LAW RELATING TO
SECTION 143-A of NEGOTIABLE INSTRUMENTS ACT
Whether payment of interim compensation
to the complainant is mandatory?
The Section 143- A of Negotiable instruments
Act 1881 is inserted in the Act, prescribing the interim compensation to the complainant
to the extent of 20 percent value of the cheque amount which may be the subject
matter of a complaint u/s 138 of Negotiable Instruments Act. Initially, the
vexed issue was whether the operation of the said provision shall be
prospective or retrospective. It was finally resolved in much as the provision
shall be prospective in nature i.e the applicability of section 143 A shall not
relate to complaints filed earlier , but only after the provision is found
place in the statute book. It is a settled proposition in law that unless so
specified, the law shall be prospective in nature. The law enunciated in this
regard shall also be dealt in the discussion that shall follow further.
That said, another dimension arose as regards
whether the interim compensation of 20 percent of the cheque amount payable to
the complainant is mandatory or directory. If it is directory, the discretion
of awarding the interim compensation shall be vested in the courts of Magistrates
who are empowered to try the case under section 138 of Negotiable instruments
Act which relates to bouncing of cheques. In case it is not mandatory then in
that event, only in apt case or cases a magistrate may direct the accused to
pay interim compensation and not as a rule. The endeavour herein shall be to traverse
into the judicial precedents in this regard. Of course, the law itself is
nascent, as the insertion of section 143-A in the Act dates back only to 2018.
It shall be apposite, thus, to first reproduce
to the provision for facilitating the further discourse.
The backdrop
The prelude to the Section 143-A of the Act shall have to
be seen through the legislation. The Minister of State in the Ministry of
Finance, while replying to the discussion in parliament had stated that Members
had generally expressed their views on this Bill and everyone has said that
earlier when cheques used to bounce, then people used to fear. Now there are
about 16 lakh cases of cheque bounce in the subordinate and district courts in
the entire country and of these, about 32 thousand cases have gone upto the
High Courts. By virtue of the provision enacted it will be ensured that such
cases do not go up to High Courts. Thus, an amendment was brought in it so that
in commercial transaction cases or even in the ordinary individual complaints, public
benefit from it. The cheques issued by businessman or general public are
dishonoured, thus, ways are to be found about it and to reduce the instances of
cheque bouncing. If provision to this effect is enacted, both the businessmen as
well as common people shall be benefited. Even the Government's cheques will
not bounce. No doubt, the form of Government Cheques has already been
prescribed by the RBI, still, sometime due to the mistakes or clerical error
the cheques are bounced. This Bill has been brought so that such situations do
not emerge. The Minister had thus proposed passing of the Bill. The Bill has
now become part and parcel of Negotiable Instruments act 1881 as Section 143-A.
The Section 143-A of the Negotiable Instruments Act was
inserted by Act 20 of 2018 and was brought into effect from 01.09.2018 onwards.
It will be relevant to extract the reply given by the Minister of State in the
Ministry of Finance, while replying to the parliament, on the debate that took
place at the time of introduction of the Bill through which this amendment was
brought in.
The provision of section 143- A of Negotiable
Instruments Acts are iterated as under-
"143A. Power to direct interim
compensation (1) Notwithstanding
anything contained in the Code of Criminal Procedure, 1973, the Court trying an
offence under Section 138 may order the drawer of the cheque to pay
interim compensation to the complainant-
(a) in a summary trial
or a summons case, where he pleads not guilty to the accusation made in the
complaint; and
(b) in any other case, upon framing of charge."
(2) The interim compensation under sub-section (1) shall not
exceed twenty percent of the amount of the cheque.
(3) The interim compensation shall be paid within sixty days
from the date of the order under sub-section (1), or within such further period
not exceeding thirty days as may be directed by the Court on sufficient cause
being shown by the drawer of the cheque.
(4) If the drawer of the cheque is acquitted, the Court shall
direct the complainant to repay to the drawer the amount of interim
compensation, with interest at the bank rate as published by the Reserve Bank
of India, prevalent at the beginning of the relevant financial year, within
sixty days from the date of the date of the order, or within such further
period not exceeding thirty days as may be directed by the Court on sufficient
cause being shown by the complainant.
(5) The interim competition payable under this section may be
recovered as if it were a fine under section 421 of the Code of Criminal
Procedure, 1973(2 of 1974).
(6) The amount of fine imposed under section 138 or the amount
of compensation awarded under section 357 of the Code of Criminal Procedure,
1973(2 of 1974), shall be reduced by the amount paid or recovered as interim
compensation under this section."
From the bare perusal of foregoing provision itself,
it emerges that the discretion is vested with the Trial Court to direct interim
compensation to be paid to the complainant. The trial court may direct such
payment only in apt cases and such a direction can only be given on a case to
case basis by taking into consideration the facts of each case. What is of
significance is that the legislature has not used the word "shall",
since it would have probably prevented the accused persons, even in genuine
cases, from defending themselves without paying 20% as interim compensation
amount to the complainant. If that was to happen, the right to defence or
claiming trial by the accused would be relegated to peril. The word
"may" under Section 143A(1) of the Negotiable Instruments Act appears
to have been intentionally provided for rather than “shall” which could have
been presumed as mandatory.
LAW
The court’s dockets are now also flooded with
application under section 143-A of the Act and challenges made to such orders
passed by the Magistrates before higher courts. With a view to alleviate the
dockets of courts and also to crystalise the whole aspect in law it is more or
less settled now. However, the judicial precedents in this regard shall have to
be analysed for further clarity.
THE HIGH COURT OF MADRAS in Crl. O.P. Nos. 15438, 15440 of 2019
and Crl. M.P. Nos. 7576, 7578 of 2019 in a matter captioned as L.G.R.
Enterprises Vs. P. Anbazhagan had dealt with the issue.
It is of equal significance that along with that amendment Section
148 of the Negotiable Instruments Act was also brought into force which enabled
the Appellate Court to insist for the deposit of 20% of the fine or
compensation amount, awarded by the Trial Court against the accused person. The
scope of this provision came up for consideration before the Hon'ble Supreme
Court in Surinder Singh Deswal @ Col. S.S. Deswal and others Vs. Virender Gandhi
in Criminal Appeal Nos. 917-944 of 2019. While considering the scope of the
amendment, namely the Amendment Act 20 of 2018, the Hon'ble Supreme Court has
held as follows:
7.1. The short question which is posed for consideration
before this Court is, whether the first appellate Court is justified in
directing the appellants - original accused who have been convicted for the
offence under Section 138 of the N.I. Act to deposit 25% of the amount of
compensation/fine imposed by the learned Trial Court, pending appeals
challenging the order of conviction and sentence and while suspending the
sentence under Section 389 of the Cr.P.C., considering Section 148 of the N.I.
Act as amended.
While considering the aforesaid issue/question, the
statement of Objects and Reasons of the amendment in Section 148 of the N.I.
Act, as amended by way of Amendment Act No. 20/2018 and Section 148 of the N.I.
Act as amended, are required to be referred to and considered, which read as under:
"The Negotiable Instruments Act, 1881 (the Act) was
enacted to define and amend the law relating to Promissory Notes, Bills of
Exchange and Cheques. The said Act has been amended from time to time so as to
provide, inter alia, speedy disposal of cases relating to the offence of
dishonour of cheques. However, the Central Government has, been receiving several
representations from the public including trading community relating to
pendency of cheque dishonour cases. This is because of delay tactics of
unscrupulous drawers of dishonoured cheques due to easy filing of appeals and
obtaining stay on proceedings. As a result of this, injustice is caused to the
payee of a dishonoured cheque who has to spend considerable time and resources
in court proceedings to realize the value of the cheque. Such delays compromise
the sanctity of cheque transactions.
The said Act with a view to address the issue of undue
delay in final resolution of cheque dishonour cases so as to provide relief to
payees of dishonour cases so as to provide relief to payees of dishonoured
cheques and to discourage frivolous and unnecessary litigation which would save
time and money. The proposed amendments will strengthen the credibility of
cheques and help trade and commerce in general by allowing lending
institutions, including banks, to continue to extend financing to the
productive sectors of the economy.
"148. Power to Appellate Court to order payment pending
appeal against conviction...
(1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction
under Section 138, the Appellate Court may order the appellant to deposit such
sum which shall be a minimum of twenty per cent of then fine or compensation
awarded by the trial Court:
Provided that the amount payable under this sub-section shall be
in addition to any interim compensation paid by the appellant under Section
143A.
(2) The amount referred to in sub-section (1) shall be deposited
within sixty days from the date of the order, or within such further period not
exceeding thirty days as may be directed by the Court on sufficient cause being
shown by the appellant.
(3) The Appellate Court may direct the release of the amount
deposited by the appellant to the complainant at any time during the pendency
of the appeal:
Provided that if the appellant is acquitted, the Court shall
direct the complainant to repay to the appellant the amount so released, with
interest at the bank rate as published by the Reserve Bank of India, prevalent
at the beginning of the relevant financial year, within sixty days from the
date of the order, or within such further period not exceeding thirty days as
may be directed by the Court on sufficient cause being shown by the
complainant."
It is the case on behalf of the appellants that as the
criminal complaints against the appellants under Section 138 of the N.I. Act
were lodged/filed before the amendment Act No. 20/2018 by which section 148 of
the N.I. Act came to be amended and therefore amended Section 148 of the N.I.
Act shall not be made applicable. However, it is required to be noted that at
the time when the appeals against the conviction of the appellants for the
offence under Section 138 of the N.I. Act were preferred, Amendment Act No.
20/2018 amending Section 148 of the N.I. Act came into force w.e.f. 1.9.2018.
Even, at the time when the appellants submitted application's under Section 389
of the Cr.P.C., to suspend the sentence pending appeals challenging the
conviction and sentence, amended Section 148 of the N.I. Act came into force
and was brought on statute w.e.f. 1.9.2018. Therefore, considering the object
and purpose of amendment in Section 148 of the N.I. Act and while suspending
the sentence in exercise of powers under Section 389 of the Cr.P.C., when the
first appellate Court directed the appellants to deposit 25% of the amount of
fine/compensation as imposed by the learned trial Court, the same can be said
to be absolutely in consonance with the Statement of Objects and Reasons of
amendment in Section 148 of the N.I. Act.
Section 148 of Negotiable Instruments Act which has also come
on the statute book in the year 2018 alongside section 143-A is however is therefore
retrospective in operation as held by Supreme Court in Surinder Singh Deswal
(Supra). It may be further elucidated that a complaint filed before the
amendment, however, appeal was filed after the amendment, the deposit of 20%
for preferring appeal before the appellate court is held to be mandatory. It was observed and found that because of the
delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing
of appeals and obtaining stay on proceedings, the object and purpose of the
enactment of Section 138 of the N.I. Act was being frustrated, the Parliament
has thought it fit to amend Section 148 of the N.I. Act, by which the first
appellate Court, in an appeal challenging the order of conviction under Section
138 of the N.I. Act, is conferred with the power to direct the convicted
accused - appellant to deposit such sum which shall be a minimum of 20% of the
fine or compensation awarded by the trial Court. By the amendment in Section
148 of the N.I. Act, it cannot be said that any vested right of appeal of the
accused - appellant has been taken away and or affected.; Therefore, submission
on behalf of the appellants that amendment in Section 148 of the N.I. Act shall
not be made applicable retrospectively and more particularly with respect to
cases/complaints filed prior to 1.9.2018 shall not be applicable has no
substance and cannot be accepted, as by amendment in Section 148 of the N.I.
Act, no substantive right of appeal has been taken away and/or affected.
Therefore, considering the Statement of Objects and Reasons of the amendment in
Section 148 of the N.I. Act stated hereinabove, on purposive interpretation of
Section 148 of the N.I. Act as amended, The Supreme Court has held that Section
148 of the N.I. Act as amended, shall be applicable in respect of the appeals
against the order of conviction and sentence for the offence under Section 138
of the N.I. Act, even in a case where the criminal complaints for the offence
under Section 138 of the N.I. Act were filed prior to amendment Act No. 20/2018
i.e., prior to 01.09.2018. If such a purposive interpretation is not adopted,
in that case, the object and purpose of amendment in Section 148 of the N.I.
Act would be frustrated. Therefore, as such, no error has been committed by the
learned first appellate court directing the appellants to deposit 25% of the
amount of fine/compensation as imposed by the learned trial Court considering
Section 148 of the N.I. Act, as amended."
Now, coming back to Section 143-A of Negotiable
Instruments Act, According to hon’ble Madras High Court the effect of Section
143-A of the Negotiable Instruments Act regarding its applicability to the
pending cases, need not require a very detailed discussion and this Court can
safely adopt the very same reasoning given by the Hon'ble Supreme Court in the
above judgment. The amendment through which Section 143A was brought into force
will be applicable even to pending proceedings. If such a purposive
interpretation is not given to this provision, it will defeat the very purpose
of amendment which was brought in as a beneficial piece of legislation for the
complainant prosecuting a criminal complaint under Section 138 of the
Negotiable Instrument Act.
According to madras High Court, the next question that
arises for consideration is the manner in which this provision is to be put
into operation in the pending proceedings.
A reading of the above provision makes it
clear that the Court trying an offence under Section 138 of the Negotiable
Instruments Act "may" (emphasis supplied) order the drawer of the
cheque to pay interim compensation to the complainant. The provision itself
shows that the discretion is vested with the Trial Court to direct interim
compensation to be paid by the complainant. It is not necessary that in all
cases, the trial Court must necessarily direct the complainant to pay interim
compensation and such a direction should be given only on a case to case basis,
by taking into consideration the facts of each case. The legislature has
intentionally not used the word "shall", since it would have
prevented the accused persons, even in genuine cases, from defending themselves
without paying 20% as interim compensation amount to the complainant. This
would have directly affected the fundamental right of an accused person to
defend himself in a criminal case. This is the reason why the legislature had
thoughtfully used the word "may" under Section 143A(1) of the
Negotiable Instruments Act. Therefore, it is not possible to read the word
"shall" into the word "may" which is used in the provision.
In view of the above finding, the word
"may", gives the discretion to the Trial Court to direct the accused
to pay interim compensation to the complainant. The exercise of discretion must
always be supported by reasons, failing which the exercise of discretion will
become arbitrary so held by madras High Court.
The
parameter of “reasons” prescribed
It thus emerge that as per the guideline enunciated by hon’ble
Supreme Court, the Madras High Court and Delhi High Court (the view of Delhi
high Court shall be dealt with later) that, whenever the trial Court exercises
its jurisdiction under Section 143-A(1) of the Act, it shall record reasons as
to why it directs the accused person (drawer of the cheque) to pay the interim
compensation to the complainant. The reasons may be varied. For instance, the
accused person would have absconded for a longtime and thereby would have
protracted the proceedings or the accused person would have intentionally
evaded service for a long time and only after repeated attempts appears before
the Court, or the enforceable debt or liability in a case, is borne out by
overwhelming materials which the accused person could not on the face of it
deny or where the accused person accepts the debt or liability partly or where
the accused person does not cross examine the witnesses and keeps on dragging
with the proceedings by filing one petition after another or the accused person
absconds and by virtue of a non-bailable warrant he is secured and brought
before the Court after a long time or he files a recall non-bailable warrant
petition after a long time and the Court while considering his petition for
recalling the non-bailable warrant can invoke Section 143-A (1) of the Act.
This list is not exhaustive and it is more illustrative as to the various
circumstances under which the trial Court will be justified in exercising its
jurisdiction under Section 143-A (1) of the Act, by directing the accused
person to pay the interim compensation of 20% to the complainant.
It was further held that the order by trial court should specify
reasons in view of the fact that it will always be subjected to challenge
before the high Court and in case reasons are given, the high court while
considering the petition may only have to look into the reasons given by the
Court below while passing the order under Section 143A(1) of the Act. An order
that is subjected to appeal or revision should always be supported by reasons.
A discretionary order without reasons on the face of it, illegal and it will be
set aside on that ground alone.
It is thus clear that the
word "may", gives the discretion to the Trial Court to direct the
accused to pay interim compensation to the complainant. The exercise of
discretion must always be supported by reasons as elucidated above, failing
which the exercise of discretion will become arbitrary.
In CRIMINAL APPEAL NO. OF 2022 (Arising out of Special Leave Petition (Criminal)No. 2872 of 2022)
captioned as NOOR MOHAMMED Versus KHURRAM PASHA the Three
Judge bench of hon’ble Supreme Court on August 2nd 2022 had dealt
with the issue of Section 143-A of the Negotiable Instruments Act.
After empowering the court to pass an order directing the accused
to pay interim compensation under Sub-Section 1 of Section 143A, Sub-Section 2
then mandates that such interim compensation should not exceed 20 per cent of
the amount of the cheque. The period within which the interim compensation must
be paid is stipulated in Sub-Section 3, while Sub-Section 4 deals with
situations where the drawer of the cheque is acquitted. Said Sub-Section 4
contemplates repayment of interim compensation along with interest as
stipulated. Sub-Section 5 of said Section 143A then states “the interim
compensation payable under this Section can be recovered as if it were a fine”.
The expression interim compensation is one which is “payable under
this Section” and would thus take within its sweep the interim compensation
directed to be paid under Sub-Section 1 of said Section 143-A.
The remedy for failure to pay interim compensation as directed by
the court is thus provided for by the Legislature. The method and modality of
recovery of interim compensation is clearly delineated by the Legislature. It
is well known principle that if a statute prescribes a method or modality for
exercise of power, by necessary implication, the other methods of performance
are not acceptable.
The Supreme Court has held in para 14 of Noor Mohammad (Supra) that the concerned provision nowhere
contemplates that an accused who had failed to deposit interim compensation
could be fastened with any other disability including denial of right to
cross-examine the witnesses examined on behalf of the complainant. Any such
order foreclosing the right would not be within the powers conferred upon the
court and would, as a matter of fact, go well beyond the permissible exercise
of power.
Delhi High Court
In JSB cargo and Freight Forwarder (P) Ltd Vs State 2021 SCC OnLineDel 5425
has held that the provision of Section 143 –A is directory in nature
and not mandatory. The hon’ble Delhi High court had relied upon the Supreme
Court judgment captioned as G.J. Raja vs. Tejraj Surana, Criminal
Appeal No. 1160 of 2019 @ SLP(Crl.)No.3342 of 2019 , has examined the
amended Section 143-A of
the Act, 1881 and held that it is prospective effect and not retrospective
effect. The relevant para of the judgment is reproduced below:--
―19.
It must be stated that prior to the insertion of Section 143-A in
the Act there was no provision on the statute book whereunder even before the
pronouncement of the guilt of an accused, or even before his conviction for the
offence in question, he could be made to pay or deposit interim compensation.
The imposition and consequential recovery of fine or compensation either
through the modality of Section 421 of
the Code or Section 357 of
the code could also arise only after the person was found guilty of an offence.
That was the status of law which was sought to be changed by the introduction
of Section 143A in the Act. It now imposes a liability that even before the
pronouncement of his guilt or order of conviction, the accused may, with the
aid of State machinery for recovery of the money as arrears of land revenue, be
forced to pay interim compensation. The person would, therefore, be subjected
to a new disability or obligation. The situation is thus completely different
from the one which arose for consideration in ESI Corpn. v. Dwarka Nath
Bhargwa, (1997) 7 SCC 131.
23. In the ultimate analysis, we hold Section 143-A to be prospective in operation and that the provisions of
said Section 143-A can be applied or invoked only
in cases where the offence under Section 138 of the Act was committed after the introduction of said Section 143A in the statute book. Consequently, the
orders passed by the Trial Court as well as the High Court are required to be
set aside. The money deposited by the Appellant, pursuant to the interim
direction passed by this Court, shall be returned to the Appellant along with
interest accrued thereon within two weeks from the date of this order.‖
Based on above the Delhi High Court has
held as under:
52.
The applicability of Section 294 of
the Cr.P.C., 1973 has been made essential in all proceedings in criminal trials
and undoubtedly, the proceedings under Section 138 of the NI Act, 1881 are termed to be quasi criminal in
nature.
53.
Furthermore, the observations of the learned Trial Court to the effect that
even if it be assumed that the provisions of Section 143-A of
the NI Act, 1881 is discretionary in nature, the Court is still clothed with
the powers to grant interim compensation to the complainant after providing sufficient
reasons, it is essential to observe that the award of interim compensation in
terms of Section 143-A of
the NI Act, 1881 has to be after providing sufficient reasons and whilst taking
the same into account, the determination of interim compensation directed to be
paid by the petitioners herein to the extent of the maximum of 20% of the
cheque amount to the complainants without even considering the submissions that
have been sought to be raised by the petitioners in relation to bank statements
of the complainant and without resorting to the provisions of Section 294 of
the Cr.P.C., 1973 cannot be held to be within the contours of Section 143-A of
the NI Act, 1881 to be with sufficient reasons. Furthermore, there are no
inherent powers conferred on a criminal court of a Magistrate de hors enabling provisions of a
statute.
54.
In view thereof, the impugned order dated 21.09.2021 of the learned
Metropolitan Magistrate (NI Act), Digital Court-01, PHC/New Delhi in CC No.CC
NI Act 12-20 titled as "SAVITA SURYAVANSHI Vs. M/S JSB CARGO AND FREIGHT
FORWARDER PVT LTD" and in CC No.CC NI Act 100-20 titled as "SUNEEL
SURYAVANSHI Vs. M/S JSB CARGO AND FREIGHT FORWARDER PVT LTD is set aside with
the matter being remanded back to the learned Trial Court to dispose of the
application under Section 143-A of
the NI Act, 1881 filed by the complainants of the said complaint cases seeking
interim compensation from the accused after invocation of Section 294 of
the Cr.P.C., 1973 and considering the submissions that are made by the
petitioner in response to the applications under Section 143-A of
the NI Act, 1881 and taking into account that vide this verdict it is
categorically held to the effect that the provision of Section 143-A of
the NI Act, 1881 is directory in nature and not mandatory.
BOMBAY
HIGH COURT
In Ashwin Ashokrao Karokar vs Mr. Laxmikant
Govind JoshiTHE
HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH AT NAGPUR, CRIMINAL WRIT
PETITION NO.48/2022 has held as under:
11. The exercise of any discretion conferred
upon a Court, must be for reasons to be spelt out, indicating application of
mind by the Court to the facts available before it in the application of the law
to such facts. There are multitude of judicial pronouncements in this regard,
which indicate the necessity for spelling out reasons in orders/judgments,
which need not quote here. This is more so for the reason that reasons are the
heart of an order/judgment and unless reasons are spelt out in the
order/judgment, neither the litigant nor the Court before whom a challenge is
laid to the exercise of such discretion, would be able to fathom what weighed
with the Court passing the order/judgment to hold one way or another, and thus
make the exercise of discretion, to be struck down for non- application of mind
and thus any order exercising or refusing to exercise discretion to award
interim compensation will have to spell out the reasons for exercise of such
exercise.
Thus, Bombay High Court has also held that
section 143(A) of Negotiable Instruments Act is directory and discretion is
vested in the courts of Magistrate to grant compensation only in apt case or
cases if there is overwhelming reasons to that effect, however, recording of
reasons and application of mind by a Magistrate shall be a must.
CONCLUSION
It is therefore now settled that whereas section 143-A of
Negotiated Instruments Act as inserted in 2018 in the Act prescribing for 20%
of cheque amount of interim compensation payable to the complainant by the
accused is not a mandatory provision. The concerned magistrate has a discretion
to award compensation only in apt case and based on the guidelines laid down by
hon’ble Supreme Court. Moreover, such a direction is passed by the Magistrate
has to be based on reasons and the order qua payment of compensation should not
be passed mechanically. The order of interim compensation in terms of section
143-A of Negotiable Instruments Act has clearly been held as not mandatory.
----------------
Anil
K Khaware
Founder & Senior Associate
Societylawandjustice.com
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