COMPENSATION IN A CHEQUE BOUNCE CASE UNDER SECTION 143A & 148 OF THE NEGOTIABLE INSTRUMENT ACT

Section 143-A of the Negotiable Act empowers any court while trying an offence for dishonor of a cheque to direct the drawer, who is the issuer of the cheque, to pay interim compensation to the complainant. The amount of compensation payable cannot exceed 20% of the amount as stated in the cheque. This amount has to be paid within a stipulated time period of 60 days from the date of the order passed by the court, or further within the extended period of 30 days, as may be directed by the court on showing sufficient cause for the delay caused.  

Section 143A of the ACT States:-

‘‘143A. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant— 

(a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and

(b)In any other case upon framing the 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. 

(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, shall be reduced by the amount paid or recovered as interim compensation under this section.’’.

Now, the matter which has become a point of contention is whether the section 143A of the NIA has retrospective effect or the prospective effect only?

For that The Bombay High Court considered the object of the NI Act which is to enhance the acceptability of the cheques in settlement of liabilities by making the drawer liable for penalties in case of dishonour of cheques due to insufficiency of funds. The court further noted the Legislature’s intent in amending the NI Act i.e. to curtail the delaying tactics of unscrupulous, dishonest drawers and mounting pendency of the criminal cases and the resulting injustice caused to the payee.

BOMBAY HIGH COURT JUDGMENT

The High Court of Bombay in its judgement, Ajay Vinodchandra Shah vs. The State of Maharashtra & Anr.[2], has held that Sections 143-A and 148 of the Amended Act are applicable to the cases pending in trial as well as in appeal, which has been filed prior to 1st September 2018.

In the instant case, the petitioner had filed writ petitions challenging the legality and constitutionality of the order passed by the learned sessions court. The sessions court directed the petitioner to deposit 25% of the amount of the compensation as a condition precedent to maintain the order of the bail or to entertain the appeal preferred by the petitioner.

The first issue, in the present case was whether the provisions of the Amended Act can apply only to those complaints which are filed after 1st September 2018 or to the complaints or appeals which are already pending wherein the court can pass the orders only after 1st September 2018. The second issue was whether these provisions are ultra vires the Constitution of India.

The High Court of Bombay on comparing Sections 143-A and 148 of the Amended Act quoted the difference between the two provisions and observed  that under Section 143A, the accused is yet to face a trial. Under subsection (2) thereof, the interim compensation under sub-section (1) shall not exceed 20% of the amount of the cheque. However, under Section 148, the High Court of Bombay may order the appellant to deposit such sum which a minimum of shall be 20% of the fine. The High Court of Bombay said that this reflects the intention of the Legislature that a person at the stage of trial is always considered innocent till he is found guilty and, therefore, the ceiling of 20% compensation is mentioned. However, in the appeal, after the first Court holds the accused guilty, then the appellate Court is given the power to pass order directing the accused to deposit the amount which shall be a minimum of 20% of the fine or compensation awarded by the trial Court. It is further stated in section 148 of the Amended Act that the amount payable under this subsection shall be in addition to any interim compensation paid by the appellant under section 143A of the Amended Act. Though the granting of interim relief is a common thread running through both the sections, they are identical.

It was further observed that the criminal trial court under Section 357 of the Criminal Procedure Code,1973 has power to grant compensation to the complainant, making it evident that the power to give compensation has been in existence with the criminal court before the Amended Act also. And thus, by virtue of this amendment, at what stage the amount of compensation can be granted has been given more clarity.

The High Court of Bombay further held that Sections 143A and 148 of the Amended Act are not ultra vires and that the right to be on bail and enjoy liberty should not be taken away in case of bailable offences unless some special ground is made out.

Thus, the High Court of Bombay had allowed the writ petitions partly by imposing a condition on the accused to deposit 20% of the total amount of the compensation. Further, the stipulated time of 60 days to deposit the said amount was extended till 90 days, till the pendency of the litigation. The orders of putting conditions of cancellation of bail or suspension of sentence in the event of non-payment were additionally set aside

PUNJAB AND HARYANA HIGH COURT 

The Punjab and Haryana High Court (“High Court“) through its judgement, Ginni Garments & Anr vs. Sethi Garment & Anr[3] had a different interpretation of the law and has held that the Section 143-A of the Amended Act has no retrospective effect whereas the Section 148 of the Amended Act will apply to the pending appeals pending on date of enforcement of this provision.

The High Court, through this judgement disposed off a bunch of 14 petitions challenging the orders passed by the trial courts under Section 138 of the Act. The sole argument in all these petitions was that under Section 143-A and Section 148 of the Amended Act, the courts below cannot be deemed to have any retrospective authority, to pass the order imposing the liability of payment of the amounts, mentioned in the impugned orders, in the pending trial or in the pending appeals.

HC observed that SC has amply clarified the legal proposition that all substantive laws have to be prospective in nature and applicability; unless prescribed to be retrospective, whereas all procedural laws have to be applicable to all cases immediately on their coming into operation, including the pending cases.

Section 143-A of the Act cast a substantive obligation upon the accused and thereby affect the substantive rights of the accused. Since the Amendment Act has not made the provision applicable retrospectively, specifically, to pending cases, hence, it cannot be applied retrospectively, to pending cases; which arose from the default of the accused which has taken place before coming into force of this provision.

Provisions of section 148 doesn’t affect the substantive right of the accused to defend himself or to prosecute his appeal. No new aspect of coercive recovery of fine or compensation from the appellant is being created through this amended provision. Hence it has to be held that provision of Section 148 of the Act shall govern all the appeals pending on the date of enforcement of this provision or filed thereafter.

SUPREME COURT OF INDIA

The Hon’ble Supreme Court of India in Surinder Singh Deswal vs. Virender Gandhi held that the amendment in Section 148 of the N.I. Act as amended shall be applicable in respect of the appeals against the order of conviction & sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to amendment Act No. 20/2018 i.e., prior to 01.09.2018. Therefore, the Hon’ble Court held that the Section 148 of N.I. Act has retrospective effect.

In another matter, the Hon’ble Supreme Court of India is ceased off with the controversy with regard to the applicability of Section 143A of N.I. Act & soon the judgment over that issue will be delivered which will ultimately resolve the conflicting opinions on its applicability.