SECTION 143-A OF NEGOTIABLE INSTRUMENTS ACT AND POWERS OF MAGISTRATES

 

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 15^th 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 1^st 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

VALIDITY OF STATUTORY NOTICE U/S 138 OF NEGOTIABLE INSTRUMENTS ACT: PARAMETER

 

VALIDITY OF statutory notice u/s 138 of NegotiaBle Instruments Act: PARAMETER

 

 

The legal statutory notice u/s 138 of Negotiable Instruments Act is of paramount importance, so far as instituting a criminal complaint u/s 138 of the said act is concerned. It is so, as the receipt of legal demand notice and non-payment of demanded sum i.e sums under the dishonoured cheques shall finally give rise to cause of action for lodging a criminal complaint u/s 138 of Negotiable Instruments Act. The requisites in this regard shall of course be (i) issuance of cheque, (ii) dishonour of cheque, (iii) cheques issued towards consideration, (iv) issuance of legal demand notice cum statutory demand notice and (v) non –payment of demanded amount i.e dishonoured cheque amount. The bundle of cause of action culminates in not making of payment by the prospective accused, even after expiry of Fifteen (15) days from the date of receipt of the legal notice and despite receipt of legal notice as aforesaid. It is worthwhile to state that if after Fifteen (15) days of receipt of legal demand notice, the payment is not made, then, only finally cause of action shall arise for filing complaint against the accused persons. That said, the validity of notice shall have to be appreciated in the touchstone of law and if legal notice is valid and despite receipt of it by the drawer of cheque, does not make payment, the complaint shall be lodged. The important dimension which has necessitated this write up, however, is what, if part payment is made before issuance of demand legal notice and in the demand legal notice, no such description is given. Whether, a demand legal notice or statutory notice u/s 138 of the Act shall be valid, if part payment made before issuance of cheque? In other words, making it simpler, if a cheque amount is for a sum of Rs 100/- for instance and Rs 10/- was paid by the drawer of cheque before issuance of statutory notice. The cheque of Rs 100/- was, though presented and dishonoured for insufficiency of funds, but the statutory notice cum demand legal notice under section 138 of Negotiable Instruments Act calls upon the drawer of the cheque to pay Rs 100/- within Fifteen (15) days of receipt of notice, without factoring the part payment made. Whether such a legal demand notice u/s 138 of Negotiable Instruments Act shall be valid or not?

We know that the legal position has remained thus far is that demand notice should contain the amount of dishonoured cheque and  no more in order to be valid, irrespective of part payment having been made before issuance of legal notice. Now, however, it appears that in order to make a legal notice a valid one u/s 138 of the NI Act, the amount paid before issuing legal notice is to be factored in the legal notice, else the legal notice may not be construed as valid.  Is it so? This position has emerged quite recently and the endeavour herein is to find out as to what are the requisites and how are that met.

It is important to reproduce the legal position as enumerated in Section 118 (a) and Sec.139 of the N.I. Act here. Section 118(a) of the Act provides that until the contrary is proved, it shall be presumed that “that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration. Further, Section 139 of the Act lays down that “it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.”

                                                 LAW

1.   That in a matter captioned as M/s Alliance Infrastructure Project Pvt. Ltd. and Ors. Vs. Vinay Mittal  ILR (2010) III Delhi 459  the Hon’ble High Court has held that:

“ The question which comes up for consideration is as to what the expression “amount of money‟ means in a case where the admitted liability of the drawer of the cheque gets reduced, on account of part payment made by him, after issuing but before presentation of cheque in question.” In relation to the said question it was observed that “If it is held that the expression "amount of money" would necessarily mean the amount of cheque in every case, the drawer of the cheque would be required to make arrangement for more than the admitted amount payable by him to the payee of the cheque. In case he is not able to make arrangement for the whole of the amount of the cheque, he would be guilty of the offence punishable under Section 138 of Negotiable Instruments Act. Obviously, this could not have been the intention of the legislature to make a person liable to punishment even if he has made arrangements necessary for payment of the amount which is actually payable by him. If the drawer of the cheque is made to pay more than the amount actually payable by him, the inevitable result would be that he will have to chase the payee of the cheque to recover the excess amount paid by him. Therefore, I find it difficult to take the view that even if the admitted liability of the drawer of the cheque has got reduced, on account of certain payments made after issue of cheque, the payee would nevertheless be entitled to present the cheque for the whole of the amount, to the banker of the drawer, for encashment and in case such a cheque is dishonoured for wants of funds, he will be guilty of offence punishable under Section 138 of Negotiable Instrument Act. I am conscious of the implication that the drawer of a cheque may make payment of a part of the amount of the cheque only with a view to circumvent and get out of his liability under Section 138 of Negotiable Instrument Act. But, this can easily be avoided, by payee of the cheque, either by taking the cheque of the reduced amount from the drawer or by making an endorsement on the cheque acknowledging the part payment received by him and then presenting the cheque for encashment of only the balance amount due and payable to him’.

The Hon’ble Delhi High Court has gone further in observing as under:

“In fact, Section 56 of Negotiable Instrument Act specifically provides for an endorsement on a Negotiable Instrument, in case of part-payment and the instrument can thereafter be negotiated for the balance amount. It would, therefore, be open to the payee of the cheque to present the cheque for payment of only that much amount which is due to him after giving credit for the part-payment made after issuance of cheque.” “ When the principal amount claimed in the notice of demand is more than the principal amount actually payable to the payee of the cheque and the notice also does not indicate the basis for demanding the excess amount, such a notice cannot be said to be a legal and valid notice envisaged in Section 138(b) of Negotiable Instrument Act. In such a case, it is not open to the complainant to take the plea that the drawer of the cheque could have escaped liability by paying the actual amount due from him to the payee of the cheque. In order to make the notice legal and valid, it must necessarily specify the principal amount payable to the payee of the cheque and the principal amount demanded from the drawer of the cheque should not be more than the actual amount payable by him though addition of some other demands in the notice by itself would not render such a notice illegal or invalid.”

2.   The Hon’ble High Court of Gujarat in the case of Shree Corporation vs Anilbhai Puranbhai Bansal (2018) 2 GLH 105 has also held on the aforesaid line.

3.   That similarly, a Division bench of Kerala High Court has also earlier, held on similar line in the judgment reported as Joseph Sartho Vs Gopinatham (2008) 3 KLJ 784

This follows, therefore, that when the complainant presents the cheque in question for an amount which was more than what was actually due to him and had sent the legal demand notice for the cheque amount, which was neither the actual amount of the legal liability so due nor the amount towards part payment of the legal liability. The legal demand notice in such a situation cannot be held to be valid. That being so, the very first ingredient of the offence is not made out since the cheque cannot be said to have been given in discharge of the whole or part amount of the liability owed to the complainant. Further the legal demand notice by not referring to the amount already paid by the accused and making a demand for an amount more than actually due to the complainant, besides invalidating the legal demand notice, also goes on to discredit the credibility of the complainant. The legal demand notice which is one of the essential ingredient of the offence under section 138 of N.I Act, being invalid, the accused cannot be made liable for the said offence.

                         

 

SUPREME COURT

4.   That more recently , the hon’ble Supreme Court in a matter captioned as Dashrathbhai Trikambhai Patel Vs Hitesh Mahendrabhai Patel & Anr  Crl Appeal No. 1497/2022 had to deal with the core issue i.e, the issue is whether the offence under Section 138 of the Act would deem to be committed if the cheque that is dishonoured does not represent the enforceable debt at the time of encashment. In para no. 12 the Supreme Court has held as under:

“12. It must be noted that when a part-payment is made after the issuance of a post-dated cheque, the legally enforceable debt at the time of encashment is less than the sum represented in the cheque. A part-payment or a full payment may have been made between the date when the debt has accrued to the date when the cheque is sought to be encashed. Thus, it is crucial that we refer to the law laid down by this Court on the issuance of post-dated cheques and cheques issued for the purpose of security. In Indus Airways Private Limited v. Magnum Aviation Private Limited (2014) 12 SCC 539 , the issue before a two-Judge Bench of this Court was whether dishonour of post-dated cheques which were issued by the purchasers towards ‘advance payment’ would be covered by Section 138 of the Act if the purchase order was cancelled subsequently. It was held that Section 138 would only be applicable where there is a legally enforceable debt subsisting on the date when the cheque is drawn. In Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Limited (2016) 10 SCC 458,  the respondent advanced a loan for setting up a power project and post-dated cheques were given for security….”

The Supreme Court has concluded in Dashrathbhai Trikambhai Patel (Supra) in para no. 30 as under:

30. In view of the discussion above, we summarise our findings below:

(i)       For the commission of an offence under Section 138, the cheque that is dishonoured must represent a legally enforceable debt on the date of maturity or presentation;

(ii) If the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque;

(iii) When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted;

(iv) If part-payments made after the debt was incurred and before the cheque was encashed upon maturity. The cheque shall not be ‘legally enforceable debt’ on the date of maturity and no offence can be deemed to have been committed under Section 138 of the Act when the cheque was dishonoured for insufficient funds.

                                  CONCLUSION

From the aforesaid discussions based on the judgments of hon’ble Supreme Court and several High Courts, there remains no doubt that in order to attract the liability of drawer qua dishonoured cheques, the part payment made, towards cheque issued earlier, shall have to be factored in the legal demand notice issued u/s 138 of Negotiable Instruments Act and that is to be endorsed as per the mandate of section 56 of Negotiable Instruments Act. The offence u/s 138 of Negotiable Instruments Act shall culminate only upon non-payment of cheque amount, despite expiry of fifteen (15) days from the date of receipt of legal notice. The cheque amount shall only be treated as Negotiable Instrument if the part payment made, after the issuance of cheque and the same is factored in the legal notice and when the cheque is presented for encashment endorsement is made as per the trap of section 56 of Negotiable Instruments Act. If the same is not done and part payment is not endorsed as per above, the legal demand notice itself shall be rendered invalid and offence u/s 138 of the Negotiable Instruments Act shall not be attracted.

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Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

AMBIT OF ORDER 41 RULE 33 AND POWER OF APPELLATE COURT

 

Ambit of Order 41 Rule 33 OF CPC & power of appellate court

Once a suit is adjudicated finally in a court of first instance, after leading of evidence, the first appeal could be preferred by the aggrieved party under Section 96 of Code of Civil Procedure. We know that first appellate court shall be the courts for appreciating the evidence as well and thus, the first appellate court shall be the court of appeal for facts and law both, unlike second appeal u/s 100 of Code of Civil Procedure, where, the high court hears the appeal on substantial question of law only. The aforesaid is the basic component, though. It is imperative in the context to elucidate another provision contained in Order 41 Rule 33 of Code of Civil Procedure as that accords substantive power to the first appellate court in appeal, contrary to norm. The first appellate court as per the principles of Order 41 Rule 33 of CPC may pass in appeal orders, even when the trial court may have omitted such issues in the first place. Moreover, even when no appeal is filed by some respondents, who may be respondents before trial court, then too orders qua such respondents could be passed by the appellate court. Moreover, even when no cross objections are filed in respect thereof, the first appellate court is not precluded in taking note of issues without cross objections. The first appellate court is clothed with the power as aforesaid, however, such power is required to be exercised sparingly and in a very apt case or cases.

This is a departure to convention. Before proceeding further, it may be apt to reproduce the provision under Order 41 Rule 33 which is a comprehensive power bestowed on the first appellate court, albeit in rare circumstances as narrated above:

33. Power of Court of Appeal-

The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees:

Provided that the Appellate Court shall not make any order under section 35 A, in pursuance of any objection on which the Court from whose decree the appeal is preferred has omitted or refused to make such order."

It could thus at once be noticed that in terms of Rule 33 of Order XLI CPC, the Appellate Court is empowered to pass any decree and to make any order which ought to have been passed or made; and which may be considered requisite in a case. While the said Rule 33 prescribes general powers of the Court of appeal, the specific powers of remand are also prescribed in Rules 23 and 23-A of Order XLI CPC.

1.   In this context it may be worthwhile to also refer to a matter of Choudhary Sahu (Dead) by LRs. v. State of Bihar (1982) 1 SCC 232, their Lordships of the Supreme Court have held that this rule i.e Order 41 Rule 33 of CPC is widely expressed and it must be applied with great caution. The object of this Rule is to empower the appellate court to do complete justice between the parties. Under this Rule, the court has power to make a proper decree notwithstanding that the appeal is as to part only of the decree and such power may be exercised in favour of all or any of the parties even though they may not have filed an appeal or objection. It was observed  in paragraphs 12 and 13 of the report as under:-

"12.The object of this Rule is to avoid contradictory and inconsistent decisions on the same questions in the same suit. As the power under this rule is in derogation of the general principle that a party cannot avoid a decree against him without filing an appeal or cross-objection, it must be exercised with care and caution. The Rule does not confer an unrestricted right to re-open decrees which have become final merely because the appellate court does not agree with the opinion of the court appealed from.

13. Ordinarily, the power conferred by this Rule will be confined to those cases where as a result of interference in favour of the appellant further interference with the decree of the lower court is rendered necessary in order to adjust the rights of the parties according to justice, equity and good conscience. While exercising the power under this Rule the court should not lose sight of the other provisions of the Code itself nor the provisions of other laws, viz., the law of limitation or the law of court fees etc."

2. The Supreme Court has also in the case of  Chandramohan Ramchandra Patil & Ors Vs Bapu Koyappa Patil (dead) & Ors through LR (2003) 3 SCC 552  has held thus:

“14. Order 41 Rule 4 of the Code enables reversal of the decree by the court in appeal at the instance of one or some of the plaintiffs appealing and it can do so in favour of even non ­appealing plaintiffs. As a necessary consequence such reversal of the decree can be against the interest of the defendants vis­ à­ vis non ­appealing plaintiffs. Order 41 Rule 4 has to be read with Order 41 Rule 33. Order 41 Rule 33 empowers the appellate court to do complete justice between the parties by passing such order or decree which ought to have been passed or made although not all the parties affected by the decree had appealed”.

15. In our opinion, therefore, the appellate court by invoking Order 41 Rule 4 read with Order 41 Rule 33 of the Code could grant relief even to the non­ appealing plaintiffs and make an adverse order against all the defendants and in favour of all the plaintiffs. In such a situation, it is not open to urge on behalf of the defendants that the decree of   dismissal of suit passed by the trial court had become final inter se between the non ­appealing plaintiffs and the defendants.”

3.      The Supreme Court has further observed in Municipal Committee Hoshiarpur Vs Punjab State Electricity Board & Ors (2010) 13 SCC 216

“27. There is no prohibition on entertaining a second appeal even on a question of fact provided the court is satisfied that the findings of fact recorded by the courts below stood vitiated by non­ consideration of relevant evidence or by showing an erroneous approach to the matter i.e. that the findings of fact are found to be perverse. But the High Court cannot interfere with the concurrent findings of fact in a routine and casual manner by substituting its subjective satisfaction in place of that of the lower courts”.

4.      In a matter captioned as Sirajudheen Vs. Zeenath & Ors. [Civil Appeal No. 1491 of 2023 arising out of SLP (Civil) No. 22557 of 2019] it is observed by Supreme Court that:

“10. It could at once be noticed that in terms of Rule 33 of Order XLI CPC, the Appellate Court is empowered to pass any decree and to make any order which ought to have been passed or made; and which may be considered requisite in a case. While the said Rule 33 prescribes general powers of the Court of appeal, the specific powers of remand are prescribed in Rules 23 and 23-A of Order XLI CPC. Hence, for the purpose of the case at hand, reference to aforesaid Rule 33 remains inapposite…”

5.      The Supreme Court in a recent judgment captioned as AZGAR BARID (D) BY LRS. AND OTHERS VS MAZAMBI @ PYAREMABI AND OTHERS CIVIL APPEAL NO. 249 OF 2010 has categorically dealt with the ambit of power of first appellate court under Order 41 Rule 33 of Code of Civil Procedure. The Supreme Court has held as under:

“6. Learned counsel appearing for the appellants herein / plaintiffs, would submit that the first appellate Court after having affirmed the finding of the trial Court that the plaintiffs are purchasers of the suit land from Sayra Bi by registered sale deed Ex.P-7 and thereby became title-holders of the suit land and affirmed that finding on issue No.1 could not have ventured into invoking Order 41 Rule 33 of CPC and could not have reversed the judgment & decree of the trial Court, as it is the case where the first appellate Court has even affirmed the finding of title in favour of the plaintiffs recorded by the trial Court. Therefore, Order 41 Rule 33  of CPC could not have been invoked into to decide an issue which was never raised by the defendant either before the trial Court or before the first appellate Court either in pleading or in argument and it is not the case where in order to avoid the contradictory decree, invocation of Order 41 Rule 33 of CPC was necessary. As such, the first appellate Court has acted absolutely without jurisdiction in granting the appeal partly after having affirmed the finding on issue No.1.”

Himachal Pradesh High Court

The Division bench of Himachal Pradesh High Court in FAO No. 384 of 2012 in a matter captioned as Oriental Insurance Company Limited Vs Smt. Krishna Kumari and others 2004 ACJ 1039 has held as under:

“45. Thus, it can easily be deduced that the mandate of Section 96, Section 107(2) and Order 41 Rule 33  of CPC is just to rectify the errors and achieve the aim and object of the of legislation. The purpose of Order 41 CPC as discussed hereinabove, is to enable the appellate Court to do complete justice between the parties and to pass order which ought to have been passed while keeping in view the facts and circumstances of the case”.

The question arose before this High Court was - whether the appellate Court can modify the award in the absence of cross­ appeal. This High Court answered in the affirmative. It is apt of to reproduce paragraph 13 of the said judgment hereunder:

"13. Because of what has been held in this judgment, it is felt necessary to exercise power vested in this court under Order 41, Rule 33 of the Civil Procedure Code to set aside the findings in the operative portion of the award requiring the appellant to pay the amount and then to recover it from the 'insurer' (it should have been 'insured'?). This is a direction in the impugned award that needs to be set aside. On this aspect, Mr. Sharma had argued that there is no cross ­appeal by the owner of the vehicle. To meet such a situation, legislature had enacted Order 41, Rule 33 in the Civil Procedure Code even in cases where an appeal is not filed by a party, like the owner in the present appeal. As such, this plea cannot be accepted."

In FAO No.203 of 2010, titled as Nati Devi & Anr vs Maya Devi & Ors, decided on 20^th  May, 2016, FAO No. 448 of 2011, titled as Sarita Devi& Ors Vs Ashok Kumar & Ors, decided on 17th June, 2016, and in FAO (MVA) No. 599 of 2008, titled as Shri Raj Pal Yadav & Anr Vs Jamna Devi & Anr, decided on 24th June, 2016, similar views were taken by the Himachal Pradesh High Court.

The Jammu and Kashmir High Court, in a case titled as State Bank of India vs. M/s Sharma Provision Store and another, reported in AIR 1999 J&K 128, held that a High Court can pass a decree which ought to have been passed by the trial Court. It is apt of to reproduce relevant portion of paragraph 7 of the said decision hereunder:

"7. .......This is an exceptional situation which authorises this Court in the present appeal to pass such decree as ought to have been passed or as the nature of the case demands. Similarly discretion vested in this Court under the aforesaid provision of law will not be refused to be exercised simply because respondents have not either filed an appeal or cross­ objections."

RAJSTHAN HIGH COURT

The High Court of Rajasthan, while dilating upon the powers of the Appellate Court under Order 41 Rule 33 of CPC, in the case titled as United India Insurance Co. Ltd Vs. Dama Ram and others, reported in 1994 ACJ 692, held that the appellate Court can rectify the error invoking Order 41 Rule 33 of CPC even in the absence of Cross Objections or appeal by the claimants. It is apt to reproduce paragraph 7 of the said decision hereunder:

"7. The Tribunal has not passed award in any case against the owner (insured) of the vehicle. It has passed awards against the appellant insurance company only. It is not in dispute that the Tribunal has categorically held that the said accident took place due to rash and negligent driving of the truck by its driver. As such, his employer, namely, Mohd. Rafiq, owner of the said truck, was liable for his negligent act. Thus the Tribunal committed a serious error in not making liable the owner and driver of the offending truck to pay the said amounts of compensation. This error can well be of corrected by this court by invoking the provisions of Order 41, Rule 33, Civil Procedure Code, even if no cross­ objection or appeal has been filed by the claimants­ respondents. It has been observed in AIR 1976 SC 634, paras 6 and 7, as follows:

(6) In Giani Ram Vs Ramji Lal  AIR 1969 SC 1144, the court said that in Order 41, Rule 33, the expression 'which ought to have been passed' means 'what ought in law to have been passed' and if an appellate court is of the view that any decree which ought in law to have been passed was in fact not passed by the court below, it may pass or make such further or other decree or order as the justice of the case may require.

(7) Therefore, we hold that even if the respondent did not file any appeal from the decree of the trial court, that was no bar to the High Court passing a decree in favour of the respondent for the enforcement of the charge.

                                                                           CONCLUSION

The discussion thus entails that the provision contained in Order 41 Rule 33 of CPC shall not mandate the appellate court to enter into the factual dispute which was neither raised nor the lis is brought before the Court. The power is required to be exercised cautiously and with utmost circumspection only in exceptional cases with a view to do complete justice, where totally uncalled for decree or order has been passed and to avoid the contradictory and inconsistent decision on the same question in the same suit it has become imperative. It has not to be routinely invoked and exercised, if the appellate Court does not agree with the pleadings and stand of the parties. As such, reversal of the decree exercising the power in the garb of exercising power under Order 41 Rule 33of the CPC enlarging the scope of appeal reversing the judgment & decree of the trial Court cannot be countenanced. This runs contrary to the provisions contained in Order 41 Rule 33 of CPC as well as the well settled law delineated by the Supreme Court in the judgments noticed herein-above.

What therefore could be deduced from above is that the mandate of Section 96 , Section 107(2) & Order 41 Rule 33 of CPC is only to rectify the errors with a view to meet the object of the legislation. The purpose of Order 41 of CPC as narrated above, is to enable the appellate Court to do complete justice between the parties and to pass order which ought to have been passed while keeping in view the facts and circumstances of the case. A meticulous and critical reading of the above-stated provision would indicate that the object of Order 41 Rule 33 of the CPC  is to avoid contradictory and inconsistent decisions on the same questions in the same suit. This Rule does not confer an unrestricted right to re-open decrees which have become final and though the power is vested in the appellate court, but it should be exercised by the appellate Court in exceptional and rare cases to do complete justice between the parties.

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                                  Anil K khaware

Founder & Senior Associate

Societylawandjustice.com