REFUND OF COURT FEE PURSUANT TO SETTLEMENT: LAW DISCUSSED

 

Refund of court fee pursuant to settlement: Law discussed

 

The settlement between the parties , whether by way of out of court settlement or through the mechanism of mediation under the auspices of the courts are encouraged with a view to bring contesting parties to a settlement to extricate them, from procrastinated legal battle in the court rooms.  In order to encourage such settlement, the Court Fee Act as well as the rules framed under Mediated Settlement has the provision for refund of court fee. In case of money suits or several suits such as a suit for specific performance, the court fee is payable ad valorem and settlement through mediation enables a party to receive court fee back acts as an incentive. However, of late, there are conflicting judgments of courts i.e whether court fee shall have to be returned in half or entire court fee could be returned. Another aspect is whether the entire court fee shall have to be returned only, when settlement is effected in mediation proceedings and if parties privately settle it between themselves and then record that same before court, whether only 50% of the court fee shall have to be returned.

 

The Delhi High Court in a matter captioned as V GUARD INDUSTRIES LTD Vs MAHAVIR HOME APPLIANCES AND ANR CS(COMM) 98/2023 has recently dealt with the aforesaid issue i.e to the extent to which the plaintiff would be entitled to refund of court fees, where the dispute is settled privately between the plaintiff and the defendants without intervention of any Alternate Dispute Resolution (ADR) mechanism. A single bench of Delhi High Court has sent the issue for clarification before a Division Bench, as it is of recurring significance. The dispute between the parties in the above matter are amicably resolved and the terms of settlement have been placed on record in an application jointly filed by the parties under Order XXIII Rule 3 of the Code of Civil Procedure, 1908 (CPC).

We know that Section 16 of the Court Fees Act entitles the plaintiff to refund of the entire court fee deposited, where the dispute is settled under of the Code of Civil Procedure, 1908 (CPC). Section 89 of the CPC to which Section 16 of the Court Fees Act makes reference, envisages settlement through arbitration, mediation, judicial settlement including Lok Adalat and mediation – in other words, settlement by Alternate Dispute Resolution (ADR) mechanisms.

Section 16 of the Court Fee Act is reproduced herein for ready reference:

16. Refund of fee. – Where the Court refers the parties to the suit to anyone of the mode of settlement of dispute referred to in section 89 of the Code of Civil Procedure, 1908 (5 of 1908), the plaintiff shall be entitled to a certificate from the Court authorising him to receive back from the collector, the full amount paid in respect of such plaint.

 

Section 89 of the CPC reads as under:

 

 89. Settlement of disputes outside the Court. –

(1) Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for :-

(a) arbitration;

(b) conciliation;

(c) judicial settlement including settlement through Lok Adalat; or

(d) mediation.

16A. Refund of fees on settlement before hearing:-

Whenever by agreement of parties –

(i) any suit is dismissed as settled out of court before evidence has been recorded on the merits of the claim; or

(ii) any suit is compromised ending in a compromise decree before evidence has been recorded on the merits of the claim; or

(iii) any appeal is disposed of before the commencement of hearing of such appeal; half the amount of all fees paid in respect of the claim or claims in the suit or appeal shall be ordered by the court to be refunded to the parties by whom the same have been respectively paid.

 

DELHI NOTIFICATION

In this context it may be relevant to point out that in the case of Delhi, vide Notification No. F.14 (22)/LA-2008/WAW/17, dated 11 February 2011 published in the Delhi Gazette, Section 16A, which provides for refund only of half the court fee deposited in case the dispute was settled privately among the parties without court/ADR intervention.

There are two separate statutory dispensations as regards Delhi. On the one hand Section 16 provides for refund of complete court fees, where the dispute is settled via ADR/judicial settlement. However, Section 16A provides for refund of half the court fees where the dispute is settled by private agreement between the parties without the intervention of ADR.

Nutan Batra Vs Buniyaad Associates  (2018) 255 DLT 696 (DB)

The Division Bench of Delhi High Court in a matter reported as Nutan Batra (Supra) has acknowledged the aforesaid position. The said judgment also makes reference to an earlier decision of the Supreme Court reported as Afcons infrastructure and Ors. v. Cherian Verkay Construction 2010 (8) SCC 24. In Afcons (Supra) it is observed that Section 89 of the CPC pertains to the settlement of the dispute through ADR. Thus, taking note of that, the Division Bench of Delhi High Court has held in Nutan Batra (Supra) as under:

“14. Thus, the intention of the Delhi Amendment was to provide for some relief in cases which are not covered by Section 16, perhaps, because Section 89 of the CPC had not been invoked. Section16A is conditional upon the suit being at a pre-evidence stage; then too, it provides for refund of only 50% of the court fees paid.

 

17. In the context of this discussion, we are required to determine the respective scope and applicability of Sections 16 and 16A of the Act.

 

18. The cases of reference to arbitration or "judicial settlement" (as interpreted in paragraph 25 of Afcons, supra) do not pose any great difficulty, as they do not fall within Section 16A of the Act at all, and are covered only under Section 89 of the CPC read with Section 16 of the Act. Similarly, a compromise entered out of Court, whether resulting in a compromise decree, or in the suit being dismissed as settled out of Court, is covered only by Section 16A and not by Section 16.”

(Emphasis supplied)

 

As per the aforesaid dicta of Nutan Batra (Supra) where a dispute is settled through mediation, the case may fall either under Section 16 or Section 16 A, depending on the facts. However, where a case is not settled through nay ADR mechanism, but privately settled between the parties, paras 14 and 18 of the Nutan Batra (Supra) makes it clear that the party would be entitled only to half the court fees paid.

 

The Supreme Court also dealt with similar issue in a matter reported as High Court of Judicature of Madra Vs M.C Subramaniam  (2021) 3 SCC 560 . It is significant to point out that in essence Section 69 A of the Tamil Nadu Court Fees and Suits Valuation Act, 1955  are para materia similar to Section 16 of the Court Fees Act. It provides for refund of the entire court fee paid, where the dispute is settled under Section 89 of the CPC.

The decision in M.C. Subramaniam                                                       Section 69A of the Tamil Nadu Court Fees and Suits Valuation Act, 1955 (“the Tamil Nadu Act”, hereinafter) is pari materia with Section 16 of the Court Fees Act. It provides for refund of the entire court fee paid, where the dispute is settled under Section 89 of the CPC. Section 69A of the Tamil Nadu Act, vis-à-vis Section 89 of the CPC, came up for interpretation before the Supreme Court in High Court of Judicature at Madras v. M.C. Subramaniam (Supra) The Supreme Court has held as under:                                                                                 “13.The provisions of Section 89 of CPC must be understood in the backdrop of the longstanding proliferation of litigation in the civil courts, which has placed undue burden on the judicial system, forcing speedy justice to become a casualty. As the Law commission has observed in its 238th Section Report on Amendment of 89 of the Code of Civil Procedure 1908 and Allied provisions, Section 89 has now made it incumbent on civil court s to strive: towards diverting civil disputes towards alternative dispute resolution processes, and encourage their settlement outside of court. These observations make the object and purpose of Section 89 crystal clear - to facilitate private settlements, and enable lightening of the overcrowded docket of the Indian judiciary. This purpose, being sacrosanct and imperative for the effecting of timely justice in Indian courts, also informs Section 69A of the 1955 Act, which further encourages settlements by providing for refund of court fee. This overarching and beneficent object and purpose of the two provisions must, therefore, inform this Court's interpretationthereof.                                                                                                                “23.We find ourselves in agreement with the approach taken by the High Courts in the decisions stated supra. The purpose of Section 69A is to reward parties who have chosen to withdraw their litigations in favour of more conciliatory dispute settlement mechanisms, thus saving the time and resources of the Court, by enabling them to claim refund of the court fees deposited by them. Such refund of court fee, though it may not be connected to the substance of the dispute between the parties, is certainly an ancillary economic incentive for pushing them towards exploring alternative methods of dispute settlement. As the Karnataka High Court has rightly observed in Kamalamma & ors. v. Honnali Taluk Agricultural Produce Cooperative Marketing Society Ltd8 (supra), parties who have agreed to settle their disputes without requiring judicial intervention under Section 89, CPC are even more deserving of this benefit. This is because by choosing to resolve their claims themselves, they have saved the State of the logistical hassle of arranging: arranging for a third party institution to settle the dispute. Though arbitration and mediation are certainly salutary dispute resolution mechanisms, we also find that the importance of private amicable negotiation between the parties cannot be understated. In our view, there is no justifiable reason why Section 69A should only incentivize the methods of out of court settlement stated in Section 89, CPC and afford step brotherly treatment to other methods availed of by the parties.".

The Delhi High Court has thus held in V Guard (Supra) that if one were to read paragraphs of M.C Subramaniam (Supra) in isolation and in the context of Section 16 of the Court Fees Act – without considering Section 16-A as has been made applicable to Delhi – it would seem to appear that, irrespective of whether the settlement is arrived at through mediation or privately between the parties, refund of full court fees would be justified. The clarity of this position is, however, compromised, where the dispute relates to Delhi, because of the insertion, in the Court Fees Section 16A, uniquely applicable to Delhi. If the judgment of the Supreme Court is to be applied straightway to suits filed in Delhi, Section 16A of the Court Fees Act may be rendered otiose as a result. Besides, such a view would also be contrary to the judgment of the Division Bench of Delhi High s Court in Nutan Batra, though, no doubt, the said decision was rendered prior to the decision in M.C. Subramaniam.                                                      In Ajay Mahajan v. Mridula Mukherjee 2023 SCC OnLine Del 2389 however has taken a contrary view from the view of Division Bench in Nutan Batra. Thus, two Division benches of Delhi High Court has taken a divergent views .In Ajay Mahajan (Supra), though the dispute was privately settled between the parties, the Division Bench directed refund of full court fee, applying Section 16 of the Court Fees Act. It though appears that section 16A of the Court Fees Act, was not brought to the attention of the Division Bench which decided Ajay Mahajan (Supra). The Delhi High court in V Guard (Supra) has thus observed that as two Division Benches of Delhi High Court has taken opposite views, the first, in Nutan Batra and second in Ajay Mahajan. The Nutan Batra holds that a plaintiff is entitled to refund of full court fees only where the settlement is via ADR (under Section 16), and is entitled only to refund of half the court fees, if the settlement is private between the parties. The Ajay Mahajan however holds that  in a case of private settlement without ADR intervention, that the plaintiff was entitled to refund of the entire court fees paid, under Section 16.

It is also significant to note that Nutan Batra (Supra) , was rendered before the Supreme Court in the judgment in M.C. Subramaniam.  The M.C. Subramaniam interprets Section 69-A of the Tamil Nadu Act, which is in pari materia with Section 16 of the Court Fees Act and envisages settlement only through ADR, as entitling the party to complete refund of court fees, irrespective of whether the dispute was settled privately between the parties or through ADR.

What is significant in the context is that the Supreme Court has, in M.C. Subramaniam, accorded an expansive interpretation to Section 69-A as also including settlement privately between the parties, it remains to be considered whether that decision can apply in Delhi in the face of a separate statutory dispensation for private settlement contained in Section 16A of the Court Fees Act, applicable exclusively to Delhi.

 

 

The hon’ble Single bench of Delhi High Court has therefore referred the issue before the Division Bench for enunciating clear position in view of the following:

 

(i)           There are two Division Benches of Delhi High Court which has taken take opposite views, the first in Nutan Batra and second in Ajay Mahajan. Nutan Batra holds that a plaintiff is entitled to refund of full court fees only where the settlement is via ADR (under Section 16), and is entitled only to refund of half the court fees, if the settlement is private between the parties

(ii)        In Ajay Mahajan it is held that in a case of private settlement without ADR intervention, that the plaintiff was entitled to refund of the entire court fees paid, under Section 16. It though appears that Ajay Mahajan did not notice Section 16-A.

(iii)       Nutan Batra was however rendered before the Supreme Court judgment in M.C Subramaniam.

(iv)       Ajay Mahajan does not, however, notice Section 16-A.

(v)         Though the Supreme Court has, in M.C. Subramaniam, accorded an expansive interpretation to Section 69-A as also including settlement privately between the parties, it remains to be considered whether that decision can apply in Delhi in the face of a separate statutory dispensation for private settlement contained in Section 16A of the Court Fees Act, applicable exclusively to Delhi.

The ld Single judge of Delhi High Court in V Guard (Supra) therefore, has referred the matter to be considered at least by a Division bench, as the issue may have to be considered and decided in the light of Sections 16 and Section 16A of the Court Fees Act and after taking into consideration the judgment of the Supreme Court in M.C. Subramaniam and of the Division Benches of Delhi High Court in Nutan Batra and Ajay Mahajan.This is necessary so as to ascertain the finality as regards the fact if the entire court fee shall have to be returned even in case of private settlement between the parties and even if the ADR mechanism is not involved by the parties to the lis. In the backdrop of notification as applicable to Delhi, provisions of Section 16 and Section 16 A of Court Fees Act and in the midst of conflicting judgments finality in this regard is required to emerge.                                                 

                                  ……..

Anil K Khaware

Founder & Senior Associate

Societylawandjustce.com

 

 

DIVORCE ON THE GROUNDS OF CRUELTY AND DESERTION: VISTA ASCERTAINED

 

Divorce on the GROUNDS of cruelty and desertion: Vista ASCERTAINED

The Division bench of Delhi High Court has recently i.e on 18.12.2023 has delved in the issue of cruelty and desertion while determining the vista for obtaining divorce. The cases in this context are captioned as (i) S P Vs RDP (Complete names withheld) bearing no.MAT App (FC) 38/2021& (ii) P V Vs R V (Complete names withheld) MAT App (FC) 54/2020. Whereas, both the cases revolved around desertion and cruelty, but, so far as the first case is concerned, the decree of divorce in favour of husband  was passed, on the premise of cruelty and desertion both. As regards PV, though, the allegation again revolved around both cruelty and desertion, however, decree of divorce was granted in favour of husband on the premise of cruelty alone. In this backdrop, the respective as aforementioned were filed by the aggrieved wives against decree of divorce granted to husbands.  Pertinently, in both the aforesaid cases, decree of divorce granted in favour of husband by Family Courts has been upheld by the hon’ble Delhi High Court, while dismissing the respective appeals preferred by the wife in both the cases.

The Appeal preferred by S P under Section 19(1) of the Family Courts Act, 1984 against the impugned Judgment and decree passed by the learned Judge, Family Court, (South-East) Saket, Delhi granting divorce on the ground of cruelty and desertion in a petition filed by the respondent/husband under Sections 13(1)(ia) and 13(1)(ib) of the Hindu Marriage Act, 1955 ( In short referred to as HMA, 1955).

Similarly, the Appeal by P V was filed under Section 28 of HMA, 1955 read with Section 19 of the Family Courts Act 1984, on behalf of the appellant/wife, against the impugned Decree/Order passed by the learned Principal Judge, Family Court, Delhi granting divorce on the ground of cruelty, in a petition filed by the respondent/husband under Sections 13(1)(ia) and 13(1)(ib) of HMA, 1955.

It may be necessary to go through the facts of the case, shorn of unnecessary details.

Facts alleged in the Case in SP Vs RDP:

Version of Husband

(i)                  The wife had a quarrelsome nature and would get hyper for no rhyme and reason and she was uncontrollable when she got angry. In her fit of anger she even broke the household items, ran out of the house in her night clothes, screaming and shouting and continued to behave in that manner;

(ii)                The husband as per the job profile had to travel across the country and the wife started accusing him of having an affair with a female colleague unmindful of the disrespect to his married and unmarried female colleagues, thus affecting his performance in job;

(iii)              Their relationship was deteriorating and becoming worse due to the tendency of the wife to pick fights. The wife started avoiding his company and refused to cohabit with him. She left the house along with the child born out of wedlock and took all the household items and went to her parent’s house. She informed him that she was consulting a lawyer for divorce;

(iv)               The wife developed an affair with one “X” (name withheld), living in Chandigarh about which he came to know when he saw various emails exchanged between his wife and “X”. X used to visit Delhi only to meet the wife of respondent , thus that caused disturbances even in the matrimonial life of “X”.

(v)                Both husband and wife herein earlier at several occasions agreed for divorce by mutual consent, but the wife had backed out every time.

(vi)                When both of the spouse were residing together, the wife frequently left the child alone in the house and was quite reckless. The school of child was frequently changed and the child was shifted to hostel in Tamil Nadu, though, the appellant/wife was residing there in the rented accommodation. The child was shifted to “Pune” upon transfer of appellant/wife, whereas all the while the husband was taking care of education and expenses of the child; 

(vii)             A false complaint was filed against the husband and the husband responded to with reply and hence the complaint was not proceeded with;

(viii)           Yet again a complaint u/s 498-A of IPC was lodged before CAW Cell in South East Delhi and the husband responded to police inquiry and as the complaint was found false, hence not proceeded with; 

(ix)               Complaint under Domestic Violence Act (DV Act) was also filed subsequently;

(x)                The DV disputes were settled in mediation and the wife agreed to withdraw the DV complaint, but rather than withdrawing the complaint, the wife obtained ex-parte maintenance of Rs 1 Lakh per month from a Metropolitan Magistrate, Mahila Court;

(xi)               The parties are living separately for quite a long period of time and he is deserted by the wife.

Version of Wife

(i)          The allegations made in the petition was false and frivolous. The Divorce Petition was a pressure tactic adopted by the respondent husband to discourage her from pursuing the recovery of arrears of maintenance before other courts. Despite the order of the learned MM, not even a penny has been paid by the respondent-husband.

(ii)        She had to agree for divorce by mutual consent under undue influence of her counsel and that she could not receive maintenance all the while, despite the order passed to that effect as appeals/ revision are preferred;

(iii)        The allegations made in the divorce petition were defamatory and the husband was trying to raise a finger on her character by concocting false story. She was subjected to harassment, ill-treatment and cruelty and was thrown out of the matrimonial home by the respondent;

(iv)       The wife was left with no option but to take shelter in the portion of her house which was left for her by her father. Her dowry articles, cash, jewellery, etc. have been retained by the respondent;

(v)         The respondent failed to take the responsibility of the child and once he thrashed his son in such a way that he lost his hearing ability. Presently, he has 80% hearing loss in his left ear and is facing difficulty in his professional life. She has no money for proper treatment or to purchase a hearing aid for the son.

The wife, thus, claimed that the divorce petition was liable to be dismissed.

After full dress trial by the family court, the husband was granted decree of divorce by family court on the grounds of desertion and cruelty and the same was upheld by the high court.

The Delhi High Court analysed the facts of the appeals in the touchstone of law. The judicial precedents relied upon by the parties are as under:

S.N	Title/Citation	Remark
1.	Suman Singh vs Sanjay Singh (2017) 4 SCC 85	Reliance by wife
2.	Nagendra vs K Meena (2016) 9 SCC 455	Reliance by husband
3.	A vs BS 249 (2018) DLT 544 (DB)	Reliance by husband
4.	Harpreet Kaur vs Amarjeet Singh 266 (2020) DLT 597 (DB)	Reliance by husband
5.	Ritesh Babber Vs Kiran Babbar 2022 SCC OnLine Del 726	Reliance by husband
6.	Jyoti Yadav vs Neeraj Yadav 2022 SCC OnLine Del 795.	Reliance by husband

 

The hon’ble Division bench in S P Supra) has held as under in para 37, 41 & 42:

“37. The Apex Court in the case of A. Jaychandra vs. Aneel Kaur 2005 (2) SCC 22, observed that cruelty is a course or conduct of one, which adversely affects the other. If the cruelty is physical, it is easy to comprehend but the problem arises when the cruelty is claimed to be mental. It was explained that first an inquiry must be made about the nature of the cruel treatment, secondly, its impact on the mind of the spouse and whether it caused reasonable apprehension that it would be harmful or injurious to the spouse. Ultimately, inference has to be drawn of the effect on the complaining spouse. If the conduct complained of itself is bad, it is enough to conclude against the spouse and no further inquiry need to be held. The proof of conduct itself is sufficient to prove the conclusion of cruelty”.

“41. The Supreme Court in the case of Raj Talreja v. Kavita Talreja, (2017) 14 SCC 194 , while relying on Ravi Kumar v. Julmidevi (2010) 4 SCC 476, has categorically held that reckless, false and defamatory allegations against the husband and family members would have an effect of lowering their reputation in the eyes of the society and it amounts to cruelty. It was observed that filing mere complaints is not cruelty, if there are justifiable reasons of filing them”.

“42. Thus, making of false allegations in a complaint filed after seven years of separation, amounts to   cruelty”.

Similarly, in S P (Supra) in para 46 it is held:

“46. The Apex Court in the case of Rajib Kumar Roy vs Sushmita Saha 2023 SCC OnLine SC 1221, observed as under:- Continued bitterness, dead emotions and long separation, in the given facts and circumstances of a case, can be construed as a case of irretrievable breakdown of marriage, which is also a facet of cruelty. In Rakesh Raman v. Kavita reported in 2023 SCC OnLine SC 497, this is precisely what was held, that though in a given case cruelty as a fault, may not be attributable to one party alone and hence despite irretrievable breakdown of marriage keeping the parties together amounts to cruelty on both sides.”

In P V (Supra) it is held as under in para 28 and 29:

“28. In the case of K. Srinivas Rao v. D. A. Deepa (AIR 2013 SC 2176), it had been held by the Supreme Court that making unfounded indecent defamatory allegations against the spouse or his or her relatives in the pleadings amount to causing mental cruelty to the other spouse.

29. The Supreme Court in the case of Raj Talreja v. Kavita Talreja, (supra) , while relying on Ravi Kumar v. Julmidevi (2010) 4 SCC 476, has categorically held that “reckless, false and defamatory allegations against the husband and family members would have an effect of lowering their reputation in the eyes of the society” and it amounts to cruelty. Similar observations were made by the coordinate bench of this court in the case of Rita v. Jai Solanki 2017 SCC OnLine Del 9078. 30. In the case of K. Srinivas Vs. K. Sunita X (2014) SLT 126 the Supreme Court held that filing of the false complaint against the husband and his family members also constitutes mental cruelty for the purpose of Section 13 (1) (ia) of the Hindu Marriage Act. Similarly, it has been held by the Supreme Court in Mangayakarasi v. M. Yuvaraj (2020) 3 SCC 786, that an unsubstantiated allegation of dowry demand or such other allegations made against the husband and his family members exposed them to criminal litigation. Ultimately, if it is found that such allegations were unwarranted and without basis, the husband can allege that mental cruelty has been inflicted on him and claim a divorce on such a ground.

It was therefore held by the Division bench of Delhi High Court in P V (Supra) that leveling of said allegations must have caused immense cruelty to the respondent/husband. According to the High Court, the learned Principal Judge, Family Court has rightly observed that “making such scandalous, defamatory, unsubstantiated allegations against the father of the respondent/husband and the respondent/ husband regarding the character of the respondent/ husband and also that the respondent/husband had tried to kill her without any evidence amounts to cruelty. The Delhi High Court on similar premise has dismissed the appeal in the case of SP as well.

The Hindu Marriage Act 1955 contains the grounds of divorce and as regards the present appeals, the case revolved around 13(1)(ia) and 13(1)(ib) of the HMA, 1955 i.e on the grounds of desertion and cruelty. There is no magical charm associated the word cruelty and desertion and that could be ascertained only in the course of trial. Any of the spouse if found victim of cruelty and desertion can apply for divorce on the said premise or premises, even if contested on the basis of evidence on record if found proved decree of divorce in favour of aggrieved spouse could be granted by a competent family court. There is no straight jacket formula for ascertaining that and the veracity of allegation and defence shall vary in case to case basis. However, cosmetic complaints with ritualistic averments shorn of specifics may not pass muster. It is often seen that a complaint or defence predicated on mala fide are found to be segregated like chauff and grain.

                                  -------

                                  Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

SECTION 143-A NEGOTIABLE INSTRUMENTS ACT: AS IT EVOLVED

 

Section 143-A Negotiable Instruments Act: As it evolved

                                  PART-II

The provision of Section 143-A in the Negotiable instruments Act (In short “The Act”) has been provided for by virtue of amendment in the act and the same is made effective w.e.f 01.09.2018. Clearly, the law in this regard is still evolving. Though, I have already written on this aspect previously, still, in view of significance of the issue and ramification, the present write up is written as Part-II to accord further impetus to the topic.  As narrated above, as the provision is made effective only in 2018, therefore, the judicial authorities are relatively fewer. The offences relating to bouncing of cheque are being filed in large numbers and with a view to restore sanity to transaction of cheques not only Section 138 is made part of the Act, but there has been gradual amendments in due course. The underlying object is to provide assurance in commercial transactions made through cheques. In this context, the legislature has provided for Section 143-A in the Act which stipulates payment up to 20% of the cheque amount to the complainant before setting up of complaint for trial. Once, notice is framed and the accused pleads “not guilty” the complainant may opt to file the application u/s 143-A of the Act for seeking the deposit. As the provision is not retrospective, therefore, the provision shall only be applicable qua complaints lodged after 01.09.2018. One may ponder over the fact as to whether the provision of Section 143-A of the Act shall apply in the relevant stage in all cases, filed after 01.09.2018 or there are any fetter attached to that? Whether the provision is directory, discretionary or mandatory?  What are the judicial precedents in this regard? The answer shall be found in the discussion that follows hereinafter.

Before continuing with the discussion, it may be worthwhile to refer to the provision of Section 143-A of the Act. The same is reproduced as under:

 “143 A. Power to direct interim compensation.—

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 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 per cent 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 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 compensation 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 11974).

(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.”.

 

S.N	Title	High CourtS	Remark
1.	Smt  Vijaya Vs Shekharppa CRIMINAL PETITION NO.100261/2022	Karnataka	The power of the court in granting interim compensation is discretionary. The order should be reasoned and after appreciation of facts only and not in matter of course.
2.	V.Krishnamurthy Vs Diary Classic ICE Creams Pvt Ltd 2022 SCC OnLime Kar 1047	Karnataka	Same as above and conduct of accused is also held relevant
3.	Sri Narayanswami Vs Shri Ramesh J.S  Crl Pet No. 1550/2022 Order dated 31.03.2022	Karnataka	same as above
4.	LGR Enterprises Vs P Anbazhvgan Crl R No. 112/2022	Madras	Same as above
5.	JSB Cargo & Freight Forwarder Pvt Ltd Vs State & Anr2021 SCC OnLineDel 5425	Delhi	The power is not mandatory, but discretionary. The order should reflect application of mind as such orders are serious in nature

 

In Smt Vijaya (Supra) The Karnataka High Court has held as under in the following respective paragraphs:

“10. The afore-extracted order passed by the Court does not bear reason as to why 20% of the amount is awarded as interim compensation. All that the Court records on going through the entire amended provision is, if the drawer of the cheque has not pleaded guilty, then he shall pay interim compensation at the rate of 20%. The petitioner in the case at hand did not plead guilty. Therefore, the Court grants interim compensation. There is no application of mind as to why the said compensation has to be awarded. Section 143A is completely misread that once the accused does not plead guilty, the complainant becomes automatically entitled to 20% of the cheque amount as interim compensation. Sub-section (1) of Section 143A reads that notwithstanding anything contained in the Cr.P.C. the Court trying an offence under Section 138 may order drawer to pay interim compensation to the complainant. If an order is passed for payment of interim compensation, it shall be paid within 60 days from the date of the order”.

 

“11. Therefore, the Legislature has cautiously worded sub-section (1) of Section 143A not to make it mandatory in all cases where clauses (a) and (b) of sub-section (1) would empower the learned Magistrate before whom proceedings are pending consideration to award interim compensation. It is the discretion conferred, as the word used is “may”. If the order is passed, then the payment is mandatory. Therefore, the learned Magistrate who is hearing the application for interim compensation should apply his mind, record his reasons in exercise of his discretion, as to why 20% of the cheque amount is to be granted, as interim compensation in any given case”.

 

12. The other side of the coin of discretion available to the learned Magistrate is that the amount should not exceed 20%. Therefore, it is not that 20% has to be the interim compensation in every case. Here again the discretion is required to be exercised by the learned Magistrate as the interim compensation can vary from 1% to 20% but shall not exceed 20%. The language of Section 143A being couched with such discretion, the discretion if not exercised in a manner known to law, becomes an arbitrary action.

“13. Application of mind in exercise of discretion is discernible only in an order that contains reasons, and reasons can be found only if they are recorded in writing, and if reasons are recorded in writing, it is only then the order will be within the counters of law.”

 

In paragraph 14 of Smt Vijaya (Supra) the Karnataka High Court has further expressed its anxiety in as much as it is observed that the consequence of non-payment of interim compensation so awarded is penal, as proceedings can be initiated by the complainant under Sections 357 and 421 of the Cr.P.C. which are recoverable as fine paid under Section 421 of the Cr.P.C. As the consequences of such order are grave , since the liability of the accused is yet to be determined, still, he will have to face grave hardship in the event of non-payment. Therefore, it is all the more necessary for a Magistrate to pass appropriate orders which bear application of mind and record reasons as to why interim compensation is to be awarded in a given case.

In the above backdrop, in Smt Vijaya (Supra), petition preferred by the accused, the Karnataka High Court was pleased to set aside the order impugned and the ld Magistrate was directed to pass appropriate order in sync with law.

In V.Krishnamurthy (Supra) the Karnataka High Court has succinctly delved into the aspect. The findings are as under:

13. Application of mind and passing of a reasoned order of grant of compensation becomes necessary in the light of penal consequences that ensue an accused who failed to comply with the order granting 20% compensation as the complainant is given several remedies of recovery which result in the accused being taken into custody. Therefore, such orders which result in such penal consequences should be rendered giving cogent reasons which would demonstrate application of mind and such orders should be passed only after hearing the accused in the matter. In cases where the learned Magistrate is to exercise discretion, such discretion should become two fold.

First fold: Where an application is so made, the learned Magistrate has to apply his mind whether such an application is to be considered at all, as every application that is made need not result in grant of 20% interim compensation. Several factors need be gone into for considering such applications bearing in mind the reason and backdrop of the amendment. As quoted herein-above the bedrock of the amendment was to stall unscrupulous drawers of cheques drawing proceedings with frivolous applications, absenting themselves, seeking continuous adjournments causing delay and grave prejudice to the case of the complainants. In these factors, the learned Magistrate after analyzing the conduct of the accused should grant compensation which would vary from 1% to 20% after recording reasons.

In a given case if the accused is cooperating with the trial without seeking any unnecessary adjournments, not absenting himself or his counsel on any date and cooperating with the conclusion of the trial in such cases, the learned Magistrate will have to apply his mind, exercise his discretion as to whether such applications should be entertained at all. Therefore, it forms two classes of litigants. One who would cooperate with the proceedings and the other who would not. In cases where there is complete co-operation from the hands of the accused in the trial, the Court may consider whether interim compensation has to be granted at all and in cases where there is no cooperation on the part of the accused, the Court may proceed to consider the application.

Second fold: The second fold of discretion in any given case , the compensation may vary from 1% to 20%. It is nowhere depicted in the statute that the amount of interim compensation should be of a particular figure. It can vary from 1% to 20%. It is this variance that gives the learned Magistrate power to exercise discretion to grant such compensation. The mandate of the statute is that it should not exceed 20%. In the cases where learned Magistrate proceeds to grant compensation, has to bear in mind the amount involved in the instrument, as certain transactions would run to several cores and the accused may have formidable defence against the complainant. In such cases, the learned Magistrate should exercise discretion in a cautious manner. Here again the conduct of the accused should be noticed. Therefore, the aforesaid two fold discretion is sine qua non for an order to be passed by the learned Magistrate while considering the application under Section 143 A  of the Act.

As the order was bereft of above, hence, the order passed by the Magistrate was set aside and remitted for orders in accordance with law.

In Sri Narayanswami (Supra) also, the Karnataka High Court has held as under:

“The order afore-extracted passed by the Court does not bear reason as to why 20% of the amount is awarded as interim compensation. All that the Court records on going through the entire amended provision is if the drawer of the cheque has not pleaded guilty, then he shall pay interim compensation at the rate of 20%. The petitioner in the case at hand did not plead guilty. Therefore, the Court grants interim compensation. There is no application of mind as to why the said compensation has to be awarded and the provision of Section 143 A  is completely misread that once the accused does not plead guilty, the complainant becomes automatically entitled to 20% of the cheque amount as interim compensation. Sub-section (1) of Section 143 A reads that notwithstanding anything contained in the Cr.P.C,. the Court trying an offence under Section 138 may order drawer to pay interim compensation to the complainant. If an order is passed for payment of interim compensation it shall be paid within 60 days from the date of the order. Therefore, the Legislature has cautiously worded sub-section (1) of Section 143-A not to make it mandatory in all cases where clauses (a) and (b) of sub- section (1) would empower the learned Magistrate before whom the trial is pending consideration to award interim compensation. It is a discretion conferred as the word used is "may". If the order is passed then the payment is mandatory, but not an order under the Act. Therefore, the learned Magistrate who is hearing the application for interim compensation should apply his mind, record his reasons in exercise of his discretion as to why an amount of 20% of the cheque amount is to be granted in any given case”.

The Delhi High Court in JSB Cargo (Supra) while setting aside the impugned order passed by the ld Magistrate was pleased to remit the matter for passing appropriate order in accordance with law. The para no. 53 of the said judgment shall be worth reference:

“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”.

It may be noted that the aforesaid judgment of Delhi High Court in JSB Cargo (Supra) and Karnataka High Court judgment in Smt Vijaya (Supra) are broadly on the same line. In fact, Karnataka High Courts in other cases as referred to above, besides the Madras High Court has also held on similar lines.

                                        REMARK

The judicial precedent that has evolved ever since the insertion of Section 143 A of the Act may be summarized in the judgments of judgments passed by various high courts. The broad parameter of the judgments are as under:

(i)           Section 143-A of the Act is a discretionary power accorded to the Magistrate trying with the offence u/s 138 of the Act;

(ii)         The Section 143-A is not mandatory, rather it is directory and discretion is to be exercised properly and after ascertaining the facts of the cases;

(iii)        The order cannot be passed in mechanical manner;

(iv)        Framing of notice and pleading not guilty is not enough in itself in granting order in favour of complainant for depositing 20% of the cheque amount;

(v)          The order cannot be passed on the basis of assumptions , but prima facie satisfaction should be evident from the record;

(vi)        It therefore follows that The signature on cheque in itself is not enough, if the doubt existed in respect of issuance of cheque and circumstances under that the cheque may have been issued;

(vii)       Once the order granting deposit of 20% of the amount is passed, then, its enforcement mechanism is inbuilt and then it becomes mandatory, not before. In this regard sub-clause 143-A (3)(4)(5) & (6) may be perused. Therefore, the court passing the order has to be very circumspect before passing judgment granting deposit of 20% of the cheque amount;

(viii)     The Section 143-A (1) sub-clause (2) it is stipulated that the interim compensation shall not exceed 20%, therefore what clearly implies that the interim compensation could be upto 20%, however, the same should be read as 1% to 20% and upper limit being 20%. Therefore, it cannot be construed as if once interim compensation is granted, 20% of interim shall have to be granted. The discretion of court is therefore not accorded in granting interim compensation, but also the extent of it i.e 1% to 20%.

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Anil K.Khaware

Founder & Senior Associate

Societylawandjustice.com