Know the Law
One morning, I got a call from my father. The police had come to his office (also the address of Netcore’s registered office) to arrest him, my mother, my wife and me. As directors of Netcore, we had all been named in a bounced cheque case, an FIR had been filed, and there was a non-bailable arrest warrant against all of us. I froze. I knew there was an ongoing legal issue in the courts about the case, but I never realised until that moment that anyone could be arrested.
We had bounced a post-dated cheque we had given to a vendor because we believed that we had not got the service that we had paid for. At that time, I did not know that bouncing a cheque was an offence for which one could be arrested. As I found out later, under Section 138 of the Negotiable Instruments Act, 1881, it’s a cognizable offence. In other words, if charged, it’s punishable with an imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both. The aggrieved party can file a civil or criminal complaint against you, the issuer of the cheque.” [Source: VakilSearch]
My logic was: we had given a cheque in advance, we did not get the service, and so we put a stop payment on the cheque at the bank, which resulted in the cheque being bounced. It all seemed perfectly logical to me. Those were early days in our business, and no one in the finance team red-flagged the consequences of this to me. I should have known better, but I did not. I also did not seek any advice from experts who would have warned me.
The matter had then gone to court. Even then, I still did not realise the gravity of what I had done in bouncing the cheque and what powers the other party had. I was confident that we had a very solid case and could win in the court. At some point, it became an ego issue – “let’s teach them a lesson”, rather than a simple business decision even as the legal costs started to mount. But the worst was yet to come.
The phone call from my father shook me to the core. My regular lawyer who should have warned me was unavailable. (The case was filed in a different city hence that lawyer was not our regular one.) I frantically called up a couple of lawyers I knew. After an hour of keeping the police at bay, I finally got through to the outstation lawyer. To my relief, he said that he had already got a stay order against an arrest the previous day but had been too busy to inform us. He faxed across the order and the police accepted that and went away.
That one hour for me is when life had stood still – I had imagined all four of us being arrested, taken to a different city, and put in jail for an indeterminate period of time (knowing how slow the Indian justice system worked), and my young son being left all alone.
After this incident, I set aside my ego and negotiated an out-of-court settlement. I also learnt a couple of lessons – understand the law of the land where one operates. Even more important, have the right managers and advisors who can provide the right guidance. A small mistake can be devastating. No amount is too high to pay for peace of mind – and freedom.
