Goan partners slug out security check issue with distributors

Goa: Partners in Goa vociferously voiced their protest about having to furnish a security cheque to national distributors -a practise that they claimed was illegal-at The DQ Week IT Panchayat in the city on 28th February, 2008.  National distributors usually ask partners to deposit post dated cheques (PDC) with them for transactions. But additionally, they are asking for blank cheques as security cheques.

All the three distributor representatives from Neoteric Infomatique, Ingram Micro and Redington claimed that they have till date never deposited the cheques. But when asked by the moderator of the IT Panchayat, Vinita Bhatia, Executive Editor, DQ Channels, on why was it needed in the first place, they claimed that it was a company policy.

Terence Viegas Terence Viegas, Branch Manager, Ingram Micro India Ltd said that this was a company policy that has been in practise for several years. “Since we give credit to the partner, we need some security from them, so in case a cheque is dishonoured we have the security cheque,” he claimed.

However, it is obvious that if a post dated cheque were to be dishonoured then the security cheque would also follow that example. Sandeep Vaidya of Megatrends, however, demanded to know why were the distributors not willing to acknowledge the receipt of this cheque. “If taking the security cheque is company policy then why don't the distributors mention it in black and white and give documentation supporting this?” he questioned.

Ejaz of Infotech Solutions also pointed out that giving a blank cheque as security was a huge security risk. “If my liquidity is Rs 20 lakh and I give a distributor a blank cheque, I am effectively giving them the power to take all that funds from my account,” he said. Besides he added that when he had once presented a cheque and mentioned that it was a security cheque on its back, the distributor refused to accept it.

Another issue was that of who take the responsibility in case the cheque is misused. “In recent times several PDCs which were deposited with distributors were presented twice for the same billing. If this can happen with transactional cheques then how can we be sure that our security cheques will not be misused or mishandled similarly?” asked Sudheer Prabhu of Softek Marketing. However, Viegas maintained that this was a business policy and it was not a way to defraud a channel partner.

Prashant Kuncolienkar of Computronics Infotech noted that his cheques has been misplaced and he had to keep at the distributor for over three months before the case was resolved. “It is because there have been some similar instances of misuse that partners are now rebelling against it,” he said. 

To this, Viegas remarked that partners have the option of asking their banks to stop payment on those cheques, but no partner has ever done that in Goa. He also noted that there have been cases where some partners had delayed payments, but his company has not presented the security cheque.

Vishal Bhavsar, Branch Manager, Redington India mentioned that his company often used the security cheques while recording a transaction, but when the transactional PDC is presented then the cheque number is changed in the system. “We have never used the security cheque for actually charging a transaction till date,” he reiterated. 

GM Prabhudesai of Amey Computers and President of Goa IT Business Association (GIBA) maintained that this practise was wrong and also illegal. “As per the law, no company can ask you to surrender a blank cheque as security for a business transaction. We want this practise to be discontinued,” he said.

If distributors insisted on taking security cheques, Ejaz suggested that they take it for the amount of the credit they extend to the partner rather than take a blank financial instrument. This suggestion was met with a round of applause.

The subject was debated for long at the IT Panchayat and from there partners moved onto to another issue that affected them sporadically — that of the MRP being printed on the box being much lower than the price at which a dealer can sell to the customer, after factoring the distributor charge and margin. “The incidence of this issue was more in the past three months when vendors were changing prices to balance the dollar fluctuation,” said Prabhude said.

Viegas and Bhavsar said that this was an issue because the warehousing officials were not aware of the changes in prices and therefore the products went with the lower MRP. However they pointed out that this issue was not a regular one and has been handled by their respective companies.

The Panchayat saw a lot of lively participation by all the channel members and distributor representatives. The presentations by the sponsors of the event — Symantec, Gigabyte and Emerson Power Networks.