Karnataka High Court

Sri Narayanaswamy vs Sri Ramesh J S on 31 March, 2022

Bench: M.Nagaprasanna

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

           DATED THIS THE 31ST DAY OF MARCH, 2022

                          BEFORE

        THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

             CRIMINAL PETITION No.1550 OF 2022

BETWEEN:

1.   SRI NARAYANASWAMY
     AGED ABOUT 42 YEARS
     S/O SRI RAMAREDDY
     PROPRIETOR M/S THUAHARA AGENCIES
     HANUMANTHA RAYANAHALLY VILLAGE
     KADADHANAMARI POST
     CHINTAMANI TALUK
     CHIKKABALLAPUR DISTRICT - 563 125.

     C/O SMT. RASHMI K.H.,
     W/O NARAYANASWAMY,
     AGED ABOUT 35 YEARS,
     KOLLATURU VILLAGE AND POST,
     KASABA HOBLI, HOSAKOTE TALUK,
     BENGALURU URBAN, BENGALURU

2.   M/S THUAHARA AGENCIES
     REP., BY ITS PROPRIETOR
     SRI. NARAYANSWAMY
     AGED ABOUT 42 YEARS
     HANUMANTHA RAYANAHALLY VILLAGE
     KADADHANAMARI POST
     CHINTAMANI TALUK
     CHIKKABALLAPUR DISTRICT - 563 125.

     ALSO HAVING ITS BRANCH AT
     J.S.R COMPOUND
     CHELUR ROAD,
                                   2




       CHINTAMANI 563125
       CHIKKABALAPUR DISTRICT.
                                            ... PETITIONERS
(BY SRI RAGHU PRASAD B.S., ADVOCATE (PHYSICAL HEARING))


AND:

SRI RAMESH J.S.,
S/O LATE J.S.SRINIVASAIAH
AGED ABOUT 54 YEARS
RESIDING AT NO. 20,
5TH MAIN, 4TH CROSS
NAVODAYA NAGAR,
J.P.NAGAR, 7TH PHASE
BENGALURU - 560 078.
                                            ... RESPONDENT
(BY SRI LEDARESH R.S., ADVOCATE (PHYSICAL HEARING))

     THIS CRIMINAL PETITION IS FILED UNDER 482 OF CR.P.C.,
PRAYING TO SET ASIDE THE ORDER DATED 12.01.2022 PASSED
ON I.A. NO.4 FILED U/S 143(a) PASSED IN C.C.NO.6431/2021 BY
THE XII ADDITIONAL SMALL CAUSES JUDGE AND ADDL.C.M.M.,
BENGALURU (SCCH-8) AND DISMISS I.A.NO.4.

     THIS CRIMINAL PETITION COMING ON FOR ADMISSION THIS
DAY, THE COURT MADE THE FOLLOWING:

                               ORDER

Sri Narayanaswamy, petitioner No.1 who is the proprietor of

petitioner No.2-M/s. Thuahara Agencies collectively referred to as the

petitioner in this order is before this Court calling in question an

order dated 12-01-2022, passed on I.A.No.4 in C.C.No.6431 of 2021,

by the XII Additional Small Causes Judge and Additional Chief

Metropolitan Magistrate at Bengaluru, allowing the application filed

under Section 143A of the Negotiable Instruments Act, 1881 ('the Act'

for short).

2. Heard Sri Raghu Prasad B.S., learned counsel for the

petitioner and Sri Kedaresh R.S., learned counsel for the respondent.

3. The petitioner and the respondent were in a transaction in

pursuance of which it is claimed that the petitioner issued a cheque

for Rs.25,00,000/-, which when presented for its realization was

returned with an endorsement of 'stop payment'. Notices were issued

to the petitioner prior to initiation of proceedings under the provisions

of the Act. On 02-07-2021, the Court takes cognizance of the offence

punishable under the Act and issues process. The

respondent/complainant filed an application under Section 143A of

the Act on 13-10-2021, seeking to deposit 20% of cheque amount as

obtaining under the said provision of law. The petitioner files his

objections to the said application. The Court by the order impugned

allows the application filed by the respondent/complainant under

Section 143A of the Act and directs 20% of the amount of

instrument/cheque to be deposited before the Court. The reason

rendered by the Court is that, once the accused does not plead guilty

Section 143A of the Act mandates that 20% deposit should be made

immediately.

4. The learned Magistrate ignores the discretion that is available

as Section 143A(1) is directory, inasmuch as the word used is 'may'

and not 'shall' to make the deposit. Therefore, the discretion will have

to be exercised considering all the factors including the fact of the

accused not pleading guilty and becoming liable to deposit 20% of the

instrument amount. This very issue fell for consideration before this

Court in Criminal Petition No.100261 of 2022 (SMT. VIJAYA v.

SHEKHARAPPA) decided on 17-02-2022, wherein this Court has

held as follows:

"7. The Act was amended by the Amendment Act of 2018. It is by way of this amendment Section 143A came to be inserted. The entire text of the amendment concerning Section 143A reads as follows:

"1. Short title and commencement.-- (1) This Act may be called the Negotiable Instruments (Amendment) Act, 2018.

(2) It shall come into force on such date2 as the Central Government may, by notification in the Official Gazette, appoint.

2. Insertion of new Section 143-A.-- In the Negotiable Instruments Act, 1881 (26 of 1881)

(hereinafter referred to as the principal Act), after Section 143, the following section shall be inserted, namely:--

"143A. 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--

(a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and

(b) in any other case, upon framing of charge.

(2) The interim compensation under sub-

section (1) shall not exceed twenty per cent. of the amount of the cheque.

(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 11974).

(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.".

This amendment has come into force with effect from 1.09.2018 on publication in the official gazette. The Court may in certain circumstances award interim compensation which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. It is invoking the afore- quoted provision of law an application was filed by the complainant seeking interim compensation of 20% of the amount involved. The petitioner files her objections in detail and the Court considering the application passes order, relevant portion of which reads as follows:-

"7. Point No.1: The complainant before the court is drawee and accused is drawer of cheque in question, upon which the present case has been filed by the complainant against the accused for non-payment of amount covered under cheque which was dishonoured for the reason of insufficient funds in the account of accused to honour the cheque.

Before going for elaborate discussion, it is important to understand the amended provision of Negotiable Instrument Amendment Act, 2018, which reads as under:

"THE NEGOTIABLE INSTRUMENTS (AMENDMENT) ACT, 2018

An Act further to amend the Negotiable Instruments Act, 1881.

Be it enacted by Parliament in the Sixty-ninth Year of the Republic of India as follows:

1.(1) This Act may be called the Negotiable Instruments (Amendment) Act, 2018.

(2) It shall come into force on such date2 as the Central Government may, by notification in the Official Gazette, appoint.

2. In the Negotiable Instruments Act, 1881 (hereinafter referred to as the Principal Act), after Section 143, the following section shall be inserted, namely:--

"143A.(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, 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 amount 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.

Therefore, on going through entire amended provision of Negotiable Instruments Amendment Act, 2018 makes it clear that, if the drawer not pleaded the guilt, then he shall pay the interim compensation at the rate of 20% of the cheque amount, hence the amended provision clearly applicable to the case on hand, because, the accused did not plead the guilt, hence before going for trial she has to pay the 20% of the cheque amount as interim compensation to the complainant. Hence, the objection raised by the accused counsel does not hold any water, accordingly I answer point No.1 in the affirmative.

8. Point No.2: For the above said reasons and discussion, I proceed to pass the following:

ORDER

Interim application filed by the complainant under Section 143(A) of Negotiable Instrument Amendment Act, 2018 is hereby allowed.

The accused is hereby directed to pay 20% of the cheque amount as interim compensation to the complainant within 60 days from ṭhe date of this order failing which the complainant is at liberty to take action as per Section 421 and 357 of the Cr.P.C.

For payment of interim compensation call on 30-06- 2021."

The order afore-extracted passed by the Court does not bear reason as to why 20% of the amount is awarded as interim compensation. All that the Court records on going through the entire amended provision is if the drawer of the cheque has not pleaded guilty, then he shall pay interim compensation at the rate of 20%. The petitioner in the case at hand did not plead guilty. Therefore, the Court grants interim compensation. There is no application of mind as to why the said compensation has to be awarded and the provision of Section 143A is completely misread that once the accused does not plead guilty, the complainant becomes automatically entitled to 20% of the cheque amount as interim compensation. Sub-section (1) of Section 143A reads that notwithstanding anything contained in the Cr.P.C. the Court trying an offence under Section 138 may order drawer to pay interim compensation to the complainant. If an order is passed for payment of interim compensation it shall be paid within 60 days from the date of the order. Therefore, the Legislature has cautiously worded sub-section (1) of Section 143A not to make it mandatory in all cases where clauses (a) and (b) of sub- section (1) would empower the learned Magistrate before whom the trial is pending consideration to award interim compensation. It is a discretion conferred as the word used is "may". If the order is passed then the payment is mandatory, but not an order under the Act. Therefore, the learned Magistrate who is hearing the application for interim compensation should apply his mind, record his reasons in exercise of his discretion as to why an amount of 20% of the cheque amount is to be granted in any given case.

8. Further discretion available to the learned Magistrate is that the amount should not exceed 20%. Therefore, it is not that 20% has to be the interim compensation in every case. Here again the discretion is required to be exercised by the learned Magistrate as the interim compensation can vary from 1% to 20% but shall not exceed 20%. The language of Section 143A being couched with such discretion, the discretion if not exercised in a manner known to law, it becomes an arbitrary action. Exercise of discretion is discernible only in an order that contains reasons for exercise of such discretion and reasons can be found only if they are recorded in writing and if reasons are recorded in writing, it is only then the order would bear application of mind. As the consequence of non- payment of interim compensation so awarded is penal as proceedings can be initiated by the complainant under Sections 357 and 421 of the Cr.P.C. which are recoverable as fine paid under Section 421 of the Cr.P.C. The impugned action now alleged is that in terms of the order passed by the competent Court, the proceedings for attachment of the property are initiated by the complainant and the property of the petitioner is put to auction. Therefore, the consequences of such order are grave where the petitioner whose liability is yet to be determined will have to face grave hardship in the event of non-payment. It is thus necessary for the learned Magistrates to pass appropriate orders which bear application of mind and record reasons as to why interim compensation is to be awarded in a given case."

In the light of the reasons rendered by this Court in the aforesaid

case, the order impugned in the case at hand becomes unsustainable.

The learned Magistrate will have to exercise her discretion in terms

Section 143A of the Act, taking into consideration the application, the

contentions in the objections and pass an order which would bear

application of mind as once the order to deposit is made under

Section 143A (1) of the Act, the penal provision for non-payment

comes into action.

5. In the light of the issue stands covered by the aforesaid

judgment of this Court, I pass the following:

ORDER

(i) Criminal Petition is allowed.

(ii) The order dated 12.01.2022 passed by the XII Additional Small Causes Judge and Additional Chief Metropolitan Magistrate at Bengaluru, on I.A.No.IV in C.C.No.6431 of 2021, stands quashed.

(ii) The matter is remitted back to the learned Magistrate to pass appropriate order in accordance with law bearing in mind the observations made in the course of the order.