TaxTMI 
TaxTMI 
2022 (5) TMI 701
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....tamatics Pvt. Ltd., averred that the accused no. 1, M/S Takshila Retail Pvt. Ltd., earlier known as M/s Blues Clothing Pvt. Ltd., accused no. 2, Dinesh Sehgal and accused no. 3, Harsh Sehgal, approached the respondent no.2 for a short-term loan of Rs. 5 Crores for meeting short fall in cash flow and for immediate project requirements for implementation of various contracts. 3. A short-term loan agreement dated 9th June, 2011 was entered into by the parties and respondent no. 2 advanced the loan of Rs. 5 Crores to the accused for a period of three months at interest of 24% per annum. It was stated that the parties also agreed for execution of an irrevocable and unconditional personal guarantee of the accused no. 2 and 3, jointly and severally. It was further agreed that the accused were to pay a penal interest of 3% per month in case of default of repayment. 4. For repayment of the said loan the accused issued a cheque for the amount of Rs. 5 Crores bearing no. 017257 dated 10th September, 2011 drawn on Union Bank of India and when presented the cheque was returned dishonoured with the remarks "Insufficient Funds" vide memo dated 29th December, 2011. Statutory Notice dated 2nd Jan....
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....148 and 143A of the NI Act came into force on 1st September, 2018, whereas the appeal had been filed on 4th April, 2018, that is, before the said amendment, hence, the matter did not fall in the ambit of the same and the application under Section 148 of the NI Act in itself was not maintainable. 9. It is strongly submitted that Section 148 of the NI Act was never intended to be made applicable to all pending appeals but only for the appeals which were filed after the amendment came into force. The judgment of Hon'ble Supreme Court in Surender Singh Deswal @ Col S.S. Deswal & Ors vs. Virender Gandhi & Anr, (2019) 11 SCC 341, makes it abundantly clear that Section 148 is to apply to all appeals filed after 1st September, 2018 even when it pertains to a complaint case filed prior to the amendment. The relevant paragraphs no. 8, 8.1 and 9 of the judgment are relied upon and are reproduced hereunder:- "8. It is the case on behalf of the appellants that as the criminal complaints against the appellants under Section 138 of the N.I. Act were lodged/filed before the amendment Act No. 20/2018 by which Section 148 of the N.I. Act came to be amended and therefore amended Section 148 of the....
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....learned senior counsel appearing on behalf of the appellants shall not be applicable to the facts of the case on hand. Therefore, considering the Statement of Objects and Reasons of the amendment in Section 148 of the N.I. Act stated hereinabove, on purposive interpretation of Section 148 of the N.I. Act as amended, we are of the opinion that Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to amendment Act No. 20/2018 i.e., prior to 01.09.2018. If such a purposive interpretation is not adopted, in that case, the object and purpose of amendment in Section 148 of the N.I. Act would be frustrated. Therefore, as such, no error has been committed by the learned first appellate court directing the appellants to deposit 25% of the amount of fine/compensation as imposed by the learned trial Court considering Section 148 of the N.I. Act, as amended. 9. Now so far as the submission on behalf of the appellants that even considering the language used....
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.... 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." 10. Learned senior counsel for the petitioners further relied upon Abu Faizal vs. State of Kerala & Anr, 2019 SCC OnLine Ker 3980, wherein the following observations were made by the Kerala High Court:- "11. To see that the object and reasons behind enactment of Section 138 N.I Act, not being frustrated the Parliament has thought it fit to incorporate Section 148 into the N.I Act empowering the appellate court to issue direction to the accused to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial court vide the judgment convicting and sentencing him. 12. Accordingly, the Apex court has discarded the argument of the learned coun....
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....ught it fit to put a restriction on the filing of frivolous appeals and therefore made provision for deposit of a portion, not less than 20% of the fine or compensation imposed by the trial court. This aspect is made clear in the provisions incorporated for refund of the amount, on the judgment turns in favour of the accused and ends in acquittal. 19. Therefore, the power is meant to be invoked at a point of time when appeal is preferred or to say more specifically, prior to passing of an order suspending the execution of sentence in an application preferred under Section 389(1) Cr.P.C in the Appeal. The application preferred by either party to the appeal beyond that time shall not be entertained by the appellate court in view of sub-sections (2) and (3) and proviso thereunder, which stipulate time for making deposits, provision for release of the amount deposited to the complainant and for refund of the amount to the appellant/accused on himself being acquitted. 22. ... At the time of passing Annexure A1 order to suspend the execution of the sentence, the court has directed the accused to deposit Rs. 75,000/-, a portion of the compensation awarded by the lower court by the imp....
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....ted to the extent that the complaint case in question had been filed before the amendment but the appeal against such an order/judgment passed in the complaint case is filed after the amendment. It is submitted that if the application of Section 148 of the NI Act was to be made retrospective to the extent of including pending appeals filed before the amendment, it will create a havoc, and the pendency of the appeals will be negatively affected with complainants in appeals under Section 138 of the NI Act approaching the Court invoking the provision and hence, the purpose of the amendment of speedy disposal will be defeated. 12. Learned senior counsel for the petitioners, relying upon the judgment of Hon'ble Supreme Court in G.J. Raja vs. Tejraj Sharma, (2019) 19 SCC 469, submitted that Section 148 only applies to the appeals filed after 1st September, 2018. Similar interpretation is to be applicable to Section 148 as has been given to Section 143A of the NI Act in so far as it is prospective in nature and shall not apply to pending appeals but to fresh appeals filed after the amendment although they may pertain to complaint case filed prior to the amendment. The Hon'ble Supreme Cou....
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....thin two weeks from the date of this order." 13. It is submitted that there is a discretion to be exercised by the Court concerned while imposing the condition of payment of 20% of the fine/compensation which is to be exercised upon judicial appreciation of facts and circumstances of each case. Learned senior counsel for the petitioner relied upon Ajay Vinod Chandra Shah vs. State of Maharashtra & Anr, 2019 SCC OnLine Bom 436, wherein the Bombay High Court observed as under:- "21. Let me advert to the powers of the Appellate Court under section 148, pending appeal against conviction. The recovery of compensation granted under section 148 can be necessarily done by following the procedure laid down and available under section 357 of the Code of Criminal Procedure and amount of fine is recoverable by following procedure under section 421 of the Code. The Section is worded as 'Appellate Court 'may' order'. Thus, it gives discretion to the Appellate Court to invoke its discretionary power under section 148 while directing to deposit 20% of the amount of fine or compensation. In this clause, both the words 'may' and 'shall' are present. The words in section 148 - the Appellate Court ....
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....n, amount is recoverable finally, if the conviction is maintained. The amount can be recoverable with interest. If conviction is confirmed, the order of a higher rate of interest or commercial rate of interest, may be passed; or in default maximum sentence may be imposed. Moreover, the fine or compensation is made recoverable as per the provision of section 421 of Code of Criminal Procedure. 26. In the present case, the impugned orders are passed on 3-8-2018 by the learned Magistrate and the amendment came into force on 1-9-2018. Obviously, in the order dated 3-8-2018, section 148 is not mentioned by the learned Additional Sessions Judge. He did not intend to pass the order under section 148 but it is to be understood that the learned Sessions Judge passed the order under Code of Criminal Procedure by using the powers of the criminal Court to impose putting condition at the time of granting bail. Such a condition of bail can be imposed or it can be modified for non-compliance of the condition in view of the nature of the offence and the circumstances. 27. Therefore, the orders dated 24-9-2018 imposing a condition that the accused to deposit 25% amount out of total compensation,....
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....n or fine, it would not be appropriate to hold it otherwise. 26. Accordingly, Q. No. 2 is also answered in favour of the petitioners." 15. It is stated that the substantive sentence was suspended in the year 2018 and the order of cancellation/vacation of the suspension order in case of non-deposit has been made in 2022, after about four years, which in itself against the principles as established by law. There was no condition to the suspension of sentence when the order dated 5th April, 2018 was passed and a condition is being imposed at this stage by the Appellate Court, which puts the liberty of the petitioners at stake. 16. It is further submitted that even if the petitioners are directed to pay the fine/compensation amount, the period warranted under the provision is 60 days which may be extended for a period of 30 days, however, the Appellate Court granted a time period of one month for the payment of the fine/compensation while allowing the application under Section 148 of the NI Act, which shows the non-application of judicial mind, thereby making the order bad in law and illegal. Moreover, since the order on sentence and the substantive sentence passed against the peti....
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....t by extending the application of the provision to appeals that arise from complaints filed before the amendment was brought about. Hence, any appeal at any point of time arising out of a complaint case filed before the Court concerned could be subjected to an application under Section 148 of the NI Act. It is submitted that in light of the observations of Hon'ble Supreme Court the application under Section 148 of the NI Act was maintainable and the learned ASJ has committed no error while allowing the same. 21. Learned counsel for the respondent no. 2 further opposed the argument of the petitioners that the learned ASJ did not have the powers to modify its order dated 5th April, 2018 while passing the order dated 5th February, 2022, wherein it directed appellant/petitioners to deposit 20% of the fine/compensation amount to the complainant in default of which the suspension of sentence would stand vacated. It is submitted that the learned ASJ was well within its powers to the pass the order dated 5th February, 2022 and vacating the suspension of sentence did not amount to a review. The condition put to the petitioners for submission of the fine amount was reasonable, appropriate a....
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.... on the point that at which stage the application under Section 148 of the NI Act can be filed in an appeal against conviction under Section 138 of the NI Act, whether it may be filed at the first instance at the stage of initiation of the proceedings or at any stage during the pendency of appeal, and whether the provision is applicable to the appeals filed prior to the amendment. Since the provision itself does not make any suggestion to question of extent applicability of the provision, it is pertinent to refer to the judgment of Hon'ble Supreme Court in Surender Singh Deswal (2019). The Hon'ble Supreme Court made the following observations with respect to the nature and extent of retrospectivity attached with the provision:- "7.1. Having observed and found that because of the delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings, the object and purpose of the enactment of Section 138 of the NI Act was being frustrated. Parliament has thought it fit to amend Section 148 of the NI Act, by which the first appellate court, in an appeal challenging the order of conviction under Section 138 of the NI Act, is conf....
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....ed 29.05.2019 has rejected the submission of the appellants that Section 148 of N.I. Act shall not be made applicable retrospectively. This Court held that considering the Statement of Objects and Reasons of the amendment in Section 148 of the N.I. Act, on purposive interpretation of Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to amendment Act No.20/2018 i.e. prior to 01.09.2018." 28. In G.J. Raja (Supra), the Hon'ble Supreme Court, while referring to Surinder Singh Deswal (2019) with respect to the question of retrospectivity of Section 148 of the NI Act, noted as under:- "22. We must, however, advert to a decision of this Court in Surinder Singh Deswal v. Virender Gandhi [Surinder Singh Deswal v. Virender Gandhi, (2019) 11 SCC 341 : (2019) 3 SCC (Cri) 461 : (2019) 3 SCC (Civ) 765 : (2019) 8 Scale 445] where Section 148 of the Act which was also introduced by the same Amendment Act 20 of 2018 from 1-9-2018 was held by this Court to ....
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....stant case, the complaint case as well as the appeal had been filed before the amendment. Moreover, the suspension of substantive sentence was also granted to the accused/petitioners prior to the amendment. From filing of the complaint case to filing of appeal and suspension of sentence, all proceedings pertain to a time when Section 148 of the NI Act was not even in existence. The analysis of the abovementioned judgments of Hon'ble Supreme Court is silent with respect to question that is before this Court since the facts of the said cases are different to the instant matter. The observations of the Hon'ble Supreme Court do not indicate the position of law with regard to the applicability of Section 148 of the NI Act on cases such as the instant matter and therefore, an observation is to be made, keeping in view the opinion of the Hon'ble Supreme Court. 31. For deciding this question, it is deemed necessary to look into the purpose and intent of the legislature while passing the amendment, whereby, Section 143A and 148 were added to the NI Act. The Statement of Objects and Reasons for the amendment of NI Act is reproduced as under:- "The Negotiable Instruments Act, 1881 (the Act....
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....ing in view the objective of the amendment, it is proper to say that to avoid frivolous, unnecessary and unscrupulous litigations and proceedings, the Court concerned may take the required steps to ensure that the appellant has approached the Court with a genuine and real case against the order of conviction and is not wasting the time and resources of the judicial machinery only to delay his conviction and punishment thereof. Such a check on filing of appeals cannot be said to be limited to the cases arising only after the amendment. If it is the intention of the legislature to provide for an effective measure to deal with the menace of unnecessary litigations, then such measure may be intended to be applied to cases where the proceedings under appeal are still underway and have been pending for years. In fact, the need to filter out the cases of genuine or frivolous appeals is all the more substantial in cases that have been pending for a long time and wherein no progress is being made for such prolonged periods of time due to the pendency of the appeal proceedings. The Hon'ble Supreme Court has held the provision in question, that is, Section 148 of the NI Act, to be retrospecti....
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....s already accomplished. (v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication." 35. In case of Section 148 of the NI Act, there is no substantive right that is being taken away by the enforcement of the amendment. The Hon'ble Supreme Court in Surinder Singh Deswal (2019) has also rejected the argument that the amendment takes away the vested right of the convict to appeal. The only implication of the amendment is that some part of the amount of fine/compensation, which is accruing towards the complainant, is directed to be paid against the convict/appellant and in favour of the complainant. This is also done bearing in mind that appellant has been convicted under Section 138 of the NI Act and his guilt under the offence has already been established after thorough procedure and appreciation of evidence. In light of these facts, if a nominal fine is imposed upon the appellant, it cannot be seen to be an unfair and unreasonable penalization or taking away of substantive right of the convict/appellant. Therefore, the argu....
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....mposed a condition in retrospective. The learned ASJ could not have exercised the powers granted to it as an Appellate Court to review its own order of suspension of sentence. The learned ASJ while passing the order, to an extent, imposed a condition to the suspension of sentence, which was granted prior in time, that is, 4 years back. 38. The general practice under Section 148 of the NI Act is that the Court concerned while passing the order considering suspension of sentence, imposes the condition of payment of atleast 20% of the fine/compensation amount and if the accused/convict fails to abide by or comply with any condition, as imposed upon him while grating bail and/or suspension of order, the concerned Court may make a finding to the effect of cancelling the bail of the convict/appellant. Nevertheless, the bail or suspension of sentence does not stand automatically cancelled in cases where a fine or compensation has been levied on the appellant under Section 148 of the NI Act and is not deposited by him as per the directions of the Court concerned. In Vivek Sahni (Supra), the Punjab & Haryana High Court also shared the view that when the fine is levied under Section 148 of ....
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....gned order the learned ASJ granted one months' time to the petitioners for deposition of 20% of the amount imposed by the learned Trial Court, however, Section 148 affords a period of sixty days to the appellant to deposit the fine/compensation levied upon him by the Appellate Court. Reference is made to the decision of High Court of Kerala where the same question was entertained in Sreekandan Nair vs. State of Kerala, 2020 SCC OnLine Ker 776, and it observed as under:- "13. As per Annexure-II order, the appellate court granted only a period of fifteen days to the petitioner to deposit 20% of the amount of compensation. An appellant, who is ordered to deposit amount under Section 148(1) of the Act, is entitled to get a period of sixty days from the date of such order, to deposit the amount. The statute specifically grants a period of sixty days to an accused/appellant to comply with an order passed under Section 148(1) of the Act. Then, any direction given by an appellate court that the amount shall be deposited by the accused/appellant within a period, which is lesser than sixty days from the date of such order, would be illegal. The appellate court has no power to reduce or cur....