The Apex Court recently in the case of Rakesh Ranjan Shrivastava vs The State of Jharkhand & Anr in Criminal Appeal No. 741 of 2024
decided on March 15, 2024 dealt with the issue whether grant of Interim Compensation under sub-section (1) of Section 143A & 148(1) of the NI Act, 1881 is directory or mandatory. The ancillary issue involved before the Apex Court was if the Court holds the said provision to be a directory provision, what are factors to be considered while exercising powers under sub-section (1) of Section 143A of the NI Act.

Before we deal with the controversy in hand, it would be relevant to reproduce Section 143A of the NI Act 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
• in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and
• in any other case, upon framing of charge.
2. The interim compensation under sub-section (1) shall not exceed twenty per cent of the cheque amount.
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 year, 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 421 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.

Section 148 of the NI Act reads as under:
Power of Appellate Court to order payment pending appeal against conviction

1. Notwithstanding anything contained in the Code of Criminal Procedure, 1973, 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 percent of the fine or compensation awarded by the trial Court:
   • Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under section 143A.
2. The amount referred to in sub-section (1) shall be deposited 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 appellant.
3. The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:
   • Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, 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.

It is noteworthy that Section 143A & 148 were brought on the statute book by Act No. 20 of 2018 with effect from 1st September 2018. It would be appropriate to understand the intent of the Legislature to bring about the amendment Act 2018. The same can be deciphered from the Statement of Objects and Reasons to the Bill, which read as under:

STATEMENT OF OBJECTS AND REASONS
The Negotiable Instruments Act, 1881 (the Act) was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The said Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of dishonour of cheques. However, the Central Government has been receiving several representations from the public including trading community relating to pendency of cheque dishonour cases.

This is because of delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings. As a result of this, injustice is caused to the payee of a dishonoured cheque who has to spend considerable time and resources in court proceedings to realise the value of the cheque. Such delays compromise the sanctity of cheque transactions.

2. It is proposed to amend the said Act 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. 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.

3. It is, therefore, proposed to introduce the Negotiable Instruments (Amendment) Bill, 2017 to provide, inter alia, for the following, namely:

1. to insert a new section 143A in the said Act to provide that the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant, in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and in any other case, upon framing of charge. The interim compensation so payable shall be such sum not exceeding twenty per cent. of the amount of the cheque; and
2. to insert a new section 148 in the said Act so as to provide 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.

4. The Bill seeks to achieve the above objectives.
In the aforesaid case, on behalf of the appellant it was pleaded that sub-section (1) of Section 143A of the N.I. Act uses the word 'may' and therefore, the provision is discretionary and the Court cannot pass an order to pay interim compensation mechanically without applying its mind to the facts of the case. It was pleaded that the existence of a 'prima facie case' is Sine qua non for exercise of the power under Section 143A. The Court ought to also apply its mind to the quantum of interim compensation as a capping of 20 per cent of the cheque amount is provided as interim compensation, depending on the individual facts & circumstances of the case.

On behalf of the respondent, it was pleaded that grant of interim compensation is mandatory and in consonance with the objects and purpose of the amendment Act no. 20 of 2018, which would stand frustrated if a narrow/ hyper-technical interpretation is made. Moreover, there is a presumption under Section 139 of the N.I. Act that unless a contrary is proved, the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or liability. Moreover, to ascertain existence of a 'prima- facie' case, oral & documentary evidence is required to be analyzed, which takes unusually long time and the purpose of insertion of Section 143A would be frustrated.

Moreover, this is an award of 'Interim Compensation' and not final determination and no prejudice is caused as in the event of acquittal of the accused, as the complainant would be liable to refund the Interim Compensation along with Bank Interest. It should not be forgotten that injustice is caused to the payee of a dishonoured cheque, who has to spend considerable time and resources in Court proceedings to realise the value of the cheque and delay tactics frustrate the very purpose of S138 of the NI Act.

The Court held that the provision of Interim Compensation as contained in Section 143 A of the NI Act is Discretionary and not Directory. The Court based its reasoning on multiple counts. The Court held that 'May' used in Section 143A does not mean 'Must'. Secondly, the Court also based the judgment on the power under sub-section (1) of Section 143A is to direct the payment of interim compensation in a summary trial or a summons case upon the recording of the plea of the accused that he was not guilty and, in other cases, upon framing of charge. The Court also differentiated between Interim Compensation awarded under sub-section (1) of Section 143A and sub-section (1) of Section 148 and following earlier precedents held that award of Interim Compensation u/s 148(1) is mandatory and a minimum of 20% of the fine & Compensation is required to be deposited at the appellate stage.

The Bench also noted the legal interplay between the words 'may' and 'shall' and observed thus:

"There is no doubt that the word "may" ordinarily does not mean "must". Ordinarily, "may" will not be construed as "shall". But this is not an inflexible rule. The use of the word
"may" in certain legislations can be construed as "shall", and the word "shall" can be construed as "may". It all depends on
the nature of the power conferred by the relevant provision of the statute and the effect of the exercise of the power. The legislative intent also plays a role in the interpretation of such provisions."

The Court while declaring Interim Compensation u/s 143 A as Discretionary differentiated it with the provision under Section 148(1) giving the following reasoning:

"......Sub-section (1) of Section 148 confers on the Appellate Court a power to direct the appellant/accused to deposit 20 per cent of
the compensation amount. It operates at a different level as the power thereunder can be exercised only after the appellant/accused is convicted after a full trial.

14. In the case of Section 143A, the power can be exercised even before the accused is held guilty. Sub-section (1) of Section 143A provides for passing a drastic order for payment of interim compensation against the accused in a complaint under Section 138, even before any adjudication is made on the guilt of the accused. The power can be exercised at the threshold even before the evidence is recorded. If the word 'may' is interpreted as 'shall', it will have drastic consequences as in every complaint under Section 138, the accused will have to pay interim compensation up to 20 per cent of the cheque amount. Such an interpretation will be unjust and contrary to the well-settled concept of fairness and justice. If such an Interpretation is made, the provision may expose itself to the vice of manifest arbitrariness.

The provision can be held to be violative of Article 14 of the Constitution. In a sense, subsection (1) of Section 143A provides for penalising an accused even before his guilt is established. Considering the drastic consequences of exercising the power under Section 143A and that also before the finding of the guilt is recorded in the trial, the word "may" used in the provision cannot be construed as "shall". The provision will have to be held as a directory and not mandatory. Hence, we have no manner of doubt that the word "may" used in Section 143A, cannot be construed or interpreted as "shall". Therefore, the power under sub-section (1) of Section143A is discretionary. "

It would be trite to refer to the Apex Court judgment in the case of Surinder Singh Deswal v. Virender Gandhi (2019) 11 SCC 341 wherein the Court held that in the provisions of Section 148, the word "may" used therein will have to be generally construed as "rule" or "shall". The Court categorically held thus:

9. Now so far as the submission on behalf of the appellants that even considering the language used in Section 148 of the N.I. Act as amended, the appellate Court "may" order the appellant to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial Court and the word used is not "shall" and therefore the discretion is vested with the first appellate court to direct the appellant � accused to deposit such sum and the appellate court has construed it as mandatory, which according to the learned Senior Advocate for the appellants would be contrary to the provisions of Section 148 of the N.I. Act as amended is concerned, considering the amended Section 148 of the N.I. Act as a whole to be read with the Statement of Objects and Reasons of the amending Section 148 of the N.I. Act, though it is true that in amended Section 148 of the N.I. Act, the word used is "may", it is generally to be construed as a "rule" or "shall" and not to direct to deposit by the appellate court is an exception for which special reasons are to be assigned. Therefore amended Section 148 of the N.I. Act confers power upon the Appellate Court to pass an order pending appeal to direct the Appellant/Accused to deposit the sum which shall not be less than 20% of the fine or compensation either on an application filed by the original complainant or even on the application filed by the Appellant/ Accused under Section 389 of the Cr.P.C. to suspend the sentence. The aforesaid is required to be construed considering the fact that as per the amended Section 148 of the N.I. Act, a minimum of 20% of the fine or compensation awarded by the trial court is directed to be deposited and that such amount is to be deposited within a period of 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the appellate court for sufficient cause shown by the appellant. Therefore, if amended Section 148 of the N.I. Act is purposively interpreted in such a manner it would serve the Objects and Reasons of not only amendment in Section 148 of the N.I. Act, but also Section 138 of the N.I.Act. Negotiable Instruments Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of the dishonoured of cheques. So as to see that due to delay tactics by the unscrupulous drawers of the dishonoured cheques due to easy filing of the appeals and obtaining stay in the proceedings, an injustice was caused to the payee of a dishonoured cheque who has to spend considerable time and resources in the court proceedings to realise the value of the cheque and having observed that such delay has compromised the sanctity of the cheque transactions, the Parliament has thought it fit to amend Section 148 of the N.I. Act. Therefore, such a purposive interpretation would be in furtherance of the Objects and Reasons of the amendment in Section 148 of the N.I. Act and also Sec 138 of the N.I. Act."

The Apex Court again in Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited & Ors. (2023) 10 SCC 446 reiterated the said dictum & observed thus:

6. What is held by this Court is that a purposive interpretation should be made of Section 148 NI Act. Hence, normally, the appellate court will be justified in imposing the condition of deposit as provided in Section 148. However, in a case where the appellate court is satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal of the appellant, exception can be made for the reasons specifically recorded."

The Court in the case of Rakesh Ranjan Shrivastava (supra) finally held thus:

"15.1.As held earlier, Section 143A can be invoked before the conviction of the accused, and therefore, the word "may" used therein can never be construed as "shall". The tests applicable for the exercise of jurisdiction under sub-section (1) of Section 148 can never apply to the exercise of jurisdiction under subsection (1) of Section 143A of the N.I. Act."

The Court spelt out factors that ought to be considered while exercising Discretion while dealing with application u/s 143A of the NI Act The Court would have to evaluate the merits of the case made out by the complainant and merits pleaded by the accused in the reply to the application under sub-section (1) of Section 143A and determine whether the complainant has a bonafide & 'Prima- Facie' case in his favour. A direction can be issued by the Court to pay interim compensation only when the complainant makes out a prima facie case. If the accused is in financial distress, the Court ought not to exercise it's discretion. The Court has to apply its mind to the quantum of interim compensation to be granted.

The Court will have to consider various factors such as the nature of the transaction, the relationship between the accused and the complainant and the paying capacity of the accused and if the defence of the accused is found to be prima facie a plausible defence, the Court may exercise discretion in refusing to grant interim compensation. In short grant of interim compensation depends on the individual facts & circumstances of the case and the Court ought to record brief reasons indicating consideration of all these relevant factors.

The dictum of the Apex Court is a binding precedent and has to be followed by all Courts unreservedly. But, with due respect to the Apex Court, the said interpretation takes a technical view. It frustrates the very purpose for which Section 143A was inserted in the NI Act. It is noteworthy that this section was inserted as a detterent to curtail & contain deliberate dishonour of cheques. It was a welcome measure 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. The said interpretation would necessarily hamper 'ease of doing business ". Moreover, there would be no prejudice caused to the accused as the complainant is liable to refund the interim compensation along with bank interest in the event of acquittal of the accused.

As regards the assertion of the Apex Court in the instant case, it is pertinent that the Apex Court has in a catena of cases held that the interpretation of the terms "may" and "shall" depends on the intention of the legislature and the context in which they are used. However, there are instances where "may" can be treated as "shall" or vice versa based on the legislative intent.

The intention of the legislature is crucial in determining whether a provision is mandatory or directory. It would be relevant to refer to Ramkrishna Bus Transport And Ors. vs State Of Gujarat And Ors. (1994)2GLR1371, wherein the Court observed thus:

"40. Now, it is true that the question as to whether a particular provision is mandatory or directory depends upon intention of the Legislature and not only upon the language in which it is used. The meaning and intention of the Legislature must be treated as decisive and they are to be ascertained not only from the phraseology used but also by considering the nature, design and consequences which would flow from construing it one way or the other.... "

It is high time the Legislature should bring in an amendment to make the award of interim compensation mandatory u/s 143A or hope that in a suitable case, a larger bench of the Apex Court settles the issue in accordance with the objects and purpose of the insertion of the said Section by declaring the same as Mandatory.

Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]