TaxTMI 
TaxTMI 
2022 (7) TMI 415
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....ter, indicate that the respondent/Complainant filed proceedings under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter to be referred as the "N.I. Act"), in respect of two cheques one for Rs.15,00,000/- and the other for Rs.5,00,000/- issued by the petitioner in favour of the respondent which when presented were dishonoured for insufficient funds in the account of the petitioner resulting in the above proceedings, in which, an application under Section 143-A of the N.I. Act came to be filed. The learned Judicial Magistrate First Class (JMFC), Saoner by two impugned orders both dated 26/11/2021, granted the applications and directed the petitioner/accused to pay 20% of the cheque amount to the complainant as an interim compensation within 60 days from the date of the said order. 4. Mr. Deo, learned counsel for the petitioner/accused contends, on the facts of the matter that the learned JMFC misconstrued the provision of Section 143-A of the N.I. Act, to be mandatory in nature, which according to him it is not, and therefore, erred in passing the impugned orders. He contends, that Section 143-A of the N.I. Act, is not mandatory and is directory, considering that Se....
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....dy, Criminal Petition No.3904/2021, decided by the Karnataka High Court on 01.06.2021 and the consequent SLP No.10151/2021 decided on 07.01.2022, which holds that the power under Section 143-A(1) of the N.I. Act is discretionary. Reliance is also placed upon G. J. Raja Vs. Tejraj Surana, 2019 (19) SCC 469 to contend that the provisions of Section 143-A are directory. 4.3. In so far as the meaning of the words 'may' and 'shall', reliance is also placed upon The Official Liquidator Vs. Dharti Dhan (P) Ltd., AIR 1977 SC 740, (paras 7 and 8), and State of Uttar Pradesh Vs. Jogendra Singh, AIR 1963 SC 1618 (para 8). 4.4. In so far as the reading of the provision is concerned, reliance is placed upon Bhavnagar University Vs. Palitana Sugar Mill (P) Ltd. and others, 2003 (2) SCC 111; on Haryana Financial Corporation and another Vs. Jagdamba Oil Mills and another, 2002 (3) SCC 496; Mrs. Aparna A. Shah Vs. M/s Sheth Developers Pvt. Ltd. and others, AIR 2013 SC 3210; B. Premanand and Ors Vs. Mohan Koikal and Ors, AIR 2011 SC 1925; and Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd., Vs. Custodian of Vested Forests, Palghat and another, AIR 1990 SC 1747 ; Harbhajan Singh Vs. Press Council of I....
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....cipal Corporation of Delhi Vs. Gurnam Kaur, 1989 (1) SCC 101, (paras 11 and 12); (vi) Hyder Consulting (UK) Limited Vs. Governor State of Orissa, (paras 46 and 50); (vii) State of U.P. and another Vs. Synthetics and Chemicals Ltd. and another, 1991 (4) SCC 139, (paras 39 to 41) and (viii) Frederic Guilder Julius Vs. The Right Rev. the Lord Bishop of Oxford 1880 (V) AC 214. 5.2. It is contended that Ajay Vinodchandra Shah Vs. State of Maharashtra and another, 2019 (4) Mh.L.J. 705 (also relied by Mr. Deo, learned counsel), does not consider whether Section 143-A is mandatory or directory not does not dilate upon the expression "may" and "shall", and therefore, is of no assistance in deciding the issue in question. (this judgment has been considered by the Delhi High Court in JSB Cargo and Freight Forwarder Pvt. Ltd. (supra) page no.59 paras 39 to 43). 5.3. Mr. Bhushan Mohta, learned Counsel for the respondent, therefore contends that the use of expression 'may', in Section 143 (A) of the N.I. Act since it is coupled with an obligation upon the Court to award interim compensation, necessarily makes it mandatory and not directory. In the written notes o....
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....der Pvt. Ltd. (supra) does not consider Frederic Guilder Julius; Bachan Devi and D.K. Basu (supra), it however considers Mohan Singh and others Vs. International Airport Authority of India and others, (1997) 9 SCC 132 and State of U.P. Vs. Baburam Upadhya, AIR 1967 SC 151, both of which dilate upon the use of the word "shall" or "may". 6.1. He further places reliance upon Section 357 of the Cr. P.C., which empowers the Court to pass an order to pay compensation in addition to imposing sentence of fine or sentence, for which reliance has been placed on Ankush Shivaji Gaikwad Vs. State of Maharashtra (2013) 6 SCC 770 (paras 45 to 66), to contend that where there is a duty cast upon the Court to apply its mind only then in that contingency the provision could be said to be mandatory and not otherwise. It is contended that Section 143-A of the N.I. Act does not cast any such duty upon the Court and therefore, cannot be held to be mandatory in nature. The only requirement cast by Section 143-A is to consider whether there is requirement as spelt out from the facts of each case for grant of compensation and not to order award of deposit in each and every case. 6.2. He further conte....
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.... logically be deduced therefrom. (viii). D. Saibaba (supra) holds that the Court should bear in mind the consequences of alternative construction. (ix). B. Premanand and Ors. (supra) holds that literal construction is the thumb rule and it is only in case where a literal interpretation would lead to absurdity then only any other mode of interpretation, including a purposive one, can be resorted to; (x). Mrs. Aparna A. Shah (supra) holds that a penal provision has to be interpreted strictly; (xi). Ankush Shivaji Gaikwad (supra) holds that where there is a duty cast upon the Court to apply its mind only then in that contingency the provision could be said to be mandatory and not otherwise. (xii). Modi Cements (supra) dilates upon the reasons and objects and the purpose behind enacting Section 138 of the N.I. Act, which is to promote the efficacy of banking operations and to ensure credibility in transacting business through cheques. (xiii). Hyder Consulting (UK) Ltd. (supra) in respect of the subsidiary rules of interpretation, holds that the same words appearing in same section of the same statute must be given same meaning unles....
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....that is one of the factors which has to be considered in construing whether the provision is mandatory or directory and interpretation which would sub-serve the object and purpose of the enactment has to be allotted. (v) Mohan Singh (supra) holds that use of the word 'shall', or 'may', is not always decisive and depends on conferment of power. (vi) Deewan Singh (supra) holds that where power is conferred upon a public authority coupled with discretion the word "may" which denotes discretion should be construed to mean a command. (vii) Dilip K. Basu (supra) holds that the use of the word "may" by itself is not determinative of the true nature of the power or the obligation conferred or created under the provision and in a given case, it could be construed as 'shall' thereby meaning mandatory nature of the provision. (viii) Anant H. Ulahalkar (supra) while interpreting Section 9 (1) - A of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965, lays down rules of interpretation regarding the use of the words 'may' and 'shall'. (ix) Kunhayammed (supra) speaks about the doctrine of merger, and lays down principles as ....
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.... was amended by inserting Section 143-A and 148 therein. The purpose for the amendments, as reflected from what has been stated in the objects and reasons in the amending Act, is as under : "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 s....
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....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." 8.3. In Bachahan Devi (supra) after considering the earlier judicial precedents on the point as to how th....
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....ed by laying down any general rule of universal application. Such controversy has to be decided by ascertaining the intention of the legislature and not by looking at the language in which the provision is clothed. And for finding out the legislative intent, the court must examine the scheme of the Act, purpose and object underlying the provision, consequences likely to ensue or inconvenience likely to result if the provision is read one way or the other and many more considerations relevant to the issue. 37. Several statutes confer power on authorities and officers to be exercised by them at their discretion. The power is in permissive language, such as, 'it may be lawful', 'it may be permissible', 'it may be open to do', etc. In certain circumstances, however, such power is 'coupled with duty' and must be exercised. -----------" It is thus obvious that to interpret the legal import of the word 'may', the Court has to consider various factors, namely, the object and the scheme of the Act, the context and background against which the words have been used, the purpose and the advantages sought to be achieved by the use of this word. The same proposition has been....
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....obligations upon private parties are ordinarily to be regarded as mandatory; Kedamath Jute Mfg, Co. Ltd. v. Commercial Tax Officer, AIR 1966 SC 12; (viii) If exceptions, exemptions or concessions are granted by a statute subject to fulfillment of certain conditions, then such conditions must be mandatorily fulfilled. Subject to fulfillment of conditions, the provision may be liberally construed; (ix) The nature, design and consequences which would follow from construing the provision as "mandatory" or "directory". Where construction of a provision as directory will render the provision or significant parts otiose, redundant or a surplusage. The principle is that the legislature does not use words in vain; and (x) Where the construction of a provision as mandatory would result in absurdity, which could never have been intended by the legislature, the provision can be construed as directory." 8.5. In Surinder Singh Deswal (supra), while considering the provisions of Section 148 of the N.I. Act, in light of the above aims and objects, for its enactment, and whether the said provision was prospective or retrospective, it was held that Section 148 of the N.....
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....own by the appellant. Therefore, if amended Section 148 of the NI Act is purposively interpreted in such a manner it would serve the Objects and Reasons of not only amendment in Section 148 of the NI Act, but also Section 138 of the NI Act. The 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 dishonour 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, Parliament has thought it fit to amend Section 148 of the NI Act. Therefore, such a purposive interpretation would be in furtherance of the Objects and Reasons of the amendment in Section 148 of the NI Act and also Section 138 of the NI Act." 8.6. In G. J. Raja (supra), the Hon'ble Apex Court, while considering the issue as to whether Section 143-A o....
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....o the insertion of Section 143-A in the Act there was no provision on the statute book whereunder even before the pronouncement of the guilt of an accused, or even before his conviction for the offence in question, he could be made to pay or deposit interim compensation. The imposition and consequential recovery of fine or compensation either through the modality of Section 421 of the Code or Section 357 of the Code could also arise only after the person was found guilty of an offence. That was the status of law which was sought to be changed by the introduction of Section 143-A in the Act. It now imposes a liability that even before the pronouncement of his guilt or order of conviction, the accused may, with the aid of State machinery for recovery of the money as arrears of land revenue, be forced to pay interim compensation. The person would, therefore, be subjected to a new disability or obligation. The situation is thus completely different from the one which arose for consideration in ESI Corpn. Case [ESI Corpn. v. Dwarka Nath Bhargwa, (1997) 7 SCC 131 : 1997 SCC (L&S) 1680]. 21. In our view, the applicability of Section 143-A of the Act must, therefore, be held to be....
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....tion/liability for the first time to pay interim compensation. 3. Such liability is post conviction, where the accused is already held guilty of the offence. Such disability or obligation / liability is during the course of Trial- i.e. pre-conviction, where the complaint is not yet adjudicated and guilt of the accused is yet to be determined. 4. Merely permits the Appellate Court to order deposit of sums of 20% and above of the fine or compensation awarded by the Trial Court as the guilt stands already determined due to conviction. Permits the Trial Court to award interim compensation upto 20% of the Cheque amount, without determination of the guilt of the accused. 5. Such compensation/fine could be recoverable under Sections 421 and 357 of the Code, which apply postconviction, and are adequate to take care of such requirements. Introduces Section143-A(5), making the interim compensation, recoverable, as if it were a fine under Section 421 Cr. P.C. thereby exposing the accused to coercive methods of recovery of such interim compensation through the machinery of the State as if the interim compensation represented arrears of land revenue. The coercive meth....
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....ion, there is no 'duty to act', upon the Court, spelt out by the provisions of Section 143-A of the N.I. Act, considering which Frederic Guilder Julius (supra); Jogendra Singh (supra), Deewan Singh (supra) and judgments taking a similar view would clearly not be applicable. 9.2. This is supplemented by the fact that from a plain reading of Section 143-A of the N.I. Act, it is clear that it is a provision enacted as an interim measure, during the pendency of the trial, when the guilt of the accused is still to be determined. The word 'may', thus used in Section 143-A (1) of the N.I. Act, has to be construed in light of the fact that the direction to award compensation, is at the trial stage and as an interim measure. The fact that even in cases under Section 138 of the N.I. Act, the presumption under Section 139 of the N.I. Act, is not absolute, but is rebuttable, also has to be borne in mind. That apart, in a particular case, given the requirement of Section 138 of the N.I. Act, it may so happen that the complaint itself may not be maintainable, for the cheque not having been presented during the period of its validity; the notice not having been issued in the stipulated time; t....
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....vision directs the Appellate Court, to order deposit of such sum which shall be a minimum of 20% of the fine or compensation, as awarded by the Trial Court, Section 143-A of the N.I. Act, on the other hand, does not cast any such duty or obligation upon the Court trying the offence to, in all cases, order deposit of an amount upto 20% of the cheque amount in the Court, as Section 143-A (2) of the N.I. Act, confers a discretion upon the Court to direct the deposit of the sum not exceeding 20% of the cheque amount as an interim compensation. 9.6. Whereas Section 148 (1) of the NI Act, uses the expression "-- such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court --", which indicates that the total sum, of which 20% is to be awarded, already stands prejudged, there is no such prejudging at the stage of invocation/applicability of Section 143-A of the N.I. Act, as the trial is yet to be over, considering the use of the expression occurring in Section 143-A(1) of the N.I. Act " - the Court trying the offence --" and the language of Clause (a) and (b) of Section 143-A(1) of the N.I. Act, which indicates the stages at which such powe....
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....rmissible for the Court, to even decline awarding of any interim compensation, of course, for reasons to be recorded. Thus, when the power is wide enough to cover both the grant and refusal to grant, the power would be discretionary [see Dharti Dhan (P) Ltd. (supra)], as no absolute right has been conferred upon the complainant to claim interim compensation, but a discretion has been conferred upon the Court to so direct, the exercise of which discretion will depend upon the Court holding in favour of the complainant, depending upon whether a case was made out for the same or not, based upon the facts availing on record, in each case. 9.10. In the above context, it is equally material to note what has been held in Mardia Chemicals Ltd. (supra) wherein while considering the condition of deposit of 75 % of the amount of demand notice before a proceeding could be entertained by the tribunal, while considering the power of the tribunal to waive or reduce the amount under the proviso to Section 17(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("the SARFAESI Act", for short hereinafter) it has been held that since the pr....
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....the same will come into picture only if interim compensation is awarded, and merely prescribes, what would be the mode of recovery in case, interim compensation is awarded. Even otherwise, the mode of recovery of any fine awarded in criminal proceedings has been prescribed in Section 421 of Cr.P.C. and what Section 143-A (5) of the N.I. Act does is merely make Section 421 of Cr.P.C. applicable which in any case, would have been applicable. 9.14. The use of the expression 'shall not exceed twenty per cent of the amount of the cheque", as occurring in Section 143-A (2) of the N.I. Act, also does not make the provision mandatory, as the use of the word 'shall' in Section 143-A (2) has to be viewed in the background of the word 'may' as used in Section 143-A (1), which colors the content of the entire provision. The expression "shall not exceed twenty per cent" in Section 143-A (1) merely caps the limit of the discretion which the Special Court is permitted to exercise in the matter and nothing else. The word "shall" as used in the above expression does not transcend beyond the limits of discretion of the Special Court, in the matter of awarding interim compensation, which as alread....
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....51/2021 wherein while dismissing the same on 07/01/2022, it has been held as under : "Though the power under Section 143A of the Negotiable Instruments Act is discretionary power, we, having considered the matter on merits, find that the direction to deposit 20% of the amount is perfectly justified. As such, in the facts and circumstances of the case, we do not find any ground to interfere with the order impugned in this petition. Accordingly, the special leave petition stands dismissed." 10.1. With great humility, I am unable to agree with what has been held in Rajesh Soni (supra) by the learned Single Judge of Chhattisgarh High Court, holding that Section 143-A(1) is mandatory in nature (para 19) for the reason that the distinction between the intent and purpose of Section 143-A and Section 148 of the N.I. Act as spelt from their language, has not been noticed by the learned Court. 11. The exercise of any discretion conferred upon a Court, must be for reasons to be spelt out, indicating application of mind by the Court to the facts available before it in the application of the law to such facts. There are multitude of judicial pronouncements in this regard, which i....