpress only, lack of team-leading skill, not proper or fit for a senior role, less punctual, and was taking his work very lightly and company projects for granted. We lost one big client because of his attitude and punctuality. He is accepting the mistake and assuring that he won't repeat it again. It's not that we won't get any other employee, but management wants to give him a chance.
I thought taking a security deposit check might be a good idea. Open for any other suggestions too.
Thanks,
Mansi
From India, Ahmedabad
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Dear Mansi,
By hiring this type of person, your management is taking a calculated risk. Nevertheless, taking the security cheque and making a legal agreement for accepting the cheque is a messy business. As mentioned earlier, it would be better to hire him for minimum wages, such as Rs 12-15K. Let him work for one year or so. Next year, review his salary based on performance, but at that time, ensure the salary is consistent with the designation.
My suggestion of paying minimum wages may sound funny or ridiculous. However, the candidate needs to understand that there has to be a trade-off, and he must accept it for the continuity of employment.
Thanks,
Dinesh Divekar
From India, Bangalore
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By hiring this type of person, your management is taking a calculated risk. Nevertheless, taking the security cheque and making a legal agreement for accepting the cheque is a messy business. As mentioned earlier, it would be better to hire him for minimum wages, such as Rs 12-15K. Let him work for one year or so. Next year, review his salary based on performance, but at that time, ensure the salary is consistent with the designation.
My suggestion of paying minimum wages may sound funny or ridiculous. However, the candidate needs to understand that there has to be a trade-off, and he must accept it for the continuity of employment.
Thanks,
Dinesh Divekar
From India, Bangalore
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Security Deposit.pdf
WORK PLACE STANDARDS - Blank.doc