The Negotiable Instruments Act, 1881 came into being as an Act to define and
amend the law relating to promissory notes, bill of exchange and cheques. The
main object behind Negotiable Instruments Act, 1881 was to legalise the system
under which Negotiable Instruments pass from one hand to other in negotiations
like ordinary goods. Mostly the English law is followed in case of the
Negotiable Instruments Act, 1881except in the area where it was required in
Indian context to change the applicability.
It has also been said that the law
of Negotiable Instruments is not the law of a single country but of the whole of
the commercial world and except for certain differences depending on
peculiarities existing in each country the general rules of the law is on the
same pattern in all the countries.
The Negotiable Instruments Act, 1881in its more than 135 years of existence has
been subjected to as many as 27 amendments and the most relevant one in present
context being The Banking, Public Financial Institutions and Negotiable
Instrument Laws (Amending) Act, 1988 and the subsequent the Negotiable
Instruments (Amendment and Miscellaneous Provisions) Act, 2002 and the last one
being Negotiable Instruments (Amendment) Act, 2015 with retrospective effect
Out of the three specific type of instruments referred in the Negotiable
Instruments Act namely the promissory note bill of exchange and cheques it was
only the Cheques which became one of the most common instruments for trade and
commerce because of certainty and convenience.
Negotiable Instruments (Amendment) Bill of 2017
As per the Statement of Objects and Reasons of the Bill of 2017, the Negotiable
Instruments Act of 1881 is proposed to be amended 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. Further, it is expected
that the proposed amendments will strengthen the credibility of cheques and help
trade and commerce in general by allowing lending institutions, including banks,
to continue to extend financing to the productive sectors of the economy.
The Amendment Bill inserts a new Section 143-A in the Act of 1881, making
provision for the payment by the drawer of the dishonoured cheque to the payee
thereof of interim compensation of an amount not exceeding 20% of the value of
the instrument during the pendency of proceedings for the offence of dishonour
under Section 138 of the Act (a) in a summary trial or a summons case, where the
drawer pleads not guilty to the accusation made in the complaint; and (b) in any
other case, upon framing of charge.
The said interim compensation has to be paid within a period of 60 days from the
date on which the order to that effect is made. The interim compensation so
recovered shall be deductible from the amount of fine imposed under Section 138
by the Magistrate upon conviction of the drawer or any compensation directed to
be paid under Section 357 of Code of Criminal Procedure, 1973. Section 138 of
the Act of 1881 provides for imposition of a sentence of imprisonment not
exceeding a period of 2 years or fine extending to twice the amount of the
dishonoured cheque or both.
The said amount of interim compensation may be
recovered in the manner provided under Section 421 of Cr. P. C - by way of
attachment and sale of any movable property of the drawer or a warrant to the
Collector of the concerned district to recover the same as arrears of land
revenue from the movable or immovable property of the drawer.
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 year.
Indian Courts are riddled with the humongous problem of pending cases. As per
the 213th Report of the Law Commission almost 20% of the pending litigation
pertains only to cheque dishonor disputes under Section 138 of the Negotiable
Instruments Act, 1881.
The prosecution and recovery mechanism under Sections 138 to 142 of the Act was
introduced by the 1988 Amendment with the objective of deterrence for enhancing
credibility of cheque issuances in business transactions. The intent of the
Legislature was to deter dishonest Drawers with the consequences of criminal
trial if they were to issue cheques with the intention to defraud.
the complex judicial procedures have been manipulated by unscrupulous Drawers to
their advantage which has severely marred this objective, although, apparently
there has been constant judicial effort to iron out the irregularities as
evident from various Judgements of the Honble Supreme Court of India.
In the wake of current scenario, The Negotiable Instruments (Amendment) Act,
2018 passed by both the Houses (Lok Sabha on July 23, 2018; Rajya Sabha on July
26, 2018; and notified on August 02, 2018) has come as a breather for the
aggrieved Drawees. Non-payment because of cheque dishonor contribute majorly
towards business inconsistencies leading not only to an cash flow, but also
chain of inconveniences/incalculable losses forced upon them involuntarily.
In an important Judgment passed by Honble Supreme Court of India in Criminal
Appeal No. 1160 of 2019 @ SLP (Crl.) No. 3342 of 2019 titled G. J. Raja Vs Tejraj Surana
Held that Section 143-A of the Negotiable Instruments Act,
1881 to be prospective in operation and that the provisions of said Section
143-A 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
Going by the facts as laid down in Criminal Appeal No. 1160 of 2019 @ SLP (Crl.)
No. 3342 of 2019 titled G. J. Raja Vs Tejraj Surana
, a Complaint under Section
138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the
Act) being C. C.No.7171 of 2018 is presently pending against the Appellant
before the IInd Fast Track Court - Metropolitan Magistrate, Egmore, Chennai.
According to the complaint, two cheques issued by the Appellant in the sums of
Rs.20,00,000/- and Rs.15,00,000/- in favour of the Respondent-Complainant were
dishonoured on account of insufficiency of funds. The Complaint was lodged on
04.11.2016. With effect from 01.09.2018, Section 143-A of the Negotiable
Instruments Act, 1881 was inserted in the Act by Amendment 20 of 2018.
Soon thereafter, the Trial Court ordered that 20% of the cheque amount be made
over by the Appellant to the Respondent as interim compensation in accordance
with the provisions of Section 143-A of the Act. Thus, the Appellant was
directed to pay to the Respondent a sum of Rs.7,00,000/-. The Appellant being
aggrieved, filed Criminal O. P. No. 3406 of 2019 before the High Court of
Judicature at Madras. By its order dated 08.02.2019, the High Court found no
illegality or infirmity in the order awarding interim compensation under Section
143-A of the Act but reduced the percentage from 20% of the cheque amount to 15%
of the cheque amount.
The order of the High Court of Judicature at Madras was put to challenge in
Criminal Appeal No. 1160 of 2019 @ SLP (Crl.) No. 3342 of 2019 titled G. J.
Raja Vs Tejraj Surana
, wherein, the Honble Supreme Court while issuing notice
the Appellant directed him to deposit the sum so ordered by the High Court in
the Trial Court. It was further directed that upon deposit, Court should invest
the money in Fixed Deposit and that the money would not be made over to the
Respondent till further orders.
Since the Respondent, despite having been served
with the notice, had not entered appearance, the Honble Supreme Court by its
Order dated 01.07.2019 requested Mr. Vinay Navare, Learned Senior Advocate to
assist the Honble Supreme Court as Amicus Curiae.
Is Section 143-A of the Negotiable Instruments Act, 1881 Retrospective?
Retrospective laws are those in which the date of commencement is earlier than
the enactment or which validates some invalid law. Corpus Juris defines it thus;
Literally defined, a retrospective law is a law that looks backward or on things
that are past; and a retroactive law is one that acts on things that are past.
In common use, as applied to statutes, the two words are synonymous, and in this
connection may be broadly defined as having reference to state of things
existing before the act in question. A retrospective law in legal sense is one
that takes away or impairs vested rights acquired under the existing laws or
creates a new obligation, imposes a new duty or attaches a new disability in
respect to transactions or considerations already past.
A reading of Section 143-A shows:
(i) interim compensation must not exceed 20% of
the amount of the cheque;
(ii) it must be paid within the time stipulated under
(iii) if the accused is acquitted, the complainant shall be
directed to pay to the accused the amount of interim compensation with interest
at the bank rate;
(iv) the interim compensation payable under said Section can
be recovered as if it were a fine under Section 421 of the Code of Criminal
Procedure, 1973 (‘the Code’, for short); and (v) if the accused were to be
convicted, the amount of fine to be imposed under Section 138 of the Act or the
amount of compensation to be awarded under Section 357 of the Code would stand
reduced by the amount paid or recovered as interim compensation.
Since Sub-Section (5) of Section 143-A stipulates that the interim compensation
could be recovered as if it were a fine under Section 421 of the Code,
said Section 421 also needs to be considered at this stage.
Section 421 appears in Chapter XXXII of the Code which Chapter deals with Execution, Suspension,
Remission and Commutation of Sentences
. By very context and the language of the
provisions contained in the Chapter, they apply in cases where the guilt of an
accused is determined and he is convicted of an offence punishable with sentence
and/or fine. Part-C of the Chapter deals with ‘Levy of Fine’ and Section 421
appearing in said Part-C is to the following effect:
421. Warrant for levy of fine.-
(1) When an offender has been sentenced to pay a fine, the Court passing the
sentence may take action for the recovery of the fine in either or both of the
following ways, that is to say, it may
(a) issue a warrant for the levy of the amount by attachment and sale of any
movable property belonging to the offender;
(b) issue a warrant to the Collector of the district, authorizing him to realize
the amount as arrears of land revenue from the movable or immovable property, or
both, of the defaulter.
Provided that, if the sentence directs that in default of payment of the fine,
the offender shall be imprisoned, and if such offender has undergone the whole
of such imprisonment in default, no Court shall issue such warrant unless, for
special reasons to be recorded in writing, it considers it necessary so to do,
or unless it
has made an order for the payment of expenses or compensation out of the fine
under Section 357 (2) of the Code of Criminal Procedure, 1973.
Government may make rules regulating the manner in which warrants under clause
(a) of sub- section (1) are to be executed, and for the summary determination of
any claims made by any person other than the offender in respect of any property
attached in execution of such warrant.
(3) Where the Court issues a warrant to the Collector under clause (b) of
sub-section (1), the Collector shall realise the amount in accordance with the
law relating to recovery of arrears of land revenue, as if such warrant were a
certificate issued under such law: Provided that no such warrant shall be
executed by the arrest or detention in prison of the offender.
According to Section 421 of the Code, fine could be recovered either by warrant
of attachment or sale of movable property belonging to the offender or by
issuance of warrant to the Collector authorising him to realise the amount as
arrears of land revenue from the movable or immovable property or both of the
It is thus clear that in case an accused, against whom an order to pay interim
compensation under Section 143-A of the Act is passed, fails or is unable to pay
the amount of interim compensation, the process under Section 421 can be taken
resort to which may inter alia result in coercive action of recovery of the
amount of interim compensation as if the amount represented the arrears of land
revenue. The extent and rigor of the
procedure prescribed for such recovery may vary from State to State but
invariably, such procedure may visit the person concerned with coercive methods.
For instance, by virtue of Section 183 of the Maharashtra Land Revenue Code,
1966, in case there be a default in payment of land revenue, the person
concerned could be arrested and detained in custody for 10 days in the office of
the Collector or of a Tehsildar unless the arrears of revenue which were due,
were paid along with the penalty or interest and the cost of arrest and of the
notice of demand as also the cost of his subsistence during detention.
Since the Complaint was lodged in the year 2016 that is to say, the act
constituting an offence had occurred by 2016 whereas, the concerned provision
viz. Section 143-A of the Act was inserted in the statute book with effect from
01.09.2018. The question that arises therefore is whether Section 143-A of the
Act is retrospective in operation and can be invoked in cases where the offences
punishable under Section 138 of the Act were committed much prior to the
introduction of Section 143-A.
The Honble Supreme Court while dealing with issue regarding applicability of
said Section 143-A to offences under Section 138 of the Negotiable Instruments
Act, 1881 committed before the insertion of said Section 143-A held as under;
15. While considering general principles concerning ‘retrospectivity of
legislation’ in the context of Section 158-EE inserted in the Income Tax Act,
1961, it was observed by this Court in Commissioner of Income Tax (Central) - I,
New Delhi Vs Vatika Township Private Limited
28. 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. The idea behind
the rule is that a current law should govern current activities. Law passed
today cannot apply to the events of the past.
If we do something today, we do it
keeping in view the law of today and in force and not tomorrow’s backward
adjustment of it. Our belief in the nature of the law is founded on the bedrock
that every human being is entitled to arrange his affairs by relying on the
existing law and should not find that his plans have been retrospectively upset.
This principle of law is known as lex prospicit non respicit: law looks forward
not backward. As was observed in Phillips v. Eyre
2, a retrospective
legislation is contrary to the general principle that legislation by which the
conduct of mankind is to be regulated when introduced for the first time to deal
with future acts ought not to change the character of past transactions carried
on upon the faith of the then existing law.
16. Similarly, while considering the effect of modified application of the
provisions of the Code, as a result of Section 20 (4)(bb) of the Terrorist 1
(2015) 1 SCC 12 (1870) LR 6 QB 1 and Disruptive Activities (Prevention) Act,
1987, whereunder the period for filing challan or charge-sheet could get
extended, this Court considered the issue about the retrospective operation of
the concerned provisions in Hitender Vishnu Thakur & Ors. Vs State of
Maharashtra & Ors
. as under:
26. The Designated Court has held that the amendment would operate
retrospectively and would apply to the pending cases in which investigation was
not complete on the date on which the Amendment came into force and the challan
had not till then been filed in the court. From the law settled by this Court in
various cases the illustrative though not exhaustive principles which emerge
with regard to the ambit and scope of an Amending Act and its retrospective
operation may be culled out as follows:
(i) A statute which affects substantive rights is presumed to be prospective in
operation unless made retrospective, either expressly or by necessary
intendment, whereas a statute which merely affects procedure, unless such a
construction is textually impossible, is presumed to be retrospective in its
application, should not be given an extended meaning and should be strictly
confined to its clearly defined limits.
(ii) Law relating to forum and limitation is procedural in nature, whereas law
relating to right of action and right of appeal even though remedial is
substantive in nature.
(iii) Every litigant has a vested right in substantive law but no such right
exists in procedural law. [3 (1994) 4 SCC 602]
(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
(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.
17. The fourth and the fifth principle as culled out by this Court in Hitendra
Vishnu Thakur are apposite to the present fact situation.
The provisions contained in Section 143-A of the Negotiable Instruments Act,
1881 have two dimensions.
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.
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.
The Honble Supreme Court of India adverting to the arguments that coercive
methods could also, as is evident from provision like Section 183 of the
Maharashtra Land Revenue Code, in some cases result in arrest and detention of
the accused observed as under;
19. We must at this stage, refer to a decision of this Court in Employees’ State
Insurance Corporation Vs Dwarka Nath Bhargwa where provisions of Section
45-B where provisions of Section 45-B, which was inserted in Employees State
Insurance Act, 1948 with effect from 28.01.1968 was held to be procedural and
that it could have retrospective application. Said Section 45-B is as under:
45B. Recovery of contributions:
Any contribution payable under this Act
may be recovered as an arrear of land revenue. The issue was whether the
modality of recovery so prescribed in said Section 45-B could be invoked in
respect of amounts which had become payable on 27.01.1967 and 24.01.1968, i.e.
before said Section 45-B was inserted in the statute book. While holding that
the arrears could be recovered as arrears of land revenue, it was observed, It
is not in dispute and cannot be disputed that the contributions in question had
remained payable all throughout and were not paid by the respondent.
20. It must be stated that prior to the insertion of Section 143-A in the Act
there was no provision on the statute book whereunder even before the 4 (1997) 7
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 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
It now imposes a liability 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. The situation is thus completely different from the one which arose
for consideration in Employees’ State Insurance Corporation4 case.
21. Though arising in somewhat different context, proviso to Section 142
(b) which was inserted in the Act by Amendment Act 55 of 2002, under which
cognizance could now be taken even in respect of a complaint filed beyond the
period prescribed under Section 142 (b) of the Act. was held to be prospective
by this Court in Anil Kumar Goel Vs Kishan Chand Kaura
, it observed;
There is nothing in the amendment made to Section 142 (b) by Act 55 of 2002 that
the same was intended to operate retrospectively. In fact that was not even the
stand of the respondent. Obviously, when the complaint was filed on 28-11- 1998,
the Respondent could not have foreseen that in future any amendment providing
for extending the period of limitation on sufficient cause being shown would be
22. In our view, the applicability of Section 143-A of the Act must, therefore,
be held to be prospective in nature and confined to cases where offences were
committed after the introduction of Section 143-A, in order to force an accused
to pay such interim compensation.
The Honble Supreme Court in Surinder Singh Deswal & Ors. Vs Virender Gandhi
where Section 148 of the Negotiable Instruments Act, 1881 which was also
introduced by the same Amendment Act 20 of 2018 from 01.09.2018 was held by
Honble Supreme Court to be retrospective in operation. As against Section 148 of
the Negotiable Instruments Act, 1881 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 Section 421 and 357 of the Code, which apply
post-conviction, are adequate to take care of such requirements. In that sense
said 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 143-A of the Act. Therefore, the decision of Honble Supreme
Court in Surinder Singh Deswal & Ors. Vs Virender Gandhi,
stands on a different
Dinesh Singh Chauhan, Advocate
J&K High Court of Judicature, Jammu.
Email: [email protected]
, [email protected]