Safiya Malik

The Rajasthan High Court recently adjudicated on the applicability of Section 143A of the Negotiable Instruments Act, 1881, concerning complaints filed prior to the provision’s enactment on September 1, 2018. The court determined that Section 143A has no retrospective effect and quashed trial court orders requiring the accused to pay interim compensation.

The petitions arose from three complaints filed under Section 138 of the Negotiable Instruments Act, 1881, alleging that the petitioner had issued cheques that were subsequently dishonored. These complaints were lodged in 2017, before Section 143A was introduced. At the time, no statutory provision permitted courts to direct interim compensation during trial.

The provision in question, Section 143A, was introduced via an amendment effective from September 1, 2018. It authorized courts to direct the drawer of a cheque to pay interim compensation of up to 20% of the cheque amount to the complainant during trial. Following the amendment, the trial court directed the petitioner to pay 20% of the cheque amount as interim compensation.

The petitioner challenged this order, contending that Section 143A cannot be applied retrospectively to complaints filed before its enactment. The petitioner argued that at the time of filing the complaints, no provision mandated interim compensation, and the subsequent introduction of Section 143A could not impose new liabilities or obligations retroactively.

The complainant opposed this contention, asserting that the legislative intent behind Section 143A was to expedite relief for complainants and address delays caused by procedural tactics. It was argued that interim compensation aligns with the broader objectives of the Negotiable Instruments Act, which seeks to uphold the credibility of cheque transactions. The complainant also cited judicial precedent concerning Section 148 of the Act, another provision introduced via the same amendment, which has been held applicable to appeals arising from complaints filed before September 1, 2018.

The Rajasthan High Court considered whether Section 143A of the Negotiable Instruments Act could be applied retrospectively. The court examined principles of statutory interpretation, observing that legislative provisions are presumed to apply prospectively unless expressly or implicitly stated otherwise. The judgment referred to the Supreme Court’s decision in Commissioner of Income Tax vs. Vatika Township Private Limited (2015), which established: “Legislation is presumed not to have retrospective operation unless a contrary intention appears. The rule ensures that current laws regulate current activities and do not affect past transactions conducted under previous laws.”

The court noted that Section 143A imposes a new liability by requiring the drawer of a dishonored cheque to pay interim compensation before adjudication of guilt. It observed that this constitutes a substantive obligation, which cannot be applied retrospectively without explicit legislative intent.

The judgment cited the Supreme Court’s decision in G.J. Raja vs. Tejraj Surana (2019), which held: “Prior to the insertion of Section 143A, there was no statutory basis for directing payment of interim compensation before conviction. The provision creates a new obligation and must be applied prospectively, limited to cases where offences were committed after its enactment.”

The court distinguished Section 143A from Section 148 of the Act, which applies at the appellate stage after the accused has been convicted under Section 138. It stated that Section 148 does not impose a new liability, as it pertains to cases where guilt has already been adjudicated.

The judgment also referred to the legislative intent behind the amendment, stating: “The introduction of Section 143A sought to address delays in the disposal of cheque dishonor cases by enabling interim compensation during trial. However, the provision’s prospective application ensures that it does not affect rights and liabilities arising before its enactment.”

The Rajasthan High Court held that Section 143A of the Negotiable Instruments Act applies prospectively to complaints filed after September 1, 2018. Consequently, it quashed the trial court orders directing interim compensation in the present cases, as the complaints were filed in 2017, prior to the provision’s enactment.

The court directed the respondents to refund any amounts deposited by the petitioners under the trial court’s orders, along with applicable interest, within four weeks.

Case Title: Rashmi Khandelwal vs. Kanhiyalal & Others
Case Number: S.B. Criminal Miscellaneous (Petition) No. 1623/2019
Bench: Justice Anoop Kumar Dhand

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