Court allows adjustment of recovered amount under SARFAESI Act towards compensation under NI Act; emphasizes fair proceedings

The court allowed the adjustment of the amount recovered under the SARFAESI Act towards the compensation ordered under Section 148 of the NI Act. It held that when multiple proceedings are pending for the recovery of the same or connected amount, the court should adjust the amount paid/recovered in one proceeding against another to prevent undue burden on the appellant. The court also ruled that non-deposit of the directed amount under Section 148 of the NI Act should not automatically lead to the cancellation of bail, emphasizing that bail conditions should not be overly burdensome. Both issues were decided in favor of the petitioners.

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Issues Involved:
1. Adjustment of amount recovered under SARFAESI Act towards compensation or fine under Section 148 of the NI Act.
2. Automatic cancellation of bail on non-deposit of the amount directed under Section 148 of the NI Act.

Detailed Analysis:

Issue 1: Adjustment of Amount Recovered under SARFAESI Act
The primary question is whether a convict under Section 138 of the NI Act, while appealing the conviction, can request the adjustment of the amount already recovered under the SARFAESI Act towards the deposit of compensation or fine as directed by the appellate court under Section 148 of the NI Act, especially when the amounts involved in both proceedings arise from the same transaction.

The court noted that the petitioners had taken credit facilities and issued cheques that were dishonored, leading to proceedings under both the NI Act and the SARFAESI Act. The Judicial Magistrate convicted the petitioners under Section 138 of the NI Act and sentenced them to imprisonment and compensation. Meanwhile, under the SARFAESI Act, two mortgaged properties were sold, and the respondent bank recovered Rs. 1.73 crores.

The appellate court directed the petitioners to deposit 20% of the compensation amount under Section 148(2) of the NI Act. The petitioners sought adjustment of this amount against the amount recovered under the SARFAESI Act, which was dismissed by the court on the grounds of no legal provision permitting such adjustment.

The High Court, however, found that the appellate court erred in its approach. It emphasized that if multiple proceedings are pending for the recovery of the same or connected amount, the court should adjust the amount paid/recovered in one proceeding against another. It cited examples from maintenance proceedings under different statutes and noted that no one should be required to pay more than what is due, even under different proceedings.

The court referred to Sections 143A and 148 of the NI Act, which provide for interim compensation and deposit of a minimum percentage of the fine or compensation awarded by the trial court. It also examined Sections 357 and 421 of the Code of Criminal Procedure, which deal with compensation and the recovery of fines. The court concluded that there is no prohibition against ordering such an adjustment and that the legislative intent is to ensure speedy recovery without creating an undue burden on the appellant.

The court cited the Supreme Court's judgment in D. Purshotama Reddy and another vs. K. Sateesh, which held that compensation recovered under the NI Act should be adjusted in civil proceedings for the same amount. Thus, the court held that the facts of each case should allow for such adjustments, answering the first question in favor of the petitioners.

Issue 2: Automatic Cancellation of Bail on Non-Deposit of Amount
The second question addressed whether bail granted to an appellant should be automatically canceled if the amount directed under Section 148 of the NI Act is not deposited.

Upon examining Sections 143A and 148 of the NI Act, the court found no specific provision stating that non-deposit of the ordered amount would result in automatic cancellation of bail. Section 143A allows for recovery as if it were a fine under Section 421 of the Cr.P.C., but does not mandate bail cancellation for non-payment. The court noted that the offense under Section 138 of the NI Act is bailable and that conditions for granting bail should not be onerous.

The court emphasized that the legislature did not include a provision for automatic bail cancellation in Section 148 of the NI Act. It referred to a series of judgments by the Supreme Court, which held that bail conditions should not be unduly burdensome. Therefore, the court concluded that non-payment of interim compensation or a certain percentage of compensation or fine should not automatically result in bail cancellation.

Conclusion:
The court set aside the challenged order and deemed the amount recovered under the SARFAESI Act as adjusted towards the 20% compensation ordered by the court. The appellate court was directed to proceed with the appeal in accordance with the law. Both questions were answered in favor of the petitioners.

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