Section 143A NI Act On Interim Compensation Has No Retrospective Application : SC

Settling a confusion in prosecution of cheque bounce cases, the Supreme Court on Tuesday held that Section 143A of the Negotiable Instruments Act on payment of interim compensation to the complainant during the pendency of the case has no retrospective application.

This means that Section 143A will apply to only those complaints filed after the 2018 amendment to the NI Act which inserted the provision.

The bench comprising Justices Uday Umesh Lalit and Vineet Saran pronounced the order in the case GJ Raja vs. Tejraj Surana against a Madras High Court order on this issue. The bench has reserved the same for judgment.

In this case, the Fast Track Court-II, Metropolitan Magistrate, Egmore, Chennai had directed the accused to pay the 20% of the cheques amount as interim compensation payable to the de-facto complainant. The issue of retrospectivity is not seen addressed in the High Court order that upheld the Magistrate's direction. However, the High Court partly upheld the order by modifying interim compensation to 15% of each cheque amounts to the complainant.

2018 Amendment

This provision, which was introduced last year by an amendment, gives power to the Trial Court to direct the accused to 'pay' an interim compensation which cannot be more than 20% of the 'cheque amount'. The interim compensation has to be paid within a period of sixty days of the order. It can be recovered in the manner of recovery of fine as provided in Section 421 of the Code of Criminal Procedure. The provision further states that the interim compensation so received has to be returned by the complainant along with interest at bank rates as prescribed by the Reserve Bank of India, if the accused is acquitted after trial.

Section 148 of the NI Act, which was introduced by the same amendment, empowers the Appellate Court to direct the accused/appellant to 'deposit' minimum of 20% of 'fine' or 'compensation' awarded by the Trial Court. Recently, the Supreme Court held that Section 148 of the Negotiable Instruments 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 for the offence under Section 138 of the N.I. Act were filed prior to 2018 amendment Act i.e., prior to 01.09.2018.

High Courts' View

The Punjab and Haryana High Court had held that the Section 143A of the Negotiable Instruments Act has no retrospective effect whereas the Section 148 will apply to the pending appeals pending on date of enforcement of this provision. The court held thus, because, according to it, Section 143-A of the Act has created a new 'obligation' against the accused, which was not contemplated by the existing law and which created a substantive liability upon him. But, the Section 148 of the Act only reiterated; and to some extent modified in favour of the accused, the procedure of recovery already existing in the statute book.

The Allahabad High Court has held that the amendment will be applicable even to the proceeding pending prior to the date of incorporation of the amendment as Section 143 (A) is of procedural nature and not of substantive nature. The Bombay High Court, in Ajay Vinodchandra Shah V/s State of Maharashtra, had rejected the contention that it is to be made prospectively applicable to the cases only which are filed after 1.9.2018.. The Supreme Court had approvingly referred to the observation made in this judgment of the Bombay High Court regarding retrospective applicability of Section 148 of the Act.

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