Breaking: Section 148 Of Negotiable Instruments Act Has Retrospective Effect, Holds Supreme Court [Read Judgment]

The bench of Justice MR Shah and Justice AS Bopanna upheld a First Appellate Court order that had directed the appellants-convicts to deposit 25% of the amount of fine/compensation ordered by the Trial Court. (This First Appellate court order was later affirmed by the Punjab and Haryana High Court).

Section 148 of the NI Act, introduced vide an amendment in 2018, empowers the Appellate Court to direct the accused/appellant to 'deposit' minimum of 20% of 'fine' or 'compensation' awarded by the Trial Court.

In Surinder Singh Deswal @ Col. S.S. Deswal vs. Virender Gandhi, the issue considered by the Supreme Court bench was whether the first appellate court is justified in directing the appellants – original accused who have been convicted for the offence under Section 138 of the N.I. Act to deposit 25% of the amount of compensation/fine imposed by the learned trial Court, pending appeals challenging the order of conviction and sentence and while suspending the sentence under Section 389 of the Cr.P.C., considering Section 148 of the N.I. Act as amended?

The contention of the accused before the Apex Court was that the Section 148 shall not be applicable with respect to criminal proceedings already initiated prior to the amendment in Section 148 of the N.I. Act

Explaining the object of 2018 amendment, the bench said that that it is because of the delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings, the Parliament thought it fit to amend Section 148 of the N.I. Act . The court added that by the amendment , it cannot be said that any vested right of appeal of the accused – appellant has been taken away and/or affected. It observed:

"Therefore, considering the Statement of Objects and Reasons of the amendment in Section 148 of the N.I. Act stated hereinabove, on 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 for 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."

Appellate Court Has Power To Direct Deposit Of Minimum 20% Fine/Compensation Awarded By Trial Court

Another contention made before the bench was that, as per Section 357(2) of the Cr.P.C., no such fine is payable till the decision of the appeal and therefore the first appellate Court ought not to have passed any order directing the appellants to deposit 25% of the amount of fine/compensation, pending appeal/s. Reliance was placed on the judgment in Dilip S. Dhanukar v. Kotak Mahindra Bank. Rejecting this plea, the bench said:

"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."

Not To Direct To Deposit By The Appellate Court Is An Exception For Which Special Reasons Are To Be Assigned

Yet another contention raised in this case was based on the word 'may' used in Section 148 of the N.I. Act. The provisions states that '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". It was contended that since the word used is not "shall", the discretion is vested with the first appellate court to direct the appellant – accused to deposit such sum and the appellate court has construed it as mandatory, would be contrary to the provisions of Section 148 of the N.I. Act as amended. The bench observed:

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.

The court further observed:

"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 aforesaid is required to be construed considering the fact that as per the amended Section 148 of the N.I. Act, a minimum of 20% of the fine or compensation awarded by the trial court is directed to be deposited and that such amount is to be deposited within a period of 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the appellate court for sufficient cause shown by the appellant. Therefore, if amended Section 148 of the N.I. Act is purposively interpreted in such a manner it would serve the Objects and Reasons of not only amendment in Section 148 of the N.I. Act, but also Section 138 of the N.I. Act. Negotiable Instruments Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of the dishonoured of cheques. So as to see that due to delay tactics by the unscrupulous drawers of the dishonoured cheques due to easy filing of the appeals and obtaining stay in the proceedings, an injustice was caused to the payee of a dishonoured cheque who has to spend considerable time and resources in the court proceedings to realise the value of the cheque and having observed that such delay has compromised the sanctity of the cheque transactions, the Parliament has thought it fit to amend Section 148 of the N.I. Act. Therefore, such a purposive interpretation would be in furtherance of the Objects and Reasons of the amendment in Section 148 of the N.I. Act and also Sec 138 of the N.I. Act."

Is Section 143A Retrospective?

Recently, 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. A Special Leave Petition is pending consideration before the Supreme Court which raises the issue whether Section 143-A of NI Act, has retrospective application or not?

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