The legislature has passed the Negotiable Instruments (Amendment) Act, 2018 with the aim to further the cause of efficacy and efficiency under the NI Act. The same was notified on 2nd August 2018 and came into force on 1st September 2018. These new provisions under the NI Act are:
2.1. Section 143A: Power to Direct Interim Compensation
Under the newly inserted Section 143A of the NI Act, a new measure for the payment of interim compensation by the accused Drawer to the Complainant has been provided in cases where the Court orders for the same during the pendency of the proceedings under Section 138 of the Act.
- The Extent of Application: Such order may be made by the court only in summary trials or summons cases (where the drawer pleads that he is not guilty as accused) and in any other cases, only upon framing of charges.
- Scope of the Interim Compensation: The quantum of the interim compensation shall not exceed more than 20 % of the amount of the cheque.
- Time Frame: The payment of the interim compensation shall be made within a period of 60 days from the date of the order. However, the Court may extend the time frame for such payment by not more than 30 days upon sufficient cause being shown by the Drawer to this effect.
- In Case of Acquittal: If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay the drawer the amount of interim compensation with interest at banks rates prevalent in the beginning of the financial year. The same payment is to be made within 60 days of the order or within a further period of 30 days as may be directed by the Court on sufficient cause being shown by the Complainant.
With regard to Section 143A of the Act, the payment of interim measures ensures that the interest of the Complainant is upheld in the interim period before the charges are proven against the Drawer. The intent behind this provision is to provide aid to the Complainant during the pendency of the proceedings under Section 138 of the Act, where he is already suffering the double-edged sword of loss of receivables by the dishonor of the cheque and the subsequent legal costs in pursuing the claim and offense. The quantum of such interim compensation would be up to 20% of the amount of the cheque. This would further not preclude any civil claims of the Complainant.
Being equitable, the section also does not prejudice the Drawer in case of his acquittal by the Court. In such a case, the Court shall order the Complainant to return the amount of interim compensation to the Drawer within a period of 60-90 days along with interest on the sum.
Per contra, if the Drawer is found guilty under Section 138, the sum of money paid in the form of interim compensation would be deductible from the final compensation payable to Complainant. Further, even the scope of this Section 143A has been circumscribed to only material stages of the trial and is not to be applied prematurely.
2.1. Section 148: Order of Payment Pending Appeal
Under this new provision, where an appeal is sought against the conviction of the drawer under Section 138 offense, 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. Further, the same is to be in addition to the payment of interim compensation under Section 143A of the Act.
- Release to Complainant: The Court may direct the release of the amount deposited by the Appellant to the Complainant at any time during the pendency of the appeal.
- Time frame: The payment of the interim compensation shall be made within a period of 60 days from the date of the order. However, the Court may extend the time frame for such payment by not more than 30 days.
- In case of Acquittal: If the Appellant is acquitted, the Court shall direct the complainant to repay the drawer the amount of interim compensation with interest at banks rates prevalent in the beginning of the financial year. The same payment is to be made within 60 days of the order or within a further period of 30 days as may be directed by the Court on sufficient cause being shown by the Complainant.
With regard to the new Section 148, this Section serves as a huge boon to the Complainants under the Act whose right after the determination of the guilt of the accused was anything but final. Where a challenge to the Conviction was admitted by a higher court in an appeal, a stay was put in place upon the decision of the trial court and therefore, the Complainant was again precluded from the amount of the cheque that was determined to be owed to the Complainant and was furthered fated to bear the cost and energy expenditure of further rounds of litigation. This position had severely prejudiced the rights of the Complainant under the NI Act.
To cure this defect of law, the present Section 148 was introduced. Under this provision, where an appeal is sought by the Drawer against a conviction under Section 138 of the Act, the Appellate Court may order him to deposit a sum, not below 20 % of the fine or compensation under the decision of the trial court. Such amount would also be in addition to any interim compensation paid under Section 143A of the Act. This provision is a substantial aid to the Complainant who would suffer through firstly a trial and then endless appeals that would destroy his pursuit of the Drawer under Section 138 of the Act. Under this Section the Court is free to determine the sum payable in the course of the appeal looking to the facts and stipulations of the matter before it.
The insertion of Section 143A and 148 of the NI Act is a welcome change to the framework of the NI Act. These provisions are aimed at strengthening efficacy and expediency under the present regime that suffers from slowdowns, procedural roadblocks, and uncertainty of the process.
These provisions are meant to uphold the interests of the complainant in two key stages where there were no protections previously, providing interim compensation and ordering payment by the accused in case of an appeal against conviction. These are instances in the process of the NI Act which were misused by the ill-intentioned drawers to abuse the process of the Act and to engage in dilatory and coercive tactics in order to force the complainant to settle the claim against the drawer at substantially lower sums or to drop the claims altogether owing to the sheer amount of expenditure of time, energy and money all while meager results may be seen to materialize in the pursuit of the cheque dishonor proceedings.
For a better understanding of the provisions, it is necessary to understand the merits and challenges that these provisions entail.
- The introduction of these provisions helps in tackling delays in the proceedings under the Act which is a welcome change.
- Just discretion has been provided to the Court to assess whether under the facts and stipulations of the matter the imposition the compensation or payment is called for and if so, to what extent. This prevents prejudicial treatment of the Drawer and equitable treatment of parties.
- These provisions are Complainant centric and are aimed at protecting their interests which stood very much prejudiced in the past. While proceedings and appeals are sub judice, it is the complainant who suffers substantial losses both in the form of loss of the cheque amount and the consequent legal costs of civil and criminal perusal of the amount of dishonor and the drawer. These provisions empower the Complainant and further the cause of Chapter XVII of the Act.
- Section 148 protects the Complainant from the sting of endless appeals and stays. This Provision ensures that the essence of the stipulations under the Act is not lost to endless technical challenges driven by the intent to dilute the stipulations of the Act and to evade the due process of the law.
- These provisions create a framework of certainty and stringency of provisions under the Act. The same has a deterrent effect on those who seek to preclude the rights of others through dishonor of cheques and consequent illicit and evasive tactics.
- These amendments would reduce pendency in courts because of the deterrent effect on the masses along ensuring certainty of the process that was very much lacking in the past, especially enforced at key stages of the proceedings under the Act.
- Sections 143A and 148 operates in prejudice of the Accused as the imposition of such costs upon the Drawer without the final determination by the Court operates on a presumption of guilt against the Drawer.
- While these provisions provide discretion to the Court to decide whether such sums are to be imposed or their quantum, the Act provides no rationale to guide the decision of the court. This unbridled discretion may lead to increased litigation and pendency in the Courts challenging the decisions under these Sections.
- Though the provisions stipulate that where the Drawer is Acquitted, the Court shall order the Complainant to return the money sum received by him under Sections 143A and 148, in practice, the same provision would turn out to be very contentious in cases where the Complainant either refuses to or is unable to return the sum because of inability to do the same. This would give rise to further litigation.
- Despite the merits of the stipulations, the Amendment Act does not stipulate whether the provision would take effect retrospectively or prospectively. This raises an opportunity for various litigations questioning the applicability of these provisions to matter pending under Section 138 of the Act, at the time of coming into force of the Amendment Act (1st September 2018).
- Under the aforementioned provision for repayment of the sum by the Complainant to the Drawer, the Complainant must make a payment of interest along with the principal sum. This provision can act in prejudice of the Complainant who might be wary to even request the Court to order the Drawer to make payment of interim compensation or an amount under appeal as the cost of paying further interest upon the sum upon losing the bout before the court would act against the interest of the Complainant.
The changes brought forth by way of the 2018 amendment to the Negotiable Instruments Act, 1881 are substantial in nature and focus heavily on upholding the interests of the Complainants in such proceedings. Yet, the aforementioned Sections operate essentially upon the discretion of the judge. This raises another challenge for the complainant to prove his cause before the Court towards getting such relief. While the law should serve as a boon upon Complainants under Section138 proceedings, it reasonable to assume that the implications of these Sections are left to be worked out before the Court, given the wide ambit of Discretion bestowed upon the Court. Nonetheless, these amendments are a positive step towards a more equitable and efficacious regime and are welcomed as such.