Should The Applicability of Section 143-A & Section 148 of The Negotiable Instruments Act, 1881 be Retrospective or Not?

Ashu Kansal, Karan Kohli | May 2019

Ever since the Notification dated 02.02.2018 (‘Notification’) amending the Negotiable Instruments Act, 1881(‘NI Act’) came into force, inserting new sections i.e., Section 143- A for awarding interim compensation by the Accused to the Complainant before the Ld. Trial Court and Section 148 for awarding compensation by the Appellant/ Convict to the Respondent/ Complainant, there has been a constant chatter qua the interpretation as to whether the new amendment will have retrospective effect or not.

Before proceeding further, it is pertinent to take note of the new amendments, which have been introduced by the above-mentioned notification, which are reproduced herein below:

“143-A. Power to direct interim compensation–

Notwithstanding anything contained in the Code of Criminal Procedure (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 –

In a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and
In any other case, upon framing of charge.

The interim compensation under subsection( 1) shall not exceed twenty percent of the amount of the cheque.
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.
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 years, 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.
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).
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.

148. Power of Appellate Court to order payment pending appeal against conviction–

Notwithstanding anything contained in the Code of Criminal Procedure, 1973(2 of 1974), in an appeal by the drawer against conviction under section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court: Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under section 143A.
The amount referred to in subsection( 1) shall be deposited 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 appellant.
The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal. Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, 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.

The new amendments are pretty certain in terms of providing interim compensation. The Ld. Trial Court may award up to 20% of the cheque amount as interim compensation to the complainant and the same has to be paid by the accused within a maximum period of 90 days if deemed fit by the Trial Court. The Appellate court may award up to 20% of the fine or compensation imposed by the Ld. Trial Court and the same is to be deposited within a maximum period of 90 days with the Appellate Court. The said sections also provide a remedy in terms of laying down a procedure for recovery of the said compensation amount in terms of the provisions of Section 357 of the Code of Criminal Procedure, 1973 (Cr.P.C.).

But, the controversy still remains whether the amendments in the NI Act, be applicable only to fresh cases filed after the said notification came into force or whether it will also be applicable to hundreds and thousands of cases already pending before Courts all over the country.

This aspect was first examined and decided by the Court of Shri Sumeet Anand, M.M. (NI Act), Patiala House Court, New Delhi vide order dated 06.08.2018 in the matter titled as Salora International vs.Vikas Mehra bearing CC No. 21709/16 wherein the Ld. Metropolitan Magistrate held on an application moved by the Complainant under Section 143-A that:

It is not stated in the Amendment Act that whether an application for section 143-A is retrospective in nature. It is a settled proposition of law that any amendment in the procedural Law, if not specifically provided to be retrospective, then its application is always prospective.

Furthermore, perusal of the official gazette/section 143 A suggest that interim compensation is to be awarded at the time of service of notice of accusation. However, the stage of notice of accusation has been crossed in this matter long back and at the present the case is at the stage of complainant’s evidence, particularly at the stage of cross examination of AR (CW-1) of the complaint.

Furthermore, section 143 A is not mandatory in nature as the provision of providing interim compensation is prefixed with the words “May”.

Accordingly, based on above done discussion, this court is of the considered opinion that section 143 A is not applicable.

The Ld. Court came to the conclusion that in the said matter as the proceedings are at the stage of cross examination and the stage of notice of accusation/framing of notice has passed long back, the new amendment under section 143 A will not apply to the said proceedings. The Ld. Trial Court also held that any amendment in the procedural law will always have a prospective effect until and unless it is specified that the amendment is retrospective in nature. An important aspect was also deliberated by the Ld. Trial Court whereby it has come out with the finding that the new amendment under Section 143 A is not mandatory in nature and the same is at the discretion of the Trial Court and if the Trial Court deems fit, it may award upto 20% of the cheque amount in favour of the Complainant.

This issue has recently been the subject matter of judgment of the Hon’ble Punjab and Haryana High Court, Chandigarh. The Hon’ble Punjab and Haryana High Court, Chandigarh was hearing a batch of 14 petitions titled as M/s Ginni Garments and Anr. Vs. M/s Sethi Garments which challenged the orders passed by different Trial Courts under section 138 of the NI Act wherein the Trial Courts had ordered the accused to pay 20% or less of the cheque amount to the complainant as interim compensation under Section 143 A, as well as the orders passed by the Appellate Courts directing the convicts to deposit 20% or more amount of fine or compensation as imposed by the Trial Courts upon them as compensation.

The Hon’ble Court disposed off the 14 petitions before it vide common order dated 04.04.2019. While answering the question qua the retrospective effect of the amendment of Section 143-A & Section 148, the Hon’ble High Court held that Section 143 A shall have NO retrospective effect but on the contrary it held that Section 148 shall have retrospective effect and the same shall be applicable to not only the fresh Appeals but the same shall also be applicable to the pending appeals before the Appellate Courts.

In the context of Section 143 A, The Hon’ble High Court held that:

“It has to be held that Section 143 A of the Act cast a substantive obligation upon the accused and thereby, affect the substantive right 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 earlier.

By virtue of sheer amount of ‘interim compensation’, which may work out in a particular case in crores of rupees, for a person who is not having means of more than few lakhs of rupees, the consequence under this Section can be totally devastating, irrecoverable and irreparable. Therefore, this provision can, at the best be applicable prospectively where prospective accused would be aware of such consequences in advance, and it cannot be applied to the cases where the trial has already commenced qua a default which was suffered; when this provision was not in-existence.”

Per Contra qua Section 148, The Hon’ble High Court held that:

“In view of the above discussion, it is quite clear that the procedure of recovery of fine or compensation from a convictappellant of pending appeal already existed in CR.P.C; before advent of the provision as contained in Section 148 of the Act. Hence, no new aspect of coercive recovery of fine or compensation from the appellant is being created through this amended provision.

Since the provisions for recovery of fine or compensation from the appellant/convict already existed in the existing procedure relating to the recovery, therefore, the provision introduced vide Section 148 of the Act; which relates only to recovery of amount partly, as interim measure, has to be treated purely procedural only, which is otherwise also beneficial for the appellant as compared to the pre-existing provisions. Hence, it has to be held that provision of Section 148 of the Act shall govern all the appeals pending on date of enforcement of this provision or filed thereafter”

The Hon’ble Punjab and Haryana High Court has by way of detailed analysis differentiated the two i.e., Section 143-A & Section 148. In terms of Section 143-A as the amendment creates a new liability or obligation upon the accused which was not in existence at the time when the cheque got dishonored, hence, it is said that the same affects the substantive rights of the accused and as a result, the same shall be prospective in nature. The Hon’ble Supreme Court of India has already in the matter of Anil Kumar Goel versus Kishan Chand Kaura; 2008(1) R.C.R.(Criminal)290, has held that:

All laws that affect substantive rights generally operate prospectively and there is a presumption against their retrospectivity if they affect vested rights and obligations, unless the legislative intent is clear and compulsive. Such retrospective effect may be given where there are express words giving retrospective effect or where the language used necessarily implies that such retrospective operation is intended. Hence the question whether a statutory provision has retrospective effect or not depends primarily on the language in which it is couched. If the language is clear and unambiguous, effect will have to be given to the provision in question in accordance with its tenor. If the language is not clear then the court has to decide whether, in the light of the surrounding circumstances, retrospective effect should be given to it or not.

Clarifying further, the Hon’ble Supreme Court has held that all those laws which affect the substantive and vested rights of the parties have to be taken as substantive law, whereas any provision of law dealing with the form of the trial, mechanism of the trial or procedure thereof, has to be treated as procedural in nature. The relevant part of the judgment of the Hon’ble Supreme Court in case of Thirumalai Chemicals Ltd. vs. Union of India and others; 2011(6) SCC 739 is as follows:-

Substantive law refers to body of rules that creates, defines and regulates rights and liabilities. Right conferred on a party to prefer an appeal against an order is a substantive right conferred by a statute which remains unaffected by subsequent changes in law, unless modified expressly or by necessary implication. Procedural law establishes a mechanism for determining those rights and liabilities and a machinery for enforcing them. Right of appeal being a substantive right always acts prospectively. It is trite law that every statue is prospective unless it is expressly or by necessary implication made to have retrospective operation. Right of appeal may be a substantive right but the procedure for filing the appeal including the period of limitation cannot be called a substantive right; and aggrieved person cannot claim any vested right claiming that he should be governed by the old provision pertaining to period of limitation. Procedural law is retrospective, meaning thereby that it will apply even to acts or transactions under the repealed Act.

Therefore, based upon the law/ precedent already laid down by the Hon’ble Supreme Court of India, the Hon’ble Punjab and Haryana High Court has come to the conclusion that Section 143-A only casts a substantive obligation upon the accused to pay interim compensation to the Complainant and thereby it only effects the substantive right of the accused and since the Amendment has not made the provisions specifically to be retrospective, hence, it cannot be applied retrospectively and the Amendment shall not apply to pending cases.

However, the situation with regards to Section 148 is drastically different to section 143-A as the new provision does not in any way, affects the substantive rights of the accused, either to defend himself before the Appellate Court or to put forward arguments on his Appeal. Also, since the provision relating to recovery of fine or compensation imposed by the Trial Court already exists under the NI Act, the amendment relating to interim compensation is only to be treated as procedural in nature and as per the provisions laid down by the Hon’ble Supreme Court in Thirumalai Chemicals Ltd. Vs. Union of India and others; 2011(6) SCC 739 (supra) that procedural law is retrospective in nature, hence, the same shall be applicable to pending appeals as well.

Interestingly, shortly after the detailed order of the Hon’ble Punjab and Haryana High Court, The Apex Court in SLP (Crl.) 3342 of 2019 in matter titled as G.J. Raja vs. Tejraj Surana vide order dated 15.04.2019 dwelled upon the controversy as to whether Section 143-A of the NI Act has retrospective application or not?

The Apex Court after hearing the submissions issued a notice in the above matter and has fixed the case for 01.07.2019. Now, it will be interesting to see what happens in the Apex Court and what conclusion does the Apex Court impart.

Recently, the Bombay High Court in Criminal Writ Petition No. 258 of 2019 titled as Ajay Vinodchandra Shah vs The State of Maharashtra & Anr. has held that in case of Interim Compensation under Section 143-A, the Trial Court can invoke its power and impose interim compensation upto 20% of the cheque amount in the event that the Plea of the accused or charge has not been framed against the accused. Hence, Section 143- A can only be applicable to those cases in which charge/notice has not been framed against the accused and shall not apply to cases in which charge/notice has been framed against the accused.

In Conclusion, both the Hon’ble High Courts have correctly interpreted the Section 143-A in holding that Section143-A is not applicable retrospectively and is only applicable to fresh cases that are filed after the amendment came into force or to those cases in which Plea of the accused/charge or notice has not been framed against the accused by the Trial Court. Also, the interim compensation envisaged under Section 143-A gives the Trial Court discretion on imposing the interim compensation as it uses the word MAY and not SHALL. However, maybe there is a need for a law in relation to Section 143-A to be amended in order to create pressure upon the accused. The Ld. Trial Court shall mandatorily enforce the condition of imposing maximum amount of 20% as interim compensation upon the accused thereby creating greater fear in the eyes of the Accused not to issue any cheque knowing that the same is going to get dishonored. This will help in lifting some of the burden from the Complainant as the Complainant will recover some amount from the dishonored cheque rather than having to wait for the length of the entire Trial for a number of years.

The Hon’ble High Court has also correctly interpreted Section 148 to be procedural in nature and the new amendment does not create any new obligation upon the convict as the provision of fine or compensation already exists under Section 357 of Code of Criminal Procedure, 1973 and the Appellate Court is already entrusted to award any fine or compensation under Section 357. Hence, Section 148 is procedural in nature and as a result of which it can be applied retrospectively and shall apply to fresh appeals as well as the pending appeals before the Appellate Courts.

About Author

Ashu Kansal

Ashu Kansal is a Partner at Adhita Advisors, having more than fifteen years of experience. His main areas of expertise are banking and finance laws, securitization - related matters, recovery of debts, suits, and arbitration matters. Apart from drafting various pleadings, he also advises/ gives opinions and strategies to clients on various litigation matters in various forums including the Supreme Court, High Courts and various other Tribunals across the Country. He has also briefed top Senior Counsels across the country for multinational clients.

Karan Kohli

Karan Kohli is an Associate with Adhita Advisors and a graduate of Guru Gobind Singh Indraprastha University (IP University). He has been handling complaint cases under section 138 of the Negotiable Instruments Act, 1881 & commercial disputes. He regularly appears before Hon’ble High Court of Delhi, various district courts as well as Tribunals and Forums.