G. J. Raja v. Tejraj Surana (2019) and Surinder Singh Deswal v. Virender Gandhi (2019)

The amending legislation of 2018 inserted two provisions into the Negotiable Instruments Act with effect from 1 September 2018. Section 143A lets the trial court direct the drawer to pay interim compensation. Section 148 lets the first appellate court require a convicted appellant to deposit a proportion of the fine or compensation as a condition of suspending sentence.

Both provisions were inserted by the same amendment, on the same day, for the same purpose. Yet one was held prospective and the other retrospective. Learning them as a pair is the only way to see why, and the distinction the Court drew is the examinable point.

The provision

Section 143A provides:

• (1) Notwithstanding anything in the Criminal Procedure Code, the court trying an offence under s. 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 shall not exceed twenty per cent of the amount of the cheque.
• (3) It shall be paid within sixty days from the date of the order, or within such further period not exceeding thirty days as the court may direct on sufficient cause being shown by the drawer.
• (4) If the drawer is acquitted, the court shall direct the complainant to repay the amount 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, or such further period not exceeding thirty days as the court may direct on sufficient cause shown by the complainant.
• (5) The interim compensation may be recovered as if it were a fine under s. 421 of the Criminal Procedure Code.
• (6) The amount of fine imposed under s. 138, or of compensation awarded under s. 357 of the Code, shall be reduced by the amount paid or recovered as interim compensation.

The Court's own summary of the section is a compact answer: interim compensation must not exceed twenty per cent of the cheque amount; it must be paid within the time stipulated in sub-s. (3); on acquittal the complainant must repay with interest at the bank rate; it may be recovered as if it were a fine under s. 421; and on conviction the fine or the compensation under s. 357 stands reduced by the amount paid or recovered.

Facts

Two cheques issued by the appellant, for Rs. 20,00,000 and Rs. 15,00,000, in favour of the respondent complainant, were dishonoured for insufficiency of funds. The complaint was lodged on 4 November 2016 before a fast track court at Egmore, Chennai — that is, nearly two years before s. 143A came into force.

Soon after the section came into force, the trial court ordered twenty per cent of the cheque amount to be made over as interim compensation, directing payment of Rs. 7,00,000. The High Court, on 8 February 2019, found no illegality in the award but reduced the percentage from twenty to fifteen per cent.

The appellant challenged that order. While issuing notice, the Supreme Court directed the sum to be deposited in the trial court, invested in a fixed deposit and not made over pending further orders. The respondent not having appeared, an amicus curiae was requested to assist.

Held: s. 143A is prospective

The Court held s. 143A to be prospective in operation, confined to cases where the offence was committed after the introduction of the section, and applicable or invocable only in such cases. The orders of the trial court and the High Court were set aside, and the money deposited by the appellant was directed to be returned with the interest accrued, within two weeks.

The reasoning, and the recovery machinery

The key step is sub-s. (5). Since interim compensation may be recovered as if it were a fine under s. 421, that section had to be considered. Section 421 appears in the Chapter of the Criminal Procedure Code dealing with execution, suspension, remission and commutation of sentences. By the very context and language of the provisions in that Chapter, they apply in cases where the guilt of an accused has been determined and he has been convicted of an offence punishable with sentence or fine.

Section 143A therefore takes machinery designed for the post-conviction stage and applies it at a stage before any pronouncement of guilt — creating a fresh disability which did not exist before. A provision of that character is not to be applied to offences already committed.

The Court fortified the conclusion by analogy with the proviso to s. 142(b), inserted by the amending Act of 2002, under which cognizance could be taken of a complaint filed beyond the prescribed period on sufficient cause being shown. That proviso was held prospective in Anil Kumar Goel v. Kishan Chand Kaura (2007) 13 SCC 492, on the reasoning that there was nothing in the amendment to suggest retrospective operation, and that when the complaint was filed the respondent could not have foreseen that an amendment extending the period of limitation on sufficient cause would be enacted.

Facts

Appellants 1 and 2 were partners of the third appellant firm. The first respondent, also a partner, retired, and a memorandum of understanding dated 30 November 2013 was entered into.

Cheque No. 665643 dated 31 March 2014, drawn on Canara Bank for Rs. 45,84,915, was issued to the respondent against part payment of his retirement dues. Sixty-three other cheques were issued out of the same transaction. On 6 April 2015 the respondent deposited the first cheque; it was returned by memo dated 7 April 2015 with the remark that funds were insufficient. The other sixty-three were also dishonoured.

The statutory demand notice was sent on 6 May 2015, and twenty-eight complaints were filed before the Judicial Magistrate, First Class, Panchkula. By judgment dated 30 October 2018 the appellants were held guilty and convicted, and by order of 13 November 2018 they were sentenced to two years' imprisonment and to pay, jointly and severally, an amount equal to the cheque amount plus one per cent as interest and litigation expenses.

On appeal to the Sessions Judge, Panchkula, they applied under s. 389 of the Criminal Procedure Code to suspend sentence. The appellate court, by order dated 1 December 2018, suspended the sentence pending appeal, subject to bail and surety bonds of Rs. 50,000 with one surety, and subject to deposit of twenty-five per cent of the amount of compensation awarded by the trial court, to be deposited within four weeks by demand draft.

Across all twenty-eight cases the total to be deposited was Rs. 9,40,24,999. Time to deposit was extended to 28 January 2019. Petitions under s. 482 challenging the deposit condition were dismissed by the High Court on 24 April 2019; special leave petitions were dismissed by the Supreme Court on 29 May 2019. Fresh s. 482 petitions followed, and twenty-eight of them were dismissed by the High Court on 10 September 2019, which order was under appeal.

The appellants' argument was that the complaints had been filed in 2015, long before s. 148 came into force; that non-deposit could not lead to vacation of the order suspending sentence, the amount being recoverable under s. 421 of the Code; and that since s. 143A had been held prospective in G. J. Raja, and both sections were inserted by the same amending Act, s. 148 must be prospective too.

Held: s. 148 is retrospective

The Court rejected the argument. Although the complaints had been filed before the amending Act, at the time the appeals against conviction were preferred the amendment had come into force with effect from 1 September 2018; and it was in force when the applications under s. 389 to suspend sentence were made. Considering the object and purpose of the amendment, a direction to deposit twenty-five per cent of the fine or compensation while suspending sentence under s. 389 was absolutely in consonance with the Statement of Objects and Reasons of the amendment.

The mischief, and the power conferred

The Court set out the reason for the amendment. Because of the delay tactics of unscrupulous drawers of dishonoured cheques, due to easy filing of appeals and obtaining stay on proceedings, the object and purpose of the enactment of s. 138 was being frustrated. Parliament therefore thought it fit to amend s. 148, by which the first appellate court, in an appeal challenging an order of conviction under s. 138, is conferred with the power to direct the convicted accused appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial court.

No vested right is taken away. By the amendment it cannot be said that any vested right of appeal of the accused appellant has been taken away or affected; no substantive right of appeal has been taken away or affected. The authorities relied on by the appellants on vested rights of appeal were therefore inapplicable.

On a purposive interpretation of s. 148 as amended, the section applies to appeals against orders of conviction and sentence for an offence under s. 138 even where the criminal complaints were filed before 1 September 2018; otherwise the purpose of the amendment would be frustrated. The Court also noted that the section says the appellate court may order the appellant to deposit such sum.

G. J. Raja itself drew the line, and this is the paragraph to learn.

| | s. 143A | s. 148 | |---|---|---| | Stage of operation | At trial, even before any pronouncement of guilt or order of conviction | At the appellate stage, where the accused has already been found guilty | | Effect | Creates a fresh disability of a kind not previously existing | Depends on existing machinery and principles already in existence, ss. 421 and 357 of the Code being adequate post-conviction | | A provision for repayment on acquittal | Present, in sub-s. (5) read with sub-s. (4) | No provision akin to s. 143A(5) is present, and none was required | | Operation | Prospective | Retrospective | | Quantum | Not exceeding twenty per cent of the cheque amount | A minimum of twenty per cent of the fine or compensation awarded |

The reason for the difference, in one sentence: s. 148 borrows machinery that already applies to persons convicted, whereas s. 143A extends post-conviction machinery to persons not yet convicted, and so creates a disability that cannot be applied to past offences.

Section 143A of the Negotiable Instruments Act 1881 is prospective and may be invoked only where the offence under s. 138 was committed after 1 September 2018, because it applies at the trial stage before any determination of guilt and creates a fresh disability by borrowing the post-conviction recovery machinery of s. 421 of the Criminal Procedure Code. Section 148 is retrospective and applies to appeals against convictions even where the complaint was filed before that date, because it operates after conviction, depends on existing machinery, and takes away no substantive right of appeal.

1. Set out s. 143A in full with its five figures — twenty per cent, sixty days, thirty days, the bank rate, and the reduction of fine or compensation on conviction. These are frequently asked directly.
2. State the s. 148 power: a minimum of twenty per cent of the fine or compensation, ordered by the first appellate court while suspending sentence under s. 389.
3. Give the two holdings and then the distinction table. The distinction is what the question is really about.
4. Give the mischief from Surinder Singh Deswal: delay tactics, easy appeals, stays, and the frustration of the object of s. 138.
5. Add the Anil Kumar Goel analogy, which shows that the Court has treated the 2002 amendment to s. 142(b) the same way.
6. Note the figures in Surinder Singh Deswal: twenty-eight complaints, sixty-four cheques, a two-year sentence, and Rs. 9,40,24,999 to be deposited. They show the practical weight of the section.

In a problem question, fix the date of the offence and the date of the order. If the order is at trial and the offence predates 1 September 2018, s. 143A cannot be invoked. If the order is by the first appellate court after conviction, s. 148 applies whenever the complaint was filed.