The Negotiable Instrument Act 1881 was enacted with a view of protecting the interest of the people wherein there is a transfer of payment involved between the holders by way of negotiable instruments.
The word “Negotiable” means “transferable by delivery” and “Instrument” as “a written document by which a right is created in favour of some person”. Therefore, the term Negotiable Instruments can be deciphered as “a document that is transferrable by way of delivery”. The most common negotiable instrument includes Promissory note, Bills of exchange, Cheque, Banknote, Draft, Share Warrants, Bearers, Debentures, Dividend Warrants, and Treasury Bill.
The said act has gone through umpteen amendments/ modifications even before it came into existence in the year 1881. The said act was originally drafted in the year 1866 by the 3rd Indian Law Commission and the same was introduced in December 1867. However, various objections were raised to the same, and the revised draft was scheduled to be reintroduced in the year 1877 but despite sufficient efforts, the same could not reach its final stage. That thereafter, upon recommendation of the New Law Commission, the bill was re-drafted in 1879 and most of the parts recommended by the New Law Commission were adopted by the Select Committee and the same was again re-drafted for the fourth time before it came into existence by getting passed into the law in the year 1881 that is presently known as the Negotiable Instruments Act, 1881 (Act No.26 of 1881). [i]
That since 1881, the said Act has gone through various amendments time and again but the imperative ones were introduced through The Negotiable Instruments (Amendment) Act, 2018 (Act No. 20 of 2018). The sections introduced by way of said Amendment Act are as follows:
Section 143-A: Power to direct Interim Compensation
Section 143A (1)empowers the Court trying offence under section 138 to order the drawer of the cheque to pay the interim compensation in a summary trial or a summons case, the cheque drawer pleads not guilty to the accusations made in the complaint; and in any other case, upon framing of charges.
However, the sub-section (2) clarifies the interim compensation shall not exceed twenty (20) per cent of the cheque amount and as per sub-section (3) the same shall be payable within sixty(60) days from the date of the order under sub-section (1), or within such further period not exceeding thirty (30) days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque.
That the sub-section (4) covers the scenarios wherein the drawer of the cheque is acquitted. The said sub-section specifies that 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(60) days from the date of the order, or within such further period not exceeding thirty(30) days as may be directed by the Court on sufficient cause being shown by the complainant.
That the sub-section (5) clarifies 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. However, as per sub-section (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.
Section 148: Power of Appellate Court to order payment pending appeal against conviction
Section 148(1) specifies that if an appeal against the conviction under section 138 is pending before the Appellate Court, Appellate Court may order the Appellant to deposit such a sum which shall be a minimum of twenty per cent (20%) of the fine or the compensation awarded by the Trial Court in addition to any interim compensation paid by the appellant under section 143A, within sixty (60) days of the passing of such order with such further not exceeding by thirty (30) days as may be directed by the Court on sufficient cause being shown by the Appellant in accordance with the sub-section(2).
The sub-section (3) further empowers the Appellate Court to release the said twenty per cent (20%) to the Complainant at any time during the pendency of the appeal. However, as per the proviso to sub-section(3) if the Appellant is acquitted, the Appellant 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 (60) days from the date of the order, or within such further period not exceeding thirty (30) days as may be directed by the Court on sufficient cause being shown by the complainant.
Applicability of Section 143A and 148: Retrospective or Prospective
That after the said sections were introduced, a major concern raised was if the applicability of the said sections shall be retrospective or prospective.
That the Hon’ble Supreme Court then elucidated the issues by way of various judgments mentioned hereinbelow:
J. Raja vs. Tejraj Surana (30.07.2019 – SC): MANU/SC/1002/2019
“It must be stated that prior to the insertion of Section 143A in the Act, there was no provision on the statute book whereunder even before the pronouncement of the guilt of an Accused, or even before his conviction for the offence in question, he could be made to pay or deposit interim compensation. The imposition and consequential recovery of fine or compensation either through the modality of Section 421 of the Code or Section 357 of the CrPC could also arise only after the person was found guilty of an offence. That was the status of law which was sought to be changed by the introduction of Section 143A in the Act. It now imposes a liability that even before the pronouncement of his guilt or order of conviction, the Accused may, with the aid of State machinery for recovery of the money as arrears of land revenue, be forced to pay interim compensation. The person would, therefore, be subjected to a new disability or obligation.”
“Section 143A is to be prospective in operation and that the provisions of said Section 143A can be applied or invoked only in cases where the offence under Section 138 of the Act was committed after the introduction of said Section 143A in the statute book”
Surinder Singh Deswal vs Virender Gandhi: MANU/SC/0793/2019
“Therefore, considering the Statement of Objects and Reasons of the amendment in Section 148 of the N.I. Act stated hereinabove, on a purposive interpretation of Section 148 of the N.I. Act as amended, we are of the opinion that Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence Under Section 138 of the N.I. Act, even in a case where the criminal complaints about 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. If such a purposive interpretation is not adopted, in that case, the object and purpose of amendment in Section 148 of the N.I. Act would be frustrated.”
Therefore, the Apex Court clarified that Section 148 of the Amendment Act, shall have a retrospective effect (applicable to the Complaints filed before 1st September 2018) and the Section 143A, shall be prospective and confined to cases where the offence was committed after the introduction of Section 143A, to force an accused to pay such interim compensation.
Contentions raised as to the interpretation
The first Contention raised: The first contention raised in case Surinder Singh (supra) was the language used in Section 148 of the N.I. Act as amended, the appellate court “may” order the appellant to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial Court and the word used is not “shall” and therefore the discretion is vested with the first appellate court to direct the appellant. The Apex Court held:
“…considering the amended Section 148 of the N.I. Act as a whole to be read with the Statement of Objects and Reasons of the amending Section 148 of the N.I. Act, though it is true that in amended Section 148 of the N.I. Act, the word used is “may”, it is generally to be construed as a “rule” or “shall” and not to direct to deposit by the appellate court is an exception for which special reasons are to be assigned. Therefore amended Section 148 of the N.I. Act confers power upon the Appellate Court to pass an order pending appeal to direct the Appellant Accused to deposit the sum which shall not be less than 20% of the fine or compensation either on an application filed by the original complainant or even on the application filed by the Appellant Accused under Section 389 of the Cr.P.C. to suspend the sentence…”
The second contention raised: That another contention raised was upon relying upon Section 357(2) of the Cr.P.C. that once the appeal against the order of conviction is preferred, fine is not recoverable pending appeal and therefore such an order of deposit of 25% of the fine ought not to have been passed and in support of the above reliance placed upon the decision of this Court in the case of Dilip S. Dhanukar (supra)[ii] is concerned, the aforesaid has no substance. To this Apex Court clarified:
“…The opening word of amended Section 148 of the N.I. Act is that “notwithstanding anything contained in the Code of Criminal Procedure…..”. Therefore irrespective of the provisions of Section 357(2) of the Cr.P.C., pending appeal before the first appellate court, challenging the order of conviction and sentence under Section 138 of the N.I. Act, the appellate court is conferred with the power to direct the appellant to deposit such sum pending appeal which shall be a minimum of 20% of the fine or compensation awarded by the trial Court. Court…”
That from the above-stated discussions and interpretations, it can be concluded that the Act has been amended with a positive view of strengthening the trial and so far it has worked out efficiently considering cheque bounce as one of the most common types of litigation, however, inserting extra steps by allowing the interim relief and the percentage amount thereof per section 148, if such relief is not paid in time by the accused party, it may result into a further delay in the litigation than it took before the amendment came into force. That needless to mention after the complainant puts his skin into the trial after depositing the interim or the per cent amount as specified in section 148, it shall treat the proceedings with more sincerity and regularity. Therefore, overall it seems to be a constructive amendment and it shall be interesting to note that how courts are responding to such amendments and what are the challenges it may face while enforcing such amendments.
[i] Law Commission of India, 11th Report, Negotiable Instrument Act, Department of India Ministry.
[ii] Dilip S. Dhanukar v. Kotak Mahindra Bank, reported in (2007) 6 SCC 528.
This Article is written by Ayushi Agarwal. Ayushi Agarwal is an Associate at N.K. Bhardwaj and Associates. At present, she is working as a retainer with a real-estate giant in Noida. Her practice focuses on complex consumer and real-estate litigation and other internal corporate work. She has earned her L.L.M. in business and corporation from the University of San Diego (U.S.A), L.L.B. from the Banaras Hindu University (Uttar Pradesh), and Bachelors of Commerce from the University of Delhi.
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