Supreme Court settles the applicability of Section 143A of the Negotiable Instruments Act in cheque bounce cases: G.J. Raja vs. Tejraj Surana (30 July 2019)

Date of the Judgment: 30 July 2019
Citation: Criminal Appeal No. 1160 of 2019 @ SLP(Crl.)No.3342 of 2019
Judges: Uday Umesh Lalit, J. and Vineet Saran, J.
Can an amendment to a law apply to cases that occurred before the amendment was introduced? The Supreme Court of India addressed this critical question in a case concerning the Negotiable Instruments Act, 1881, specifically focusing on Section 143A, which deals with interim compensation in cheque bounce cases. The court held that Section 143A of the Negotiable Instruments Act, 1881, which allows for interim compensation in cheque bounce cases, is prospective in nature and cannot be applied to cases where the offense occurred before the provision came into effect. The judgment was delivered by a bench comprising Justice Uday Umesh Lalit and Justice Vineet Saran, with Justice Uday Umesh Lalit authoring the opinion.

Case Background

The case involves a complaint filed by Tejraj Surana (Respondent) against G.J. Raja (Appellant) under Section 138 of the Negotiable Instruments Act, 1881. The complaint was lodged on 04.11.2016, alleging that two cheques issued by the Appellant, totaling Rs. 35,00,000, were dishonored due to insufficient funds.

Subsequently, on 01.09.2018, Section 143A was inserted into the Negotiable Instruments Act, 1881, allowing courts to order the drawer of a cheque to pay interim compensation to the complainant. The Trial Court, relying on this new provision, ordered the Appellant to pay 20% of the cheque amount (Rs. 7,00,000) as interim compensation to the Respondent.

The Appellant challenged this order before the High Court of Judicature at Madras, which reduced the interim compensation to 15% of the cheque amount but upheld the Trial Court’s order. Aggrieved by this, the Appellant approached the Supreme Court of India.

Timeline

Course of Proceedings

The Trial Court, after the introduction of Section 143A of the Negotiable Instruments Act, 1881, ordered the Appellant to pay 20% of the cheque amount as interim compensation. The High Court of Judicature at Madras, while acknowledging the applicability of Section 143A, reduced the percentage to 15%. The Appellant then appealed to the Supreme Court, challenging the retrospective application of Section 143A. The Supreme Court appointed Mr. Vinay Navare as Amicus Curiae to assist the court.

Legal Framework

The core legal issue revolves around the interpretation and application of Section 143A of the Negotiable Instruments Act, 1881. This section, introduced on 01.09.2018, empowers courts to order the drawer of a cheque to pay interim compensation to the complainant in cases of cheque dishonor.

Section 143A of the Negotiable Instruments Act, 1881, states:

“143A. 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 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 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.
(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.”

The judgment also considers Section 421 of the Code of Criminal Procedure, 1973, which deals with the warrant for levy of fine. This section is relevant because Section 143A(5) of the Negotiable Instruments Act, 1881, states that interim compensation can be recovered as if it were a fine under Section 421 of the Code of Criminal Procedure, 1973.

Section 421 of the Code of Criminal Procedure, 1973, states:

“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 sub-section (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.”

Arguments

The Appellant argued that Section 143A of the Negotiable Instruments Act, 1881, should not apply retrospectively to cases where the offense occurred before the section came into effect. The core of the argument was that the imposition of interim compensation creates a new liability and subjects the accused to coercive recovery methods, which should not apply to past transactions.

The Amicus Curiae, Mr. Vinay Navare, supported the Appellant’s contention, emphasizing that Section 143A introduces a substantive change in the law by creating a new obligation on the accused to pay interim compensation even before guilt is established.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether Section 143A of the Negotiable Instruments Act, 1881, is retrospective in operation and can be applied to cases where offenses under Section 138 of the Act were committed before the introduction of Section 143A.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered several authorities to determine the retrospective or prospective nature of Section 143A of the Negotiable Instruments Act, 1881.

Judgment

Authorities Viewed by the Court:

• The Supreme Court relied on Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika Township Private Limited [ (2015) 1 SCC 1 ]* to highlight the general principle that laws are presumed not to have retrospective operation unless explicitly stated.
• The Court referred to Hitendra Vishnu Thakur and others vs. State of Maharashtra and others [ (1994) 4 SCC 602 ]* to distinguish between substantive and procedural laws, noting that substantive laws are generally prospective.
• The Court distinguished Employees’ State Insurance Corporation vs. Dwarka Nath Bhargwa [ (1997) 7 SCC 131 ]*, where a provision was held to be procedural and thus retrospective, emphasizing that Section 143A introduces a new liability.
• The Court cited Anil Kumar Goel v. Kishan Chand Kaura [ (2007) 13 SCC 492 ]* to support that amendments extending limitation periods are prospective.
• The Court distinguished Surinder Singh Deswal and Ors . vs. Virender Gandhi [ (2019) 8 SCALE 445 ]*, where Section 148 of the Negotiable Instruments Act, 1881, was held to be retrospective, noting that unlike Section 143A, it did not create a new disability.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that laws affecting substantive rights should generally be prospective in nature. The Court emphasized that Section 143A of the Negotiable Instruments Act, 1881, creates a new liability on the accused by requiring payment of interim compensation before guilt is determined. This, combined with the coercive recovery methods available under Section 421 of the Code of Criminal Procedure, 1973, led the Court to conclude that Section 143A should not apply to offenses committed before its enactment. The Court was also concerned about the potential for injustice if individuals were subjected to new obligations for past actions.

The court’s reasoning was based on a balance of legal principles and factual considerations. While the factual context of the case highlighted the specific issue of applying Section 143A to a pre-existing offense, the court’s decision was predominantly driven by legal principles of statutory interpretation, particularly the distinction between substantive and procedural laws and the general rule against retrospective application of laws affecting substantive rights.

The Supreme Court considered the argument that Section 143A was merely procedural, but rejected this interpretation. The court reasoned that the provision not only changes the procedure but also creates new rights and liabilities, making it a substantive law. The court also considered the potential hardship on the accused if they were forced to pay interim compensation for actions that occurred before the law was enacted.

The court’s decision was unanimous, with both judges agreeing that Section 143A should be applied prospectively. The court relied on established principles of statutory interpretation and the distinction between substantive and procedural laws.

The court stated:

“The provisions contained in Section 143A have two dimensions. First, the Section creates a liability in that an accused can be ordered to pay over upto 20% of the cheque amount to the complainant. Such an order can be passed while the complaint is not yet adjudicated upon and the guilt of the accused has not yet been determined.”

“Secondly, it makes available the machinery for recovery, as if the interim compensation were arrears of land revenue. Thus, it not only creates a new disability or an obligation but also exposes the accused to coercive methods of recovery of such interim compensation through the machinery of the State as if the interim compensation represented arrears of land revenue.”

“In our view, the applicability of Section 143A of the Act must, therefore, be held to be prospective in nature and confined to cases where offences were committed after the introduction of Section 143A, in order to force an accused to pay such interim compensation.”

The potential implications for future cases are that Section 143A cannot be invoked in cases where the offense occurred before 01.09.2018. This decision clarifies the scope of Section 143A and ensures that individuals are not subjected to new liabilities for past actions.

Key Takeaways

• Section 143A of the Negotiable Instruments Act, 1881, is prospective in nature.
• It applies only to cases where the offense was committed after 01.09.2018.
• The interim compensation provision cannot be applied retrospectively.
• The decision protects individuals from new liabilities for past actions.

Directions

The Supreme Court directed that the orders passed by the Trial Court and the High Court be set aside. The money deposited by the Appellant, along with any interest accrued, was ordered to be returned to the Appellant within two weeks from the date of the judgment.

Development of Law

The ratio decidendi of the case is that Section 143A of the Negotiable Instruments Act, 1881, is prospective in nature and cannot be applied to offenses committed before its enactment. This judgment clarifies the scope of Section 143A and establishes that new liabilities cannot be imposed retrospectively, thus reinforcing the principle against retrospective application of substantive laws. This decision changes the position of law by clarifying that Section 143A cannot be applied retrospectively, thereby protecting individuals from new liabilities for past actions.

Conclusion

In conclusion, the Supreme Court held that Section 143A of the Negotiable Instruments Act, 1881, which allows for interim compensation in cheque bounce cases, is prospective in nature. This means it only applies to offenses committed after the provision came into effect on 01.09.2018. The Court set aside the orders of the lower courts and directed the return of the deposited amount to the Appellant. This judgment reinforces the principle that laws affecting substantive rights should not be applied retrospectively.