section 143-A oF
Negotiable Instruments Act and POWERS OF MAGISTRATES
The law as regards power of
Magistrates while ordering payment of interim compensation u/s 143-A of
Negotiable Instruments Act in a complaint lodged u/s 138 of Negotiable
Instruments Act has always been debated, since, the clear judicial
pronouncement was not available. It could be understood, as the provision 143-A was brought in the
statute book only as recently as on 01.09.2018 and thereafter the dockets of
the courts of Magistrate are flooded with application seeking compensation @20%
of the cheque amount in cheque bouncing cases, in the respective complaints.
Apart from section 143-A, the
Section 148 of the Negotiable Instruments Act has also been analysed by the
Supreme Court, (as applicable at the appellate stage), while clearly laying
down the guidelines and/ or fatter on exercise of the powers by the courts of Magistrate.
In a very recent judgment reported as 2024 INSC 205 captioned as Rakesh
Ranjan Srivastava Vs The State of Jharkhand (Crl Appeal No. 741 of 2024)
pronounced on March 15th 2024.
In order to appreciate the object of Section 143 A while bringing it in
the statute book by Act No. 20 of 2018 with effect from 1st September 2018, the
said provisions are 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 cheque amount.
(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 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.”
OBJECT
OF SECTION 143-A & SECTION 148
In the statement of objects and reasons it was factored that unscrupulous
drawers of the cheques prolong the proceedings
of a complaint under Section
138 by filing appeals and obtaining a stay. Therefore, injustice is caused to
the payee of a dishonoured cheque, who has to spend considerable time and resources
in Court proceedings to realise the value of the cheque. The delays in compromise
also undermines the sanctity of the cheque transactions. Therefore, the
Negotiable Instruments Act was proposed to be amended with a view to strengthen
the credibility of cheques and help trade and commerce.
It
is also significant to point out that by the same Act No.20 of 2018, Section 148 was also
brought on the statute book, which provides that in an appeal preferred by the
drawer against conviction under Section 138, the Appellate Court may order the
appellant to deposit such a sum which shall be a minimum 20 per cent of the
fine or compensation awarded by the Trial Court. The proviso to sub-section (1)
of Section 148 clarifies that the amount payable under sub-section (1) of
Section 148 is in addition to interim compensation paid by the appellant/accused
under Section 143A. There are no separate objects and reasons set out for the
addition of Section 148.
SECTION
143-A is Not mandatory but directory
The Supreme Court has held further that there is no doubt that the word “may” ordinarily
does not mean “must”. Ordinarily, “may” will not be construed as “shall”. Though,
the same is not an inflexible rule. It may be noted that the use of the word “may”
in certain legislations can be construed as “shall”, and the word “shall” can
be construed as “may”. Thus, it depends on the nature of the power conferred by
the relevant provision of the statute and the effect of the exercise of the
power. The legislative intent also plays a role in the interpretation of such provisions.
Even the context in which the word “may” has been used is also relevant.
What is of pertinence is that
the power under sub-section (1) of Section 143A is to direct the payment of
interim compensation in a summary trial or a summons case upon the recording of
the plea of the accused that he was not guilty and, in other cases, upon framing
of charge. As the maximum punishment under Section 138 of the Negotiable
Instruments Act is of imprisonment up to
2 years, in view of clause (w) read with clause (x) of Section 2 of the Code of
Criminal Procedure, 1973 (for short, ‘the Cr.PC’), the cases under Section 138
of the N.I. Act are triable as summons cases.
However, sub-section (1) of Section
143 provides that notwithstanding
anything contained in the Cr.PC, the learned Magistrate shall try the complaint
by adopting a summary procedure under Sections 262 to 265 of the Cr.PC.
However, when at the commencement of the trial or during the course of a
summary trial, it appears to the Court that a sentence of imprisonment for a
term exceeding one year may have to be passed or for any other reason it is
undesirable to try the case summarily, the case shall be tried in the manner
provided by the CrPC. Therefore, the complaint under Section 138 becomes a
summons case in such a contingency. We may note here that under Section 259 of
the Cr.PC, subject to what is provided in the said Section, the learned
Magistrate has the discretion to convert a summons case into a warrant case.
Only in a warrant case, there is a question of framing charge. Therefore,
clause (b) of sub-section (1) of Section 143A will apply only when the case is
being tried as a warrant case. In the case of a summary or summons trial, the
power under sub-section (1) of Section 143A can be exercised after the plea of
the accused is recorded.
What therefore follows is that in the case of Section 143-A, the power can be
exercised even before the accused is held guilty. Sub-section (1) of Section
143A provides for passing a drastic order for payment of interim compensation
against the accused in a complaint under Section 138, even before any
adjudication is made on the guilt of the accused. The power can be exercised at
the threshold even before the evidence is recorded. If the word ‘may’ is
interpreted as ‘shall’, it will have drastic consequences as in every complaint
under Section 138, the accused will have to pay interim compensation up to 20
per cent of the cheque amount. Such an interpretation will be unjust and
contrary to the well-settled concept of fairness and justice. If such an interpretation
is made, the provision may expose itself to the vice of manifest arbitrariness.
The provision can be held to be violative of Article 14 of the Constitution. In
a sense, sub section (1) of Section 143A provides for penalising an accused even
before his guilt is established. Considering the drastic consequences of
exercising the power under Section 143A and that also before the finding of the
guilt is recorded in the trial, the word “may” used in the provision cannot be
construed as “shall”. The provision will have to be held as a directory and not
mandatory. Hence, we have no manner of doubt that the word “may” used in
Section 143A, cannot be construed or interpreted as “shall”. Therefore, the
power under sub-section (1) of Section 143A is discretionary.
We know that even sub-section
(1) of Section 148 uses the word “may”. In the case of Surinder Singh
Deswal v. Virender Gandhi (2019) 11 SCC 341 the Supreme Court after considering the provisions of Section 148, has held that the
word “may” used therein will have to be generally construed as “rule” or
“shall”. It was further observed that when the Appellate Court decides not to
direct the deposit by the accused, it must record the reasons. After
considering the aforesaid said decision in the case of Surinder Singh
Deswal the Supreme Court in the case of Jamboo Bhandari v.
Madhya Pradesh State Industrial Development Corporation Limited & Ors (2023)
10 SCC 446, has held in paragraph 6:
“6. What is held by this Court is that a purposive
interpretation should be made of Section 148 NI Act. Hence, normally, the appellate court
will be justified in imposing the condition of deposit as provided in Section
148. However, in a case where the appellate court is satisfied that the
condition of deposit of 20% will be unjust or imposing such a condition will
amount to deprivation of the right of appeal of the appellant, exception can be
made for the reasons specifically recorded.”
The Supreme Court has
categorically held that, Section 143A can be invoked before the conviction of
the accused, and therefore, the word “may” used therein can never be construed
as “shall”. The tests applicable for the exercise of jurisdiction under
sub-section (1) of Section 148 can never apply to the exercise of jurisdiction
under subsection (1) of Section 143A of the N.I. Act.
The amount of interim
compensation can be recovered under sub-section (5) of Section 143A, as if it
was a fine under Section 421 of the Cr.PC. We know that Section 421 of the
Cr.PC deals with the recovery of the fine imposed by a criminal court while passing
the sentence. Thus, recourse can be taken to Section 421 of the Cr.PC. for
recovery of interim compensation, which reads thus:
“421. Warrant for levy
of fine.—
(1) When an offender has been sentenced to pay a
fine, the Court passing the sentence may take action for the recovery of the
fine in either or both of the following ways, that is to say, it may—
(a) issue a warrant for the
levy of the amount by attachment and sale of any movable property belonging to
the offender;
(b) issue a warrant to the
Collector of the district, authorising him to realise the amount as arrears of land
revenue from the movable or immovable property, or both, of the defaulter:
Provided that, if the sentence directs that in
default of payment of the fine, the offender shall be imprisoned, and if such
offender has undergone the whole of such imprisonment in default, no Court
shall issue such warrant unless, for special reasons to be recorded in writing,
it considers it necessary so to do, or unless it has made an order for the
payment of expenses or compensation out of the fine under Section 357.
(2) The State Government may make rules regulating
the manner in which warrants under clause (a) of sub-section (1) are to be
executed, and for the summary determination of any claims made by any person
other than the offender in respect of any property attached in execution of
such warrant.
(3) Where the Court issues a warrant to the
Collector under clause (b) of subsection (1), the
Collector shall realise the amount in accordance with the law relating to
recovery of arrears of land revenue, as if such warrant were a certificate
issued under such law:
Provided that no such warrant
shall be executed by the arrest or detention in prison of the offender.”
FACTORS TO BE CONSIDERED WHILE EXERCISING DISCRETION
U/s 143-A
In para no. 16 in Rakesh Ranjan Srivastava (Supra) the Supreme Court has laid emphasis
on the fact that a trial court
shall have to prima facie evaluate the merits of the case made out by the complainant and
the merits of the defence pleaded by the accused in the reply to the application
under sub-section (1) of Section 143A. The presumption under Section 139 of the
N.I. Act, by itself, is no ground to direct the payment of interim compensation.
The reason is that the presumption is rebuttable. The question of applying the
presumption will arise at the trial. Only if the complainant makes out a prima
facie case, a direction can be issued to pay interim compensation.
At this stage, the fact that the
accused is in financial distress can also be a consideration. Even if the Court
concludes that a case is made out for grant of interim compensation, the Court
will have to apply its mind to the quantum of interim compensation to be
granted. Even at this stage, the Court will have to consider various factors
such as the nature of the transaction, the relationship, if any, between the
accused and the complainant and the paying capacity of the accused. If the
defence of the accused is found to be prima facie a plausible defence, the
Court may exercise discretion in refusing to grant interim compensation. We may
note that the factors required to be considered, which we have set out above,
are not exhaustive. There could be several other factors in the facts of a
given case, such as, the pendency of a civil suit, etc. While deciding the
prayer made under Section 143A, the Court must record brief reasons indicating consideration
of all the relevant factors.
In para no. 19 Rakesh
Ranjan Srivastava (Supra) the hon’ble Supreme Court has concluded as
under:
a. The exercise of power under sub-section (1) of Section 143A is
discretionary. The provision is directory and not mandatory. The word “may”
used in the provision cannot be construed as “shall.”
b. While deciding the prayer made under Section 143A, the Court must
record brief reasons indicating consideration of all relevant factors.
c. The broad parameters for exercising the discretion under Section
143A are as follows:
i. The Court will have to prima facie evaluate the merit of the case made out by the complainant
and the merits of the defence pleaded by the accused in the reply to the
application. The financial distress of the accused can also be a consideration.
ii. A direction to pay interim compensation can be issue, only if the
complainant makes out a prima facie case.
iii. If the defence of the accused is found to be prima facie plausible, the Court may exercise discretion in refusing
to grant interim compensation.
iv. If the Court concludes that a case is made out to
grant interim compensation, it will also have to apply its mind to the quantum
of interim compensation to be granted. While doing so, the Court will have to consider
several factors such as the nature of the transaction, the relationship, if
any, between the accused and the complainant, etc.
v. There could be several other relevant factors in the
peculiar facts of a given case, which cannot be exhaustively stated. The
parameters stated above are not exhaustive.
In
view of above, the hon’ble Supreme Court was pleased to set aside the order of
grant of interim compensation u/s 143-A of the Negotiable Instruments Act in a
matter reported Rakesh Ranjan Srivastava (Supra) and the trial court was
directed to deal with the issue afresh in view of the details elucidated and
directions contained in the aforesaid judgment. Therefore, the ambiguity in
view of judgments rendered by various high courts in respect of ambit of
section 143-A and as regards the penumbra on the power of Magistrates while deciding
application u/s 143-A of the Negotiable Instruments Act is now settled.
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Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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