Cheque Dishonour, Interim Compensation and Section 138 of Negotiable Instruments Act, 1881

Cheque Dishonour, Interim Compensation and Section 138 of Negotiable Instruments Act, 1881 - Section 143A of NI Act, 1881 - Interim compensation in case of cheque dishonour - Whether S.143A is discretionary or mandatory ? - Stage of invoking provisions of S.143A for interim compensation - Presumption of innocence of accused - Object behind S.143A of NI Act, 1881 - Object behind S.148 of NI Act, 1881 - Applicability of S. 294 of Code of Criminal Procedure, 1973 - Nature of Proceedings under S.138 of N.I. Act, 1881 - Powers of criminal court of Magistrate - Time limit to decide application under S.143A of N.I. Act, 1881

NI (Amendment) Act, 2018 has added S.143A to the NI Act, 1881. Through said Amendment Act, 2018, S.148 was also added to NI Act, 1881. S.148 (1) of NI Act, 1881 deals with amount to be deposited when appeal is filed against conviction ; S.148(1) fixes only a minimum amount and there is no upper limit fixed through S.148 (1). 

S.143A (1) of NI Act, 1881 deals with interim compensation to the complainant. In case of JSB Cargo and Freight Forwarder Pvt Ltd v. State [2021] GCtR 3449 (Delhi), a complaint was filed under S.138 of Negotiable Instruments Act, 1881. Directions were issued to trial court to decide the application filed under S.143A of N.I. Act, 1881 within 30 days after invoking S.294 of Code of Criminal Procedure, 1973 and after considering submissions of the accused. 

In this case, learned Trial Court had observed to the effect that even if it is assumed that Section 143A of the NI Act, 1881 is discretionary in nature, the Court is still clothed with the powers to grant interim compensation to the complainant, after providing sufficient reasons. 

That Section 143A of the NI Act, 1881 is brought into play during trial is apparent through the provisions of Section 143 A of the NI Act, 1881 itself, when it states that the Court “trying” an offence under Section 138 of the NI Act, 1881 may order the drawer of the cheque to pay interim compensation to the complainant in summary trial or in a summons case where he pleads not guilty to the accusation made in the complaint and in any other case upon framing of charge with directions in terms of Section 143A(2) of the NI Act, 1881 that the interim compensation under sub-Section (1) of Section 143A shall not exceed 20% of the amount of the cheque.

That an accused is not guilty until proved to be so and is presumed to be innocent till held guilty is implicit through Section 143A of the NI Act, 1881 sub Clause (4) thereof itself.

To consider whether a legislation is mandatory or directory in nature, regard must be had to the context of the said matter and the object of the provision and use of the word “shall” or “may” is not decisive. If a statutory remedy is provided for violation of the said provision then it can be construed as a mandatory provision. 

As to whether the statute is mandatory or directory depends upon the intent of the legislature and not always upon the language in which the intent is couched.

The factum that apart from the recovery of interim compensation as awarded under Section 143A of the NI Act, 1881 being made recoverable as if it were a fine under Section 421 of the Code of Criminal Procedure, 1973 and report from the recovery thereof being provided for, there is no further sentence provided under the statute for the same specifically when there is no imprisonment specified in terms of the enactment itself under Section 143A(5) of the NI Act, 1881 of any default sentence in the event of the fine not being recovered, the same itself makes it apparent that the intent of the legislature in using the word “may” in Section 143A(1) thereof for directing the drawer of the cheque to pay the interim compensation to the complainant at the stages as provided therein in Sub-Clauses (a) and (b) thereof which has mandatorily in terms of Section 143A(2) thereof been directed not to exceed 20% of the amount of the cheque, can only be termed to be directory in nature and cannot be held to be mandatory. 

The Statement of Objects and Reasons for introduction of Section 143A and 148 of the NI Act, 1881 vide the Negotiable Instruments (Amendment) Bill, 2017 is as under:- 

“STATEMENT OF OBJECTS AND REASONS 

The Negotiable Instruments Act, 1881 (the Act) was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The said Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of dishonour of cheques. However, the Central Government has been receiving several representations from the public including trading community relating to pendency of cheque dishonour cases. This is because of delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings. As a result of this, 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. Such delays compromise the sanctity of cheque transactions. 2. It is proposed to amend the said Act with a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonoured cheques and to discourage frivolous and unnecessary litigation which would save time and money. The proposed amendments will strengthen the credibility of cheques and help trade and commerce in general by allowing lending institutions, including banks, to continue to extend financing to the productive sectors of the economy. 3. It is, therefore, proposed to introduce the Negotiable Instruments (Amendment) Bill, 2017 to provide, inter alia, for the following, namely:— (i) to insert a new section 143A in the said Act to provide that 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 so payable shall be such sum not exceeding twenty per cent. of the amount of the cheque; and (ii) to insert a new section 148 in the said Act so as to provide that 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. 4. The Bill seeks to achieve the above objectives."

The applicability of Section 294 of the Code of Criminal Procedure, 1973 has been made essential in all proceedings in criminal trials and undoubtedly, the proceedings under Section 138 of the NI Act, 1881 are termed to be quasi criminal in nature. 

Under what situations S.143A can be invoked to grant such amount was explained and it was held that the award of interim compensation in terms of Section 143A of the NI Act, 1881 has to be after providing sufficient reasons and whilst taking the same into account, the determination of interim compensation directed to be paid by the accused to the extent of the maximum of 20% of the cheque amount to the complainants without even considering the submissions that have been sought to be raised by the accused in relation to bank statements of the complainant and without resorting to the provisions of Section 294 of the Code, 1973 cannot be held to be within the contours of Section 143A of the NI Act, 1881 to be with sufficient reasons. Furthermore, there are no inherent powers conferred on a criminal court of a Magistrate dehors enabling provisions of a statute.