Negotiable Instruments Act, 1881: Why Section 143-A Is Prospective & Section 148 Is Retrospective?

Section 143-A was inserted in the Negotiable Instruments Act, 1881 by Amendment Act 20 of 2018 with effect from 01.09.2018, which reads as under:

'143-A. 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 years, 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 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.'

Article 20 of the Constitution of India dealing with protection in respect of conviction for offences reads as under;
"20. Protection in respect of conviction for offences;

(1) No person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence;

(2) No person shall be prosecuted and punished for the same offence more than once;

(3) No person accused of any offence shall be compelled to be a witness against himself;"

Having operation from a past time.

It is cardinal principle of construction that every statute is prima facie prospective unless it is expressly and by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair the existing burdens. Unless there are words in the statute sufficient to show intention of the legislature to affect the existing rights, it is deemed to be prospective only - 'nova constitution futuris formam imponere debet non praeteritis' - a new law ought to regulate what is to follow, not the past.

'Retrospective' is somewhat ambiguous and that good deal of confusion has been caused by the fact that it is used in more senses than one. In general however the Courts regards as retrospective any statute which operates on cases or facts coming into existence before its commencement in the sense that it affects even if for the future only the character or consequences of transactions previously entered into or of other past conduct.

Thus, a statute is not retrospective merely because it affects existing rights; nor is it retrospective merely because a part of the requisite for its action is drawn from a time and antecedents to its passing. (Vol.44 Halsbury's Laws of England, Fourth Edition, page 570 Para 921) '

Two Judge Bench of Hon'ble Supreme Court of India in "State Bank's Staff Union (Madras Circle) Vs Union of India & Ors.", (2005) 7 SCC 584, had occasion to examine the concept of retroactive and retrospective. In Paragraphs 20 and 21 of the Judgment following has been laid down:

'20. Judicial Dictionary (13th Edn.) K.J. Aiyar, Butterworth, p. 857, states that the word "retrospective" when used, with reference to an enactment may mean (i) affecting an existing contract; or (ii) reopening up of past, closed and completed transaction; or (iii) affecting accrued rights and remedies; or (iv) affecting procedure. Words and Phrases, Permanent Edn., Vol. 37¬A, PP. 224¬25, defines a "retrospective or retroactive law" as one which takes away or impairs vested or accrued rights acquired under existing laws.

Further in "Jay Mahakali Rolling Mills Vs Union of India & Ors.", 2007 (12) SCC 198, explaining the retroactive and retrospective following has been laid down:

'8. 'Retrospective' means looking backward, contemplating what is past, having reference to a statute or things existing before the statute in question. Retrospective law means a law which looks backward or contemplates the past; one, which is made to affect acts or facts occurring, or rights occurring, before it comes into force. Retroactive statute means a statute, which creates a new obligation on transactions or considerations or destroys or impairs vested rights.'

Retroactive statute

A retroactive law takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transaction or considerations already past.
The provisions of the legislation may be retroactive i. e to cover the transactions which have taken place before the enactment it cannot have retrospective effect i. e it cannot be deemed to have come into from a back date.

Crawford in his 'Crawford's Statutory Construction' observed that amendatory statutes are subject to the general principles relative to retroactive operation. Like original statutes, they will not be given retroactive construction, unless the language clearly makes such construction necessary, In other words, amendment will usually take effect only from the date of its enactment and will have no application to prior transactions, in the absence of an expressed intent or intent clearly implied to the contrary. Indeed there is a presumption that an amendment shall operate prospectively

The question as to whether "Sec 143-A of the Negotiable Instruments Act, 1881creates new disability/obligation and exposes the accused to coercive methods of recovery?" was lurking interpretation and the controversy about the retrospectivity of two provisions viz. Section 143A and 148 of the Negotiable Instruments Act, 1881 was set at rest by Hon'ble Supreme Court of India in Criminal Appeal No. 1160 of 2019 @ SLP (Crl.) No. 3342 of 2019 titled "G. J. Raja Vs Tejraj Surana".  The Bench comprising Justice Uday Umesh Lalit & Justice Vineet Saran in Criminal Appeal titled "G. J. Raja Vs Tejraj Surana" categorically held that Section 143-A of the Negotiable Instruments Act, 1881 is prospective in operation and that the provisions can be applied or invoked only in cases where the offence under Section 138 of the Act was committed after the introduction of said Section 143-A in the statute book.

A bench of Justice M. R. Shah & Justice A. S. Bopanna, on 29th May, 2019, in Criminal Appeal Nos. 914-944 of 2019 (arising out of SLP (Criminal) Nos. 4948-4975 of 2019 titled 'Surinder Singh Deswal @ Col. S. S. Deswal Vs Virender Gandhi' had 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 Negotiable Instruments Act, 1881, even in a case where the criminal complaints for the offence under Section 138 Negotiable Instruments Act, 1881 were filed prior to 2018 amendment Act i.e., prior to 01.09.2018.

In G. J Raja, 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. The Supreme Court, allowing the appeal filed through Advocate G Anandaselvam, set aside this order. In 'Surinder Singh Deswal @ Col. S. S. Deswal Vs Virender Gandhi', the Hon'ble Supreme Court of India 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.

SC Upheld Punjab & Haryana HC View 

In effect, the Supreme Court, by these two judgments, has upheld the view adopted by Justice Rajbir Sehrawat of the Punjab & Haryana High Court who had held that the Section 143-A of the Negotiable Instruments Act, 1881 has no retrospective effect whereas the Section 148 will apply to the pending appeals pending on date of enforcement of this provision. While holding thus, the judge had observed:

"At the stage of trial, the provision of Section 143-A Negotiable Instruments Act, 1881 has created a new 'obligation' against the accused, which was not contemplated by the existing law and which created a substantive liability upon him, whereas the provision of Section 148 of the Act only reiterated; and to some extent modified in favour of the appellant, the procedure of recovery already existing in the statute book."

2018 Amendment Negotiable Instruments Act, 1881

Both these provisions were introduced last year by an amendment to the Negotiable Instruments Act. Section 143-A 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, 1973. The provision further state 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 Negotiable Instruments Act, 1881, empowers the Appellate Court to direct the accused/appellant to 'deposit' minimum of 20% of 'fine' or 'compensation' awarded by the Trial Court.

Why 143-A is Prospective While 148 is Retrospective? 

The question that when these two provisions have been introduced by the same amendment, how one is retrospective and the other is not. The Hon'ble Supreme Court in Criminal Appeal titled "G. J. Raja Vs Tejraj Surana", addressed this question as under:

"We must, however, advert to a decision of Hon'ble Supreme Court in 'Surinder Singh Deswal & Ors. Vs Virender Gandhi' where Section 148 of the Act which was also introduced by the same Amendment Act 20 of 2018 from 01.09.2018 was held by this Court to be retrospective in operation. As against Section 143-A of the Act which applies at the trial stage that is even before the pronouncement of guilt or order of conviction, Section 148 of the Act applies at the appellate stage where the accused is already found guilty of the offence under Section 138 of the Act. It may be stated that there is no provision in Section 148 of the Act which is similar to Sub-Section (5) of Section 143-A of the Act. However, as a matter of fact, no such provision akin to sub-section (5) of Section 143-A was required as Sections 421 and 357 of the Code of Criminal Procedure, 1973, which apply post-conviction, are adequate to take care of such requirements. In that sense said Section 148 Negotiable Instruments Act, 1881 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 143-A of the Act. Therefore, the decision of this Court in 'Surinder Singh Deswal @ Col. S. S. Deswal Vs Virender Gandhi'  stands on a different footing."

Section 143-A imposes a liability even before conviction The Court also observed that, prior to insertion of Section 143-A in the Act, there was no provision on the statute book where-under even before the pronouncement of the guilt of an accused, or even before his conviction for the offence in question, he could be made to pay or deposit interim compensation.

"The imposition and consequential recovery of fine or compensation either through the modality of Section 421 of the Code or Section 357 of the Code of Criminal Procedure, 1973 could also arise only after the person was found guilty of an offence. That was the status of law which was sought to be changed by the introduction of Section 143-A in the Act. It now imposes a that even before the pronouncement of his guilt or order of conviction, the accused may, with the aid of State machinery for recovery of the money as arrears of land revenue, be forced to pay interim compensation. The person would, therefore, be subjected to a new disability or obligation."

Sec 143-A Creates New Disability/Obligation And Exposes Accused To Coercive Methods Of Recovery

The bench also referred to the following principles enunciated in "Hitendra Vishnu Thakur vs. the State of Maharashtra"; [1994 AIR 2623, 1994 SCC (4) 602]

# A procedural statute should not generally speak 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.

# 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.

Applying this to provisions of Section 143-A, the Bench said:

"The provisions contained in Section 143-A have two dimensions. First, the Section creates a liability in that an accused can be ordered to pay over upto 20% of the cheque amount to the complainant. Such an order can be passed while the complaint is not yet adjudicated upon and the guilt of the accused has not yet been determined. Secondly, it makes available the machinery for recovery, as if the interim compensation were arrears of land revenue. Thus, it not only creates a new disability or an obligation but also exposes the accused to coercive methods of recovery of such interim compensation through the machinery of the State as if the interim compensation represented arrears of land revenue."