Issue challenged
1. The issue involved in this criminal appeal is whether the provision of sub-section (1) of Section 143A of the Negotiable Instruments Act, 1881 (for short, ‘the N.I. Act’), which provides for the grant of interim compensation, is directory or mandatory. If it is held to be a directory provision, the question that arises is, what are factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act.
Application filed under Section 143A of the NI Act
4. Before the Court of the learned Magistrate, the respondent moved an application under Section 143A of the N.I. Act seeking a direction against the appellant/accused to pay 20 per cent of the cheque amount as compensation. By the order dated 7th March 2020, the learned Judicial Magistrate allowed the application and directed the appellant to pay an interim compensation of Rs. 10,00,000/- to the respondent within 60 days. The Sessions Court affirmed the order of the learned Magistrate in a revision application. The said orders were subjected to a challenge before the High Court. The learned Judge of Jharkhand High Court dismissed the petition by the impugned judgment. These orders are the subject matter of challenge in the present criminal appeal.
The object of Section 143A
7. Section 143A was brought on the statute book by Act No. 20 of 2018 with effect from 1st September 2018. Section 143A reads thus:
“section 143A N.I Act”
7.1. In the statement of objects and reasons, it was stated 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. It was further observed that such delays compromise the sanctity of the cheque transactions. Therefore, it was proposed to amend the N.I. Act to address the issue of undue delay in the final resolution of the cheque dishonour cases. It was also stated that the proposed amendments would strengthen the credibility of cheques and help trade and commerce.
Section 148 N.I Act is an addition to interim compensation under section 143A N.I Act
8. We may note here that by the same Act No.20 of 2018, Section 148 was 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.
Mandatory or directory
May or Shall can be construed vice versa
9. There is no doubt that the word “may” ordinarily does not mean “must”. Ordinarily, “may” will not be construed as “shall”. But this is not an inflexible rule. The use of the word “may” in certain legislations can be construed as “shall”, and the word “shall” can be construed as “may”. It all 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.
Section 143A(1) N.I Act will apply after the plea of accused is recorded and section 143 A(1)(b) N.I Act will apply only to warrant cases
10. 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 N.I. 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.
Interim compensation can be recovered as if it were a fine as per under section 421 Cr.P.C
11. Under sub-section (5) of Section 143A, it is provided that the amount of interim compensation can be recovered as if it were a fine under Section 421 of the Cr.PC. Therefore, by a legal fiction, the interim compensation is treated as a fine for the purposes of its recovery. 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:
“section 421 Cr.P.C”
How to recover the interim compensation in N.I Act?
12. Non-payment of interim compensation by the accused does not take away his right to defend the prosecution. The interim compensation amount can be recovered from him treating it as fine. The interim compensation amount can be recovered by the Trial Court by issuing a warrant for attachment and sale of the movable property of the accused. There is also a power vested with the Court to issue a warrant to the Collector of the District authorising him to realise the interim compensation amount as arrears of land revenue from the movable or immovable property, or both, belonging to the accused. For recovery of the interim compensation, the immovable or movable property of the accused can be sold by the Collector. Thus, non-payment of interim compensation fixed under Section 143A has drastic consequences. To recover the same, the accused may be deprived of his immovable and movable property. If acquitted, he may get back the money along with the interest as provided in sub-section (4) of Section 143A from the complainant. But, if his movable or immovable property has been sold for recovery of interim compensation, even if he is acquitted, he will not get back his property. Though, the N.I. Act does not prescribe any mode of recovery of the compensation amount from the complainant together with interest as provided in sub-section (4) of Section 143A, as sub[1]section (4) provides for refund of interim compensation by the complainant to the accused and as sub-section (5) provides for mode of recovery of the interim compensation, obviously for recovery of interim compensation from the complainant, the mode of recovery will be as provided in Section 421 of the CrPC. It may be a long-drawn process involved for the recovery of the amount from the complainant. If the complainant has no assets, the recovery will be impossible.
When section 148 N.I Act can be exercised by the appellate court?
13. At this stage, we may note sub-section (1) of Section 148. Section 148 reads thus:-
After quoting section 148 N.I Act the Hon’ble Supreme Court has held that:
Sub-section (1) of Section 148 confers on the Appellate Court a power to direct the appellant/accused to deposit 20 per cent of the compensation amount. It operates at a different level as the power thereunder can be exercised only after the appellant/accused is convicted after a full trial.
Power to direct to pay interim compensation section 143A N.I Act is not mandatory but only discretionary
14. In the case of Section 143A, 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[1]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.
Appellate court can made specific reasons for exception of deposit of 20% by the accused under section 148 N.I Act
15. Even sub-section (1) of Section 148 uses the word “may”. In the case of Surinder Singh Deswal v. Virender Gandhi1, this Court, after considering the provisions of Section 148, 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 said decision in the case of Surinder Singh Deswal [(2019) 11 SCC 341], this Court, in the case of Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited & Ors. [(2023) 10 SCC 446], in paragraph 6, held thus:
“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.” (Emphasis added)
Factors to be considered while exercising discretion under section 143A N.I Act
16. When the court deals with an application under Section 143A of the N.I. Act, the Court will 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.
Remand back to the trial court to decide the application made u/s 143A N.I Act
18. Hence, impugned orders are set aside, and the application made by the complainant in Complaint Petition No. 1103/2018 under Section 143A (1) of the N.I. Act is restored to the file of Judicial Magistrate First Class, Bokaro. The learned Judge will hear and decide the application for the grant of interim compensation afresh in the light of what is held in this judgment. The amount deposited by the appellant of Rs. 10,00,000/- shall be invested in a fixed deposit till the disposal of the said application. At the time of disposing of the application, the Trial Court will pass an appropriate order regarding refund and/or withdrawal and/or investment of the said amount.
Final directions
19. Subject to what is held earlier, the main conclusions can be summarised as follows:
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 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. The financial distress of the accused can also be a consideration.
ii. A direction to pay interim compensation can be issued, 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.
Party
RAKESH RANJAN SHRIVASTAVA … APPELLANT VERSUS THE STATE OF JHARKHAND & ANR. … RESPONDENTS – CRIMINAL APPEAL NO. 741 OF 2024 – 2024 INSC 205 – March 15, 2024
https://main.sci.gov.in/supremecourt/2023/7859/7859_2023_8_1502_51462_Judgement_15-Mar-2024.pdf
