SECTION 143-A NEGOTIABLE INSTRUMENTS ACT -SCOPE REDEFINED AND SETTLED

 

Section 143-A Negotiable Instruments Act -scope redefined and settled

 

In the backdrop of some ambiguity as regards the ambit of power and the circumstances under which a Metropolitan Magistrate or a judicial Magistrate could direct payment of interim compensation to the extent or upto 20% of cheque amount, the Supreme Court by virtue of a recent judgment captioned as RAKESH RANJAN SHRIVASTAVA Vs  THE STATE OF JHARKHAND & ANR CRIMINAL APPEAL NO. 741 OF 2024 : 2024 INSC 205 has laid down guidelines in this regard in categorical terms. Therefore, it is no longer doubtful if the power under section 143-A of the Negotiable Instruments act ( In short the “Act” or the “said Act”) is mandatory or directory. Though, there has been certain judgments pronounced before, but, yet some sort of ambiguity nevertheless persisted. It is no longer the case now.

In Rakesh Ranjan (Supra) the issues involved in the criminal appeal were as under:

(i)          whether the provision of sub-section (1) of Section 143A of the Negotiable Instruments Act, 1881 which provides for the grant of interim compensation, is directory or mandatory; And

(ii)        If it is held to be a directory provision, what are the factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act.

Interestingly, in Rakesh Ranjan (Supra). The ld court of Magistrate had allowed the interim compensation of 20% of cheque amount to the complainant and the order was upheld by the ld Sessions Court in revision and it was also confirmed by the Jharkhand High Court. It is in that backdrop that, the matter reached Supreme Court.  

In fact, for many, earlier, the fallacy remained that once an accused plead not guilty, when the notice is framed under section 251 of Cr.P.C by a Magistrate, the payment of interim compensation of 20% of cheque amount is inbuilt and shall be  a necessary consequence for standing in trial.

To begin with and with a view of proper appreciation, the provision of Section 143-A of the said Act, which is inserted by virtue of Negotiable Instruments (Amendment) Act 2018 and w.e.f  01.09.2018. 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 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.”

Though, the object of the insertion of Section 143-A in the said Act was to dissuade unscrupulous drawers of the cheques prolong the proceedings of a complaint under Section 138 by filing appeals and obtaining a stay and also to safeguard and accord sanctity to cheque transactions.

It is relevant to also pin point that by the same Act No.20 of 2018, Section 148 was also brought on the statute book, which stipulates 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. It is however worth noting that section 148 of the Act relates to appeal filed by a convict, whereas section 143-A of the Act relates to awarding of compensation in the trial proceedings itself.  

         

Whether power u/s 143-A is mandatory or directory?

The Supreme court has observed in Rakesh Ranjan (Supra) that though there is no doubt that the word “may” ordinarily does not mean “must”. Ordinarily, “may” will not be construed as “shall”. But this is not an inflexible rule. The use of the word “may” in certain legislation can be construed as “shall”, and the word “shall” can be construed as “may”. It all 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.

It is also observed by the Supreme Court 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 N.I. 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, 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.

The Supreme Court has further observed in para 14 Rakesh Ranjan (Supra) that in the case of Section 143A, 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 143 A 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.

Therefore, it is held 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 held to be discretionary.

The Supreme Court while dealing with sub-section (1) of Section 148 had observed Surinder Singh Deswal v. Virender Gandhi (2019) 11 SCC 341 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 said decision in the case of Surinder Singh Deswal(Supra) ,the Supreme Court in the case of Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited & Ors. (2023) 10 SCC 446, in paragraph 6, held thus:

 

“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.”

 

Therefore, as per above, even u/s 148 of the said Act the appellate court shall have discretion in reducing or passing appropriate order as regards the pre-deposit.

The Supreme Court in para no. 19 of Rakesh Ranjan (Supra) has therefore concluded as under:

a. The exercise of power under sub-section (1) of Section 143 A 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 143 A, the Court must record brief reasons indicating consideration of all relevant factors.

c. The broad parameters for exercising the discretion under Section 143 A are as follows:

i. The Court will 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. The financial distress of the accused can also be a consideration.

ii. A direction to pay interim compensation can be issued, 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.

The Supreme Court has therefore settled the aspect with emphasis.

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Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com