I am seeking legal advice regarding a health tech start-up I invested in, which raised over INR 100 crore from 98 investors, including myself, in January 2024. The founders promised an IPO by April 2024 and assured 4x returns to investors, issuing post-dated cheques to reflect these returns. Needless to say, the IPO did not happen. I received post-dated cheques for January 2025. However, some investors who were given cheques for September 2024 faced issues when the company issued a stop payment on those cheques to avoid the risk of them bouncing. While this avoided the criminal liability associated with bounced cheques for the founders, it caused significant frustration for the investors. The founders, though credible, have asked us to refrain from legal action until the end of 2024, as they are trying to secure another round of funding. I am willing to wait for now, but I’m concerned they may stop payment on my cheques as well. - My first question is whether there is anything I can do now to protect my interests while waiting. - Secondly, what are my legal options if I choose to take action immediately, and how can I safeguard my investment and enforce the post-dated cheques if necessary?
Dear Sir, You must take some collateral security like mortgage of company property etc.
Dear Client, As per your query, you should demand a written admission of liability, additional security in terms of personal guarantees, or an escrow arrangement from the promoters. If the company puts through a stop payment order and dishonors the cheques, you can take appropriate legal recourse under Section 138 of the Negotiable Instruments Act, 1881, that attracts criminal liability in terms of imprisonment or fine. Or you might file a remedy by a civil suit under Order XXXVII of the CPC, 1908 or sue for damages for breach of contract under Section 73 of the Indian Contract Act, 1872. Obtain an injunction ex-parte under Order XXXIX, Rule 1 and 2 of the CPC, 1908, if there is a strong possibility of stopped payments. Feel free to book an appointment for a detailed discussion on the issue.
