(This is a guest post by Kratika Indurkhya)
Background
In an era where credit transactions are not only convenient but also the need of the hour, the Supreme Court has given a judgment detrimental to the interests of lending institutions. In July 2019, the Supreme Court gave a decision in G.J. Raja v. Tejraj Surana [2019 SCC OnLine SC 989] holding that Section 143A of the Negotiable Instruments (Amendment) Act, 2018 [‘Amendment Act, 2018’] is only prospectively applicable. The case was lodged in the year 2016 and the Amendment Act came into force on 1st September, 2018. This judgment has not been in vogue, albeit decided recently by the Supreme Court after a lot of skepticism and divergent views of different High Courts of the country on this issue. Section 148 and Section 143A, the only sections of the Amendment Act, 2018 have been dealt quite differently, hence creating an imbroglio situation. Whereas the High Court of Allahabad [Application u/s 482 No. 11055 of 2019, Date of Decision -11.04.2019] held that Section 143A would have a retrospective effect, the High Courts of Punjab & Haryana [2019 SCC OnLine P&H 747], Madras [2019 SCC OnLine Mad 4091] and Bombay [2019 SCC OnLine Bom 436] were at consensus and held that although Section 148A is retrospective, Section 143A will be prospective. It was the Madras High Court judgment which was taken in appeal to the Apex Court, challenging the prospective application of the section.
Statutory Context and the SC Decision
The case made an attempt to differentiate itself from Surinder Singh Deswal v. Virender Gandhi [(2019) 11 SCC 341], which dealt with the same question about retrospective effect with respect to Section 148 of the Amendment Act, 2018. Section 148 states that ‘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’.
Prior to the 2018 amendment, the imposition and consequential recovery of fine or compensation either through the modality of Section 421 or Section 357 of CrPC could arise only after the person was found guilty of an offence. This position of law was sought to be changed by introducing Section 143A. Section 143A states that ‘if the Trial Court is trying an offence under Section 138 of the Negotiable Instrument Act, 1881, interim compensation, not exceeding 20% of the cheque amount may be given’. Further, the interim compensation can be recovered by mode of recovery mentioned under Sections 421 or 357 of Code of Criminal Procedure, 1973 [‘CrPC’].
The Supreme Court in the case at hand held that since fine and compensation under Section 421 and Section 357 of the CrPC 1973, respectively, are for post-conviction, and the compensation in the present case is interim compensation, they create a new obligation and hence would be prospective. Precisely, the Supreme Court decided that since Section 143A not only changes the procedure but also creates new rights and liabilities, it shall be construed to be prospective in operation. While differentiating from Section 148 of the Amendment Act, 2018 it held that since Section 148 was to be applied post-conviction, it "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."
Analysis
The Supreme Court has held that since under Section 148 a convict goes to appeal and is not merely an accused, Section 421 and 357 of CrPC 1973, i.e., the existing legal machinery is enough and no new liability would be created. Further, it held that since Section 143A is for the trial stage, there is no applicability of Section 421 and 357 and hence the said section exposes the accused to a new obligation.
In my opinion, there are two major problems with this differentiation which requires us to revisit the CrPC. Under the head of ‘warrant of levy of fine’, Section 421 states that "the Court passing the sentence may take action for the recovery of the fine …" [emphasis supplied]. This means that the section is limited to the Court passing the sentence and does not apply to the Appellate Court. The same reason flows for Section 357 which states that "When a Court imposes a sentence of fine or a sentence … the Court may, when passing judgment" [emphasis supplied]. Hence it is incorrect to consider Sections 421 and 357 as being applicable at the appellate level.
Further, the only reason given for the retrospective application of amended Section 148 was a purposive interpretation of the clause. Towards this, the Statement of Objects and Reasons was read within the section, which says:
"[B]ecause of delay tactics of unscrupulous drawers of dishonoured cheques... compromise the sanctity of cheque transactions. With a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonoured cheques and to discourage frivolous and unnecessary litigation which would save time and money."
As relied upon in case at hand, in Vatika Township Pvt Ltd [2014 SCC OnLine SC 712], it was held that “of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.” Since the reason for holding Section 143A prospective was that it creates a substantive and not a purely procedural right, the Court ought to have at least considered the Objects and Reasons which confirms that the legislative intent was to render Section 143A retrospectively applicable.
Lastly, in overlooking and blurring of the differentiation between civil and criminal remedies is where I argue that the Court has gravely erred. It is undoubted that Section 138 states the offence for which the punishment is given in Section 142 of the Negotiable Instrument Act, 1881, but the point to be considered here is that Section 143A (which again is for offences committed given under Section 138) provides for a civil remedy. On this issue, the Supreme Court in R. Vijayan v. Baby and Anr [(2012) 1 SCC 260 ] observed that :
“Though a complaint under section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount, (which strictly speaking, has to be enforced by a civil suit), in practice once the criminal complaint is lodged under section 138 of the Act….It provides a single forum and single proceeding, for enforcement of criminal liability (for dishonouring the cheque) and for enforcement of the civil liability (for realization of the cheque amount) thereby obviating the need for the creditor to move two different fora for relief.”
This excerpt clears that the obligation is of civil nature and not criminal as the interim compensation, which is deducted from the final cheque amount to be recovered which is a civil obligation.
But why does this distinction between civil and criminal matter here? It is because Article 20(1) of the Indian Constitution only prohibits the retrospective imposition of criminal liability and not civil. In my opinion, interim compensation is a civil remedy as it is neither an ‘offence’ nor a ‘penalty’ which is a prerequisite to fall under the criminal legal system and to be barred from retrospective application.
The expression ‘offence’ is not defined anywhere in the Constitution. Article 367 of the Constitution says that unless the context otherwise provides for words which are not defined in the Constitution, the meaning assigned in the General Clauses Act, 1897 may be given. Under Section 3 (38) of the General Clauses Act, the term means "an act or omission punishable any law for the time being in force." Further, when a statute imposes a civil obligation, the failure to discharge it is not an offence unless the statute expressly makes it so. Hence, in Hathising Mfg Co. v. Union of India [(1960) 3 SCR 528] it was held that the insertion of Sec. 25FFF(1) in the Industrial Disputes Act, 1947, with retrospective effect, does not constitute a violation of Article 20(1) because the failure to pay the compensation required to be paid by the section is not made an offence though the money may be recovered by a coercive process, and the person may be imprisoned for failure to pay, under the revenue law for coercive recovery of the amount. Even Section 143A of the Amendment Act, 2018 does not make the failure to pay this interim compensation an offence. Moreover, its clause (5) is restricted to equating the modality of recovery of compensation with that of fine and does not intend to replace the civil remedy with criminal. Further, ‘fine’ means ‘to sentence a person convicted of an offence to pay a penalty in money’, and hence cannot be equated with interim compensation as the latter is awarded during the pendency of the proceedings and not when one is convicted.
It must also be noted that in Depot Manager, A.P.S.R.T.Corpn v. Mohd. Yusuf Miya [AIR 1997 SC 2232] it was held that, “offence generally implies infringement of public duty, as distinguished from mere private rights.” Even though dishonour of cheque is a criminal liability (public wrong), interim compensation is a percentage of the cheque amount to be recovered which is strictly a private right.
Article 20(1) avails only against punishment for an act which is treated as an offence, which when done is not an offence. As per the case of Jawala Ram v. State of Pepsu [AIR 1962 SC 1246], unless there is a law forbidding the doing or the omission to do something, no question of ‘punishment’ comes. Hence in this case, although the mode of recovery is ‘coercive’, non-payment of the interim compensation is still not an offence and being a civil remedy, can be retrospective. Hence, the first condition of interim compensation being an offence is not attracted.
Although there is no argument of greater amount being imposed post the Amendment Act, 2018, the author would like to clarify that interim compensation does not fall under the definition of ‘penalty’ as required in the second part of Article 20(1). In Sova Ray v. Gostha Gopal Dey [(1988) 2 SCC 134], the expression ‘penalty’ was held to mean ‘an elastic term with many different shades of meaning but it always involves an idea of punishment.’ Further, in Shiv Dutt Rai Fateh Chand [(1983) 3 SCC 529], the Apex Court held that this expression is used in the narrow sense as meaning a payment which has to be made or a deprivation of liberty which has to be suffered as a consequence of a finding that the person accused of a crime is guilty of the charge. Since interim compensation does not involve the idea of ‘punishment’ as it is awarded during the pendency of the proceedings, it does not fall under this definition. Hence, the latter part of Article 20(1) is not attracted as well. Even if there was any enhancement of the amount, in Mukandi Ram v. Executive Engineer [1956 SCC OnLine Pepsu 3], it was held that since the levy of an enhanced rate for unauthorised use of water created only a civil liability, a criminal prosecution for such unauthorised use is not barred under Article 20(1).
In conclusion, missing this question and the differentiation between criminal and civil remedies has led to an erroneous judgment by the Supreme Court and a grave injustice to creditors. Additionally, this judgment, while realising that Section 143A is a procedural law affecting the substantive rights of an individual, completely ignored the intention of the legislature and thus failed to spot that the true purpose was to save creditors and lending institutions from pending litigation as part of unscrupulous activities of debtors. Rather than a judgment which protects the lending institution and others, we have a judgment which does not help status quo.
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