Why SC Judgment On Retrospective Application Of Section 148 NI Act Is Problematic?

Same Amendment Act, two different provisions. One providing for payment of maximum 20 percent of 'amount of cheque' as interim compensation during trial. The other providing for depositing minimum 20 percent of 'fine or compensation' awarded by the trial court during appeal. The former provision is Section 143A of the Negotiable Instruments Act, 1881 (NI Act) while the latter is Section 148 of the NI Act. Both these provisions have been introduced in the NI Act through the Negotiable Instruments (Amendment)Act, 2018, which came into operation on 1.9.2018.

Interestingly, Section 143A has been held to be prospectively applicable by the Supreme Court in G.J.Raja vs Tejraj Surana (G.J. Raja), while Section 148 has been given retrospective application in SurinderSingh Deswal @ Col. S.S.Deswal and others vs Virender Gandhi (Surinder Singh).

• In this post, I'll discuss the two provisions, the reasoning given by the courts for differentiating between the two on the issue of retrospective application, and why I believe the Apex court may have gone wrong in not making both the provisions applicable prospectively.

  Text of the provisions

  Let's have a look at the text of both the sections, found in Chapter XVII of the NI Act which deals with penalties.

  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 year, 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.]

  148. Power of Appellate Court to order payment pending appeal against conviction.—(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 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:

  Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under section 143A.

  (2) The amount referred to in sub-section (1) shall be deposited 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 appellant.

  (3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:

  Provided that if the appellant is acquitted, the 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 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.

  The meaning of the provisions is fairly clear. Now, have a look at the underlined portions to spot the difference between the provisions. Section 143A gives the power to a:

  • a) trial court trying an offence under 138 NI Act
  • b) to order interim compensation
  • c) not exceeding 20 percent of the amount of cheque
  • d) which shall be recoverable as if it were a fine under Section 421 CrPC.

  Section 148 gives the power to the:

  • a) appellate court in an appeal against conviction under 138 NI Act
  • b) to order depositing of a sum
  • c) not being lesser than 20 percent of the fine or compensation imposed by trial court.
  • d) The provision is silent as to how this amount may be recovered.

  Interpretation given by the Supreme Court

  Germane to both the decisions was determination of the question as to whether the provision being scrutinized pertains to a procedural right or a substantive one. This was in adherence to the established judicial principle that laws affecting substantial rights must not be applied retrospectively (unless expressly provided so, or by necessary implication) while laws affecting procedure must be presumed to be retrospectively applicable (unless such an interpretation is not possible from the text of the provision).

  The two-judge bench in Surinder Singh holds that Section 148 must be applied retrospectively primarily on the basis of two reasons:

  1. Since Section 148 does not take away or affect the vested or substantive right of appeal, it is procedural in nature and hence it must be given retrospective application.
  2. The retrospective application will be in consonance with the statement of object and reasons of the Amendment Act. A purposive interpretation of the Amendment Act which was aimed, inter alia, at checking the delay tactics employed by unscrupulous drawers who were filing appeals and obtaining stay on proceedings required that the Section be applied retrospectively, i.e. even in cases where trials or appeals were pending as on 1.09.2018.

  Two months later, a co-ordinate bench of the Supreme Court in G.J. Raja considered whether Section 143A NI Act should be applied retrospectively. The court in G.J. Raja refers to its earlier three-judge bench decision in Hitendra Vishnu Thakur and others vs. State of Maharashtra and others (Hitendra Vishnu Thakur), which laid down five illustrative principles that should govern the ruling on retrospective operation of an Amending Act, while considering a 1993 amendment to the now repealed TADA. It relies primarily on the fourth and fifth principle reproduced below:

  "…(iv) A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished.

  (v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication."

  Guided by these two principles, the Court holds that Section 143A must be held to be applicable prospectively because it creates a substantive right owing to its two dimensions:

  1. Section 143A creates a new disability/liability/obligation for the accused by exposing them to 20% compensation amount even before their guilt is decided. This liability did not exist earlier and has been brought in only because of Section 143A.
  2. The Section also subjects the accused to the coercive state machinery by making the interim compensation recoverable as it were fine under Section 421 CrPC.

  The Court in G.J. Raja also distinguishes itself from Surinder Singh, observing "Section 148 depends upon the existing machinery and principles already in existence and does not create any fresh disability of the nature similar to that created by Section 143A of the Act". The existing machinery being referred to is constituted by Section 421 CrPC & Section 357 CrPC, which is already applicable post conviction, and hence there was no need to insert a clause akin to sub-section (5) of Section 143A in Section 148. The Court therefore ruled that Section 143A stood on a different footing than Section 148, and would apply prospectively, unlike the latter.

  NI Act: Why Section 143A Is Prospective And Section 148 Is Retrospective ?

  Where the court may have gone wrong
  

  While Surinder Singh does state that Section 148 does not take away or affect the substantive right of appeal, it offers little assistance as to what is the content of the provision, and why it affects procedure as opposed to a substantive right.

  The court in G.J. Raja is concerned that Section 143A imposes a liability on the accused even before conviction and that it prescribes coercive steps on failure to meet the liability. The Court rightly recognises that the question of whether a provision concerns a substantive right or merely affects procedure turns on the creation of a right or liability. Where I think both the decisions may have faltered is in their analysis of the content of the right introduced by Section 148.

  Two things, I submit, logically follow from the principle that a provision concerns a substantive right when it creates a liability or obligation. One, the creation of a corresponding ability/asset must also be a substantive right. Second, the extent of the liability/asset is in itself also a feature that is substantive in nature.

  So, let's say we need to decide whether and how much I owe you. Let's say I owe you Rs. 10.

  The fact that I owe you Rs. 10 concerns my substantive right/liability.

  The fact that you are owed Rs. 10 is your substantive right.

  The fact that Rs. 10 is owed is also an element of our reciprocal rights and liabilities. So, if a provision says that I owe you minimum Rs. 5 or maximum Rs. 15, that's also substantive in nature.

  Let's look at Section 148 from the perspective of the accused or the convicted appellant. Section 148 defines the scope (minimum 20 percent of the compensation or fine awarded by the trial court) of liability on the appellant with respect to the amount they must deposit with the appellate court pending appeal (even though that liability was already existing as imposition of fine under Section 138 NI Act or order for compensation under Section 357 CrPC). It is hence submitted that since Section 148 defines the scope of an already existing substantive right/liability, it is also substantive in nature, and must therefore be held to be prospectively applicable given that legislature has not made it applicable retrospectively, either expressly or by necessary implication.

  There is a stronger argument in favour of prospective application of Section 148. What seems to have missed the court's consideration is the creation of a right for the complainant. There is no ambiguity that Section 143A give rise to an earlier non-existent right to apply for interim compensation during trial for the complainant. Similarly, Section 148 also creates an earlier non-existent right for the complainant. Under Section 357(2) CrPC, the payment of compensation (and not depositing of fine – as is clear from the decision in Satyendra Kumar Mehra vs State of Jharkhand) is suspended till the appeal is decided. On the other hand, Section 148 creates a right for the complainant where she can claim the compensation during the pendency of the appeal. So whereas earlier, the complainant could not have claimed any portion of the compensation till the appeal was decided, they can now assert the claim during its pendency. While earlier there was an express bar on the court to order payment of compensation to complainant pending appeal on account of Section 357(2) CrPC, there is now discretion with the court to order payment of compensation to complainant during pendency of appeal in light of Section 148(3) NI Act.

  The non-obstante nature of Section 148 also makes it clear that the special law under that provision will take precedence over the general provision of Section 357 CrPC. It is also important here to note that the Court in Surinder Singh not only observes that order to deposit amount by the appellate court under Section 148 has to been seen as a rule rather than an exception, but also holds that order under Section 148 can be made either on an application made by the complainant or even during an application for suspension of sentence filed by the appellant under Section 389 CrPC.

  Therefore, since Section 148 creates a right for the complainant which was earlier non-existent, it is submitted that fidelity to the principles culled out in Hitendra Vishnu Thakur and followed in G.J. Raja requires that the section be held prospectively applicable.

  Before parting, attention may be brought to another fact that may be of relevance to the discussion. The Negotiable Instruments (Amendment) Act, 2015, which was the previous amendment to the NI Act before the 2018 one, was expressly made retrospectively applicable by the Parliament. There might be some weight in the submission that in this particular context, the legislature would have expressly made the whole or part of the 2018 Amendment Act retrospectively applicable, if it saw so necessary for meeting the objectives of the Amendment. This point doesn't seem to have been agitated before the court.

  (The author is a lawyer practising in New Delhi and can be reached at lakshyagupta2012@gmail.com. Views are personal)