This article has been authored by Janvi Badiyani. The article explores Sections 143 and 143A of the Negotiable Instrument Act, 1881. It aims to clarify these provisions, their significance and difference, while also examining key judgments that have shaped their interpretation. The article also discusses the necessity of summary trials under the Negotiable Instrument Act, 1881, emphasising their role in ensuring swift and efficient resolution of cheque dishonour cases.
Introduction
The Negotiable Instrument Act, 1881 (hereinafter referred to as âthe Actâ), is a foundational piece of legislation in India that governs the use and regulation of Negotiable Instruments such as promissory notes, bills of exchange, and cheques passed in order to establish a unified legal framework, the Act makes sure that these instruments are standardised and enforceable by law, which enables financial transactions to go smoothly.
Over the years, the Act has undergone numerous amendments to address the evolving needs of commerce and to incorporate technological advancements in banking and finance.
Section 13 of the Act defines a âNegotiable Instrumentâ as a written document guaranteeing the payment of a specific amount of money to the bearer or to the order of a specific person. A key feature of negotiable instruments is their transferability, enabling the holder to claim the specified amount from another party. This transferability is a key feature that makes negotiable instruments an indispensable tool in both domestic and international trade.
Thus, a signed agreement that guarantees payment to a specified individual or assignee is referred to as a negotiable instrument. It’s just a formalisation of an âIOUâ, which stands for âI OWE YOUâ. IOUs are formal contracts that acknowledge debt. They are frequently seen as informal rather than legally binding. IOUs are still in use today and in corporate transactions, they might be followed by a formal agreement that binds the parties to the conditions of the debt.
The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, (hereinafter referred to as âAmendment Act, 2002â) introduced Sections 143 to 147 to address the prevalent issues in cheque dishonour cases, a significant concern in business operations. These Sections were added to streamline the court process, reduce the backlog of cases, and enhance penalties for violations. This amendment aimed to preserve the integrity of the Act and ensure they served their intended purpose effectively.
The Act also outlines the penalties for dishonour of these instruments, thereby protecting the interests of the payee and ensuring trust in financial transactions. The amendment has significantly strengthened the legal framework by addressing issues such as cheque dishonour and expediting the legal process. Thus, the Act not only underpins the operational dynamics of modern commerce but also enhances the credibility and efficiency of financial transactions in India.
Overall, the Act continues to be a vital element of India’s financial legal framework, enhancing trust and efficiency in business transactions. The implementation of Section 143 (power of the court to try cases summarily) has been particularly impactful, providing a mechanism for the swift resolution of cheque dishonour cases and effectively meeting contemporary economic challenges.
Letâs delve into these provisions in detail:
Section 143 of Negotiable Instrument Act
Section 143 provides that the cheque dishonour cases under the Act must be tried in a special court. These cases should be heard by either a Judicial Magistrate of the first class or a Metropolitan Magistrate. These courts are designed to handle these cases more efficiently. The trial should follow a quicker process (summary trial) as outlined in Sections 283 to 288 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (hereinafter referred to as BNSS). If the Magistrate finds the case suitable for summary trial, they can impose a maximum sentence of up to one year in jail or a fine greater than Rs 5000. However, if during the trial the Magistrate feels that the case might require a longer sentence or that a summary trial is not appropriate, they can switch to a regular trial after informing all parties and taking necessary steps to ensure fairness.
Further, it talks about the continuation of the trial, which should continue day-to-day until it is completed, ensuring minimal delays. And if an adjournment (postponement) is necessary, the Magistrate must record the reason in writing. The law strongly states that these trials should be conducted as quickly as possible, with the goal of completing them within six months from the date the complaint was filed.
The Amendment Act, 2002 introduced Section 143 to the Act with the principal objective of accelerating the judicial process for cases of cheque dishonour under Section 138 (Dishonour of a cheque for insufficiency of funds in the account). Before this change, there was insufficient legal framework to handle matters involving cheque dishonour, which resulted in drawn-out and ineffective court proceedings. The incapacity to follow a streamlined procedure resulted in court disputes continuing for years, which damaged the Actâs efficacy and the legitimacy of cheques as a trustworthy form of payment. The protracted delay in reaching a decision resulted in financial and psychological distress for the complainant, as well as an increased workload for the judiciary.
In order to particularly address these deficiencies, Section 143 was added which offers a fast-track option for the trial cases involving cheque dishonour. It requires that cheque dishonour cases be handled summarily, following the guidelines set forth in Sections 283 to 288 of BNSS for summary trials. The Judicial Magistrate or the Magistrate of the First Class will oversee these trials in accordance with Section 143, which ensures that the procedures are conducted with the appropriate court.
History behind Section 143 of Negotiable Instrument Act
Letâs understand how the provisions related to summary trial in the Negotiable Instruments Act were evolved:
Negotiable Instrument Act (1881)
In order to establish a legal framework for the proceeding of negotiable instruments, including promissory notes, bills of exchange, and cheques, the Negotiable Instrument Act of 1881 was passed. Its main goal was to ensure consistency and dependability in commercial operations by standardising the legal procedures related to these financial transactions. The purpose of the Act was to provide clear guidelines for the transfer and enforcement of these instruments in order to allow seamless financial activities.
Banking, Public Financial Institutions and Negotiable Instrument Laws (Amendment) Act, 1988.
The 1988 Amendment was introduced in response to increased concerns about cheque dishonour. Despite the original framework, cases of cheque dishonour continued to rise leading to financial disputes and inefficiencies in the judicial system. The 1988 Amendment aimed to address this by strengthening the laws, making it easier for affected parties to receive compensation, and reducing the overall frequency of such incidents. The purpose of these amendments was to improve the efficiency of the Act in handling financial conflicts and offering prompt remedies.
Challenges and High Courtâs interpretations
Following the 1988 amendments, different High Courts began interpreting the Actâs provisions in varying ways. This inconsistency created confusion and complicated legal landscape for cheque dishonour cases. The lack of uniformity in judicial interpretations led to difficulties in enforcing the Act and hindered its effectiveness in resolving disputes efficiently. Businesses and individuals faced uncertainty regarding the application of the law.
The need for further reforms in cheque dishonour cases has been highlighted through key judicial decisions. In Kusum Ingots and Alloys Ltd. vs. Pennar Peterson Securities Ltd. And Ors. (1999) the Delhi High Court ruled that a cheque dishonoured due to a âstop paymentâ instruction by the drawer would still attract criminal liability under Section 138 of the Act. This ruling highlighted the lawâs purpose of making sure that payment obligations through cheques cannot be easily avoided.
The Supreme Court, in M/S Modi Cements Ltd. vs. Kuchli Kumar Nandi(1998), further clarified this position by resolving conflicting interpretations from various High Courts. It held that even a âstop paymentâ instruction could constitute an offence under Section 138. This decision reinforced the purpose of the Act by ensuring that drawers could not evade liability merely by issuing stop payment instructions after issuing a cheque.
In Shri Vinod Tanna and Ars. vs. Shri Zaher Siddiqui and Ors. (2002), the Bombay High Court emphasised the critical importance of following procedural mandates under the Act, particularly the timely issuance of statutory notices. The court stressed that strict adherence to the prescribed time frame is essential for the effective enforcement of Section 138.
Further reforms are also necessary when considering Section 143 of the Act, which deals with the summary trial of cases related to cheque dishonour. Although intended to expedite the process, delays in the judiciary often undermine the efficiency of such trials. Amendments aimed at enhancing procedural efficiency and reducing judicial backlog are crucial for ensuring that justice in cheque dishonour cases is swift and effective. Strengthening the mechanisms for enforcing Section 138 alongside reforming the trial process under Section 143 will contribute significantly to addressing the loopholes and delays currently present in the system.
Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002
The Amendment Act, 2002 was passed as a reaction to these issues. This extensive modification aimed to close the loopholes found in earlier clauses and expedite the handling of cases involving cheque dishonour. The addition of Section 143 was one of the main characteristics of this amendment. In an effort to ensure a speedy and effective resolution of instances involving cheque dishonour.
Section 143 was created to require summary trials in these types of matters. It mandated ongoing daily hearings and set a six month deadline for completing trials. Section 143 also gave judges the authority to give particular punishments, like fines and jail terms, in order to expedite justice and lighten the load on the courts.
Advantages of Section 143 of Negotiable Instrument Act
Section 143 of the Act offers several advantages, aimed at expediting the legal process for cheque dishonour cases and ensuring timely justice. Below are some key benefits:
- Expedited legal process- Previously, cases involving the dishonour of cheques often experienced significant delays, causing frustration and financial strain for the complainant. To address this issue, Section 143 was introduced to allow for summary trials, which are quicker and involve a more simplified procedure compared to regular trials.
- Reducing burden on courts- The rising number of cheque dishonour cases was overwhelming the courts, resulting in significant case backlogs and extended delays. By providing for summary trials, Section 143 helps to ease this burden by being quicker and involving a more streamlined process compared to regular trials.
- Use of modern technology- Earlier, the legal process in cases involving negotiable instruments followed a traditional approach, which was time-consuming and inefficient. To address this, Section 144 of the Act now allows the use of speed post, courier service, and electronic means for serving summons. Additionally, they permit the examination of witnesses through video conferencing under Section 310(3) of BNSS These changes make the process more efficient and in line with contemporary practices, significantly reducing the time and effort required for legal proceedings.
- Clarity and legal certainty– Confusion and unpredictability were frequently caused by the conventional legal processâs tendency to handle cases in an unclear and inconsistent manner. Section 143 provides clear guidelines on how these cases should be managed. This ensures that legal decisions are predictable and consistent, in addition to providing parties with a clear understanding of their rights and obligations and contributing to the development of confidence in the legal system.
- Facilitating financial transactions- The lengthy legal process required to resolve dishonoured cheques had undermined the credibility of cheques as a reliable payment method. Section 143Â restores confidence in the use of cheques for financial transactions by ensuring a more efficient and reliable resolution process, by expediting trials and reducing delays, this Section helps maintain the integrity of financial transactions and support the smooth functioning of commerce.
In summary, the modern provisions introduced in Section 143 enhance the efficiency of the legal process, provide clarity and consistency in legal proceedings, and restore confidence in the use of cheques. These improvements are essential for maintaining trust in financial transactions and the overall effectiveness of the legal system.
Expeditious disposal of a matter under Section 143
Section 143 of the Negotiable Instruments Act, 1881, is designed to ensure that cases related to the dishonour of cheques, as outlined in Section 138, are resolved quickly. Below are the points explaining the methods for expeditious disposal of these matters:
Six-Months time limit for trial conclusion
Section 143(3) mandates that trials under Section 138 should be concluded within six months from the date the complaint is filed. This provision is crucial for expediting the legal process and ensuring timely justice for the complainants. By setting a clear timeline, it aims to reduce unnecessary delays and provides swift resolution of cases related to the dishonour of cheques.
Restriction on adjournments
Section 143(2) prevents unnecessary delays, the court can grant adjournments only if the application for adjournment is accompanied with sufficient reasons. These provisions ensure that trials progress efficiently and discourage tactics that could prolong the legal process. By limiting adjournments, the law seeks to maintain momentum in the proceeding and avoid disruptions that can impede the timely delivery of justice.
Expedited examination of witnesses and recording of evidence
In addition, Section 143 facilitates the prompt examination of witnesses and the recording of evidence on oath. This streamlines the trial process, helping to avoid prolonged litigation. By ensuring that witnesses are examined and evidence is recorded efficiently, the legal process becomes more effective, reducing the time taken to reach a conclusion.
Apex court clarification on flexibility
In the case of Rakesh Rajan Shrivastava vs. State of Jharkhand (2024) the Supreme Court has clarified that the provisions of Section 143 are directory, not mandatory, This means that courts have the flexibility to apply these provisions based on the specific circumstances of each case. This flexibility prevents the law from becoming too rigid and allows for adjustments that suit the unique aspects of individual cases, ensuring that justice is served in a fair and balanced manner.
Supreme Court direction for further expediting
The Supreme Court issued guidelines to expedite the disposal of cases under Section 138 of the Act in the case of Indian Bank Association & Ors vs. Union of India & Ors (2014). These guidelines include completing the examination-in-chief, cross-examination, and re-examination of the complainant within three months from the date of filing the complaint. By setting clear expectations of the duration of these processes, the Supreme Court aims to enhance the efficiency of the legal system and ensure that cases are resolved promptly.
If we see in Section 138 it deals with the definitions, conditions and penalties for the offence of cheque dishonour. It helps to outline the steps required to initiate legal action but does not detail the trial process. Whereas after the addition of Section 143, it focuses on the procedural aspects of conducting trials for offences under Section 138. It aims to ensure swift and efficient disposal of cases through summary trials, strict timelines, and limited adjournments while providing flexibility through judicial discretion.
Section 143A of Negotiable Instrument Act, 1881
Section 143A of the Act allows a court to order the accused to pay interim compensation to the complainant in cases involving dishonour of cheques. This provision applies when the accused pleads ânot guiltyâ and the trial is ongoing.
In simple terms, when someone is accused of issuing a cheque that bounces, and they claim they are not guilty, the court can still direct them to pay some compensation upfront. This compensation can be up to 20% of the cheque amount. The idea behind this rule is to provide some financial relief to the person who filed the complaint (the payee) while the case is being heard.
If the accused is later found not guilty, they can get the compensation amount refunded. However, if they are found guilty, this amount will be deducted from the final penalty or fine. This provision helps to reduce delays and ensures that complainants donât suffer long financial losses while waiting for the trialâs outcome.
The legislative amendment of Section 143A was inserted into the Act through the Negotiable Instrument (Amendment Act 2018) Act. This Amendment was made to address the issue of delay in cases of Section 138 and to provide interim relief to complainants in cheque dishonour cases.
The amendment came into force on September 1, 2018. By allowing the court to order interim compensation, it aimed to reduce the financial burden on complainants and address delays in the legal process and to mark a significant step towards a more efficient and equitable legal framework for handling cheque dishonoured cheques.
Section 143A(1) of the Act is a crucial provision that allows for the grant of interim compensation to the complainant in cheque dishonour cases. This Section is generally considered to be a directory rather than mandatory as clarified in the case of Rakesh Ranjan Shrivastava vs. State of Jharkhand (2023). This interpretation means that while the provision empowered the court to order interim compensation of up to 20% of the cheque amount, it does not impose an obligatory duty on the court to do so in every case.
The use of the term âmayâ in the language of the Section indicates judicial discretion, allowing the court to assess the circumstance of each case before deciding whether to grant interim compensation. This discretion ensures that the provision is applied equitably, taking into account the specific facts and context of each case, rather than mandating a uniform application irrespective of individual case details. Therefore, Section 143A(1) is designed to provide flexibility and fairness in the judicial process, enabling courts to offer interim relief where deemed appropriate while avoiding a rigid, one-size-fits-all approach.
In the case of Surinder Singh Deswal @ Col.S.S Dsawala and Ors. vs. Virender Gandhi and Anr. (2019) the Supreme Court ruled that Section 143A of the Act applies only to offences committed after the enactment of the Negotiable Instrument (Amendment) Act, 2018. This decision ensures that the interim compensation mechanism does not retroactively affect cases where the offence occurred before the amendment. This means that only new offences, occurring after the amendment, are subject to the provisions of Section 143A. The judgement highlighted the importance of giving prompt financial relief to complainants while also considering the right of the person who issued the cheque. This decision has significantly impacted the judicial process by ensuring that complainants in cheque dishonour cases receive time assistance, leading to faster and fairer resolution.
In the case of Rakesh Ranjan Shrivastava vs. State of Jharkhand (2023) the Supreme Court ruled that the provisions under Section 143A of the Act are discretionary rather than mandatory in nature. This means that while courts have the authority to award interim compensation, they are not required to do so in every case. The court emphasised that trial courts should carefully assess the specific circumstances of each case before deciding on interim compensation, considering all relevant factors and the particular context of the situation of interim compensation.
Payment timeline
Section 143A mandates that interim compensation must be paid within 60 days from the date of the order, with a possible extension of an additional 30 days for sufficient cause. The objective here is to enforce timely payment of compensation, preventing unnecessary delays and ensuring that the complainant receives financial relief.
Procedural safeguard
Section 143A(5) is essential for enforcing interim compensation in cheque dishonour cases. It integrates with Section 461 of BNSS which provides a procedure for recovering fines imposed by a court. Section 461 allows the court to attach and sell the property of the defaulter to recover unpaid fines.
By linking with this Section, 143(5) ensures that interim compensation awarded for dishonoured cheques can be effectively endorsed. If the drawer fails to pay the interim compensation within the 60 days time frame, the court can use the measures outlined in Section 461 to seize and sell the drawerâs property to secure the payment.
Examining Section 507 of BNSS with Section 143A of the Act provides a strong mechanism to enforce compensation orders, ensuring complainants receive the awarded amount promptly. This enhances the credibility and effectiveness of the judicial process in cheque dishonour cases.
Differences between Sections 143 and 143A of Negotiable Instruments Act
Basis | Section 143 | Section 143A |
Objective | Guarantee the prompt adjudication and resolution of cases involving Section 138 (cheque dishonour. | Provides for interim compensation to the complainant during the pendency of the trial. |
Application | It applies to the overall trial procedure for cases under Section 138. | It applies to ongoing trials, providing interim relief. |
Nature | It governs how the trial should be conducted. | It deals with compensation during the trial process. |
Trial type | Summary procedure for quick disposal. | No specific trial, it is centred solely on interim compensation. |
Time limit | It should be concluded within 6 months from the date of filing the complaint. | Not applicable. |
Adjournments | Limits adjournments to those with sufficient cause to avoid delays. | Not applicable. |
Judicial discretion | Allows flexibility based on cases specified. | Allows courts to order interim compensation at their discretion. |
Refund in cases of acquittal | Not applicable. | If acquitted, the complainant must refund the interim compensation at their discretion. |
Relevance of summary trial in the cases of cheque dishonour
Within the statutory framework of Section 143, the importance and efficiency of summary trials have been highlighted by High Courts in seminal decisions such as Damodar S. Prabhu vs. Sayed Babalal H. (2010) and Indian Bank Association and Ors vs. Union of India and Ors (2014). These incidents demonstrated how crucial it is to have a streamlined legal procedure for matters involving cheque dishonour in order to ensure speedier outcomes and decrease the load on the courts. These decisions uphold the expeditious and effective resolution of these disputes through the endorsement of summary trials, hence, preserving the legitimacy and dependability of cheques as a means of payment.
Procedure under BNSS
A summary trial is a legal method for swiftly resolving minor and less complex offences, as established by Section 283 to 288 of BNSS In accordance with it, judges may hold summary trials under this Section.
Power to try case summarily
Section 283 of BNSS grants certain judicial authorities the power to conduct summary trials for specific offences. A Judicial Magistrate of the first class or a Metropolitan Magistrate is authorised to try summarily the offences listed under this section. These offences usually include minor offences and other crimes that can be punished with up to two years imprisonment. The rationale behind this provision is to expedite the judicial process for less severe cases, thereby reducing the burden on the courts and ensuring swift justice.
Summary trial by Magistrate of second class
Section 284 of BNSS allows Magistrates of the second class to conduct summary trials for specific offences. These Magistrates can handle cases where the punishment is only a fine or imprisonment for up to six months. This means that minor offences can be resolved quickly and efficiently, without the need for a lengthy trial process.
Procedure for summary trials
Section 285 of BNSS is crucial for handling summon cases in India. It sets out the procedure for summary trials, which are faster and less complicated ways to resolve criminal cases. Here is a simple breakdown of the process:
Steps in summary procedure
- Initiation proceeding: For minor offences, summary trials are held; the penalties may include fines, imprisonment for a maximum of two years, or both. A police report or a complaint submitted directly to the Magistrate can start the process.
- Jurisdiction: Summary trials can only be held by a particular Chief Magistrates, and other First-Class Magistrates.
- Issuance of summons: The accused is served with a summons to appear in court. Since these are not warrant cases, the process is less formal and does not involve the arrest of the accused unless necessary.
- Trial procedure: Instead of a formal charge sheet, the Magistrate explains the nature of the accusation to the accused. The accused may be questioned, and the Magistrate records the essential facts of the case. Witnesses are examined, and evidence is presented in a straightforward manner with less emphasis on formalities. The Magistrate maintains a concise record of the proceedings including the substance of the evidence and findings.
- Judgement: The judgement is delivered promptly, either immediately after the trial or as soon as possible thereafter. The Magistrate meticulously documents the findings of the case, detailing the evidence and the conclusion drawn from it. If a sentence is imposed, it is clearly mentioned in the judgement, specifying the nature and duration of the penalty, whether it be imprisonment, a fine, or both and through documentation it ensures transparency and provides a comprehensive record of the judicial decision.
- Limitation on sentencing: In a summary trial, the maximum sentence that can be imposed is limited to three months of imprisonment, a fine, or both. Sentences exceeding this limit are not permissible under the summary procedure, ensuring that only minor offences are handled through this expedited process.
- Right to appeal: The accused has the right to appeal against the judgement; however, the scope for appeal is limited due to the minor nature of the offences and the brevity of the trial process.
Record in summary trials
Section 286 of BNSS deals with record keeping for every case tried summarily. This requirement ensures that all pertinent details of the trial are accurately documented. The Magistrate is obligated to record the following information in a prescribed form:-
- The serial number of the case,
- The date on which the offence was committed,
- The date of report or complaint,
- The name, parentage, and residence of the accused,
- The offence alleged and any examination of the accused,
- The findings of the case,
- If the accused is convicted, a brief explanation for the conviction,
- The sentence or other final order,
- The date on which the proceedings were concluded.
This comprehensive record-keeping ensures transparency and provides a clear account of the summary trial process, which is crucial for maintaining the integrity of the judicial system.
Judgement in cases tried summarily
Section 287 of BNSS outlines the requirement for maintaining detailed records in summary trials. Even though these trials are expedited, the judgement must still include the essential elements of the evidence presented and a brief explanation of the reasons for the courtâs findings. This ensures that the judgement is not only quick but also well-reasoned and transparent.
By requiring a reasoned judgement, the law protects the rights of the accused, providing a clear basis for the courtâs decisions. This clarity and transparency help maintain fairness in the judicial process, ensuring that even in summary trials, the decisions are just and understandable.
Language of record and judgement
Section 288 of BNSS specifies the language in which records and judgement in summary trials should be written. It mandates that the language of the record and judgement must be the same as the language of the court. This ensures consistency and clarity in the documentation and helps in maintaining a standardised approach across all summary trials. The requirements aim to avoid confusion and ensure that all parties involved, including the accused, legal representatives, and appellate courts can easily understand the trial proceedings and judgments.
Important precedents related to Section 143 of Negotiable Instruments Act
We are aware that Section 143 of the Act addresses the manner in which an offence under Section 138 is tried, with particular emphasis on summaries of trials. The interpretation and implementation of Section 143 have been affected by a number of significant cases. Here are a few noteworthy ones:-
Adalat Prasad vs. Rooplal Jindal (2004)
Facts
In this case, the complainant, Rooplal Jindal, filed a complaint against Adalat Prasad under section 138 of the Act alleging dishonour of a cheque issued by Adalat Prasad. The Trial Court, after taking cognizance of the complaint, issued a summons to Adalat Prasad. Subsequently, Adalat Prasad moved an application under Section 582 of BNSS to quash the summons, arguing that there was no sufficient ground to proceed against him.
Issue
The primary legal issue in this case revolved around whether the Magistrate, after issuing the process (summon), had the authority to recall or review the order issuing the summons if it was later found that no sufficient ground existed for proceeding with the case. Specifically, the case questioned the interplay between the powers under Section 143 of the Act which allows for a summary trial of cheque dishonour cases, and the inherent powers of the Magistrate to recall a process under Section 227 of BNSS
Judgment
The Supreme Court of India in this case ruled that once the Magistrate has issued proceedings under Section 227 BNSS, the Magistrate does not have the power to recall the order or review the issuance of summons. The court held that the only remedy available to the accused, if he believes that the process should not have been issued, is to approach the High Court under Section 582 BNSS to quash the summons. The court emphasised that Section 143 of the Act which provides for a summary trial of cases, does not give the Magistrate any inherent power to recall a process, and any correction of the order can only be sought through the High Courtâs intervention. This judgement reinforced the principle that once a process is issued, the trial should proceed unless quashed by a Higher Court.
Damodar S. Prabhu vs. Sayed Babalal H.( 2010)
Facts
In this case, the respondent, Sayed Babalal H, filed a complaint under Section 138 of the Act after a cheque issued by Damodar S. Prabhu was dishonored. During the proceedings, Damodar S. Prabhu sought to settle the matter by paying the cheque amount to the complainant and requested the case be quashed. The key aspect of the case involved the imposition of costs while compounding the offence, which is permitted under Section 147 of the Act.
Issue
The main issue in this case was whether the courts should impose costs or conditions when allowing the compounding of offences under Section 138 Negotiable Instruments Act, and if so, what the appropriate quantum of Costs should be. The court also examined how Section 143 of the Act, which allows for summary trials, should be applied in the context of compounding offences.
Judgment
The Supreme Court of India in this case held that while compounding of offences under Section 138 is permissible, it should not be unconditional, especially at later stages of the litigation process. The court laid down guidelines for the imposition of graded costs for compounding offences at different stages of the trial. The court emphasised that these costs are necessary to discourage undue delays and to ensure that the provisions of Section 143, which aims at a speedy trial, are effectively implemented. The judgement underlined that compounding should be encouraged early in the process, and any delay should attract higher costs, thereby promoting swift justice and reducing the burden on the judicial system.
Although the verdict was upheld, the Supreme Court established standards for compounding. The following are the guidelines for compounding:
- At the Trial Court: If an offence is compounded at the first instance, the accused has to pay 10% of the cheque amount as a cost.
- At the Appellate Court: If the matter is settled at the appellate stage the compounding fee increases to 15%.
- At the High Court: If the matter is settled at the High Court, the fee is 20%.
- At the Supreme Court: If the matter is settled at the Supreme Court, the fee is 25%.
The Supreme Courtâs guidelines are designed to encourage timely settlements and reduce litigation costs.
M/S. Mandvi Co-Op. Bank Ltd vs. Nimesh B. Thakore (2010)
Facts
In this case M/S. Mandvi Co-Op. Bank Ltd. filed a complaint against Nimesh B. Thakore under Section 138 of the Act after a cheque issued by Nimesh B. Thokre was dishonored. During the proceedings, the accused sought to challenge the admissibility of evidence in the form of an affidavit filed by the complainant. The crux of the issue was whether such an affidavit without the need for the complainant to appear in person for examination-in-chief.
Issue
Whether, under Section 145 of the Act which allows evidence on affidavit, the complainantâs affidavit could be treated as evidence in a trial under Section 138, without the need for personal examination-in-chief. Additionally, the case examined how Section 143, which provides for summary trials, should be interpreted in the context of accepting evidence by affidavit.
Judgment
The Supreme Court of India, in its judgement, upheld the admissibility of evidence by affidavit under Section 145 of the Act in trials conducted under Section 138 of the Act. The court ruled that the affidavit submitted by the complainant could be accepted as sufficient evidence during the trial and that the complainant was not required to appear in person for examination-in-chief unless specifically summoned by the court. The judgement reinforced for cases related to cheque dishonor, by allowing the use of affidavits to streamline the process. This decision was significant in reducing the procedural delays in section 138 cases, aligning with the legislative intent to expedite the resolution of such disputes.
India Bank Association & Ors vs. Union Of India & Ors (2014)
Facts
In this case, the India Bank Association, along with other petitioners, filed a Public Interest Litigation before the Supreme Court of India against the Union India of India. The petitioners argued that the judicial system was overburdened with a large number of cases filed under Section 138 of the Act related to the dishonor of cheques. They contended that the existing legal framework under Sections 138 and 143 of the Act, which provided for summary trials and the speedy resolution of cases, was not being effectively implemented. As a result, there were significant delays in the disposal of cheque dishonor cases, affecting both the complainants and the efficiency of the judicial system.
Issues
- Whether the procedural mechanism under Sections 138 and 143 of the Act were adequate to ensure the timely resolution of cheque dishonor cases.
- Whether the judiciary and executive had taken sufficient steps to address the delays in the adjudication of such cases.
- Whether additional guidelines or directions were needed to streamline the process and expedite the disposal of cases under section 138 of the Act.
Judgment
The Supreme Court of India, recognizing the importance of the issues raised, issued a series of directions aimed at speeding up the resolution of cheque dishonor cases. The court highlighted the legislative intent behind Section 143, which mandates summary trials for cases under Section 138, and strongly states the need for its strict implementation. The court directed that:
- When a complaint under Section 138 of the Act is filed, the Metropolitan Magistrate or Judicial Magistrate must review the complaint on the same day. If the complainant is supported by an affidavit and all necessary documents are in order, the Magistrate should acknowledge the complaint and issue a summons.
- The Metropolitan Magistrate or Judicial Magistrate use a practical and realistic approach when issuing summons. Summons should be correctly addressed and sent both by post and email, using the addresses provided by the complainant.
- In certain cases, the court may seek assistance from the police or a nearby court to serve the notice to the accused. A short date should be set for the notice of appearance. If the summons is returned unserved, immediate follow-up action should be taken.
- The court may indicate in the summons that if the accused applies for compounding of offences at the first hearing, appropriate orders may be passed promptly.
- When the accused appears, the court should direct them to furnish a bail bond to ensure their appearance during the trial. The court should also serve notice under Section 274 of BNSS allowing the accused to enter a plea of defence and schedule the case for defence evidence unless the accused applies under Section 145(2) to recall a witness for cross-examination.
- The court must ensure that the examination-in-chief, cross-examinations, and re-examination of the complainant are completed within three months of assigning the case.
- The court may accept affidavits from witnesses instead of in-person testimony, but witnesses for both the complainant and the accused must be available for cross-examination when directed by the court.
M/S. Meters And Instrument Private Limited & Anr. vs. Kanchan Mehta (2017)
Facts
In this case M/S. Meters and Instrument Pvt Ltd, along with another party, had issued a cheque to Kanchan Mehta. The cheque was dishonored, leading Kanchan Mehta to file a complaint under Section 138 of the Act. The accused parties sought to compound the offence, but the complainant initially did not consent to compounding. The trial was initiated, and during the proceedings, the accused offered to pay the cheque amount along with interest and cost.
Issue
- Whether the offence under Section 138 of the Act, could be compounded by the court even after the initiation of criminal proceedings and without the consent of the complainant.
- Whether the Magistrate could close the case if the accused paid the cheque amount with interest and cost during the trial.
Judgment
The Supreme Court held that the offence under Section 138 of the Act is primarily a civil wrong, and criminal proceedings are meant to ensure payment rather than punishment.
The court observed that Section 143 of the Act, which allows for summary trials, implies that the focus should be on ensuring the payment of the cheque amount. Therefore, if the accused is willing to pay the amount due with interest and cost, the Magistrate has the discretion to close the case even if the complainant does not consent to compound.
It also emphasised the importance of speedy disposal of such cases and recognized that allowing compounding at any stage of the proceedings, including after conviction, would serve the interests of justice.
The judgement further clarified that in cases under Section 138, the Magistrate could pass an order of conviction if the offence is proved but can also decide on compounding or closure of the case in the interest of justice, following the accusedâs payment.
Conclusion
The Act particularly Sections 143 and 143A, are important legislative attempts to improve and speed up the legal systemâs ability to handle cheque dishonour issues in India. Section 143 focuses on the summary trial of certain cases, which streamlines the necessary procedure to allow for quicker decisions. This clause guarantees that matters be handled effectively, lighting the load on the legal system and giving complainants prompt justice.
However, Section 143A, which was included by the 2018 Amendment, gives the court the authority to grant the complaint temporary compensation in order to alleviate any immediate financial hardship brought on by the dishonoured cheque. While the trial is pending, this interim compensation, which can be up to 20%of the cheque amount, is due. Even though Section 143A is optional rather than required, it is essential for giving the complainant relief while upholding the accusedâs right to a fair trial.
When considered together, these elements highlight the legislative intent to promote financial discipline, protect the integrity of cheque transactions, and provide a quicker and more efficient legal system for cheque dishonour cases.
A law can be misused and rendered ineffective if it lacks severe penalties for violations. Enacting legislation without proper enforcement mechanisms is futile. Section 143A of the Act addresses this by imposing a deterrent penalty for non-compliance, stipulating interim compensation in cases of cheque dishonour. This provision fosters trust among financial institutions and businesses and acts as a deterrent for habitual offenders who issue post-dated cheques without intending to honour them.
There can be no true reformation without the use of deterrent punishment. Reformation works best for people who inadvertently commit crimes, not for repeat transgressors. Repeated economic offenders cannot be changed without suffering severe repercussions. Thus, the intent behind drafting Section 143A is undermined in the absence of sanctions for non-compliance.
It should not be necessary for complainants to fight for temporary relief intended to last until the trial. To guarantee adherence to the court order, harsh penalties and restrictions on the accusedâs rights should be applied instead. This would guarantee that everyone abides by the law and respects the rulings of the court.
Frequently Asked Questions (FAQs)
Is Section 143 of the Negotiable Instrument Act, 1881 an interlocutory order?
Yes, an interlocutory order is issued under Section 143A of the Act Directing interim compensation during a trial for cheque dishonour under section 138. This compensation, up to 20% of the cheque amount, provides temporary relief to the complainant.
In G.J Raja vs.Tejaraj Surana(2019), the Supreme Court clarified that such orders are interlocutory, meaning they are temporary and have different appeal procedures compared to the final order.
What are the key differences between Section 143A and 148 of the Negotiable Instrument Act?
Section 143A and Section 148 of the Act address different stages of cheque dishonour cases. Section 143A, introduced in 2018, allows courts to grant interim compensation up to 20% of the cheque amount during the trial, providing immediate relief to the complainant.
In contrast, Section 148 applies during the appeal stage, requiring the appellant to deposit at least 20% of the trial courtâs fine or compensation before their appeal is considered. This ensures the appellant is serious about the appeal and offers financial security to the complainant who has already won the trial.
In essence, Section 143A offers relief during the trial, while Section 148 secures compensation during the appeal process, enhancing the effectiveness and reliability of cheque-related legal proceedings.
Can interim compensation be ordered to be paid only after the accused pleads not guilty?
Yes, only after the accused enters a not guilty plea can interim compensation be granted under Section 143A of the Act once the accused enters a not guilty plea to Section 138 accusation and the trial has begun, the court may order the drawer of the cheque to provide interim compensation to the complainant in accordance with Section 143 A’s provisions.
This process requirement makes sure that interim compensation is only taken into account following the formal charge contestation by the accused, which starts the trial process. This method strikes a balance by guaranteeing that interim compensation will not be granted too soon and will remain accessible as a remedy in the event that the accused refutes the charges and the matter goes to trial.
There are numerous court rulings, such as the Supreme Courtâs ruling in G.J. Raja vs.Tejraj Surana (2019), which elucidated the procedural and application features of Section 143A, have concurred with this interpretation.
References
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