Section 143A of Negotiable Instruments Act on Interim Compensation is not retrospective

The Supreme Court ruled out the confusion and held that  Section 143A of the Negotiable Instruments Act (hereinafter referred as ‘the Act’) on payment of interim compensation to the complainant during the pendency of the case has no retrospective application.

The ruling was given in the matter of GJ Rana vs. Tejraj Surana [SLP (CR.) 3349/19] delivered on 30.7.2019

Challenge:

The question of law involved in the above-mentioned SLP was whether the application of section 143A NI Act is retrospective or prospective in nature?

Held:

The Apex Court compared the general principles concerning ‘retrospectivity of legislation’ in the context of Section 158-BE inserted in the Income Tax Act, 196. The Alex Court in the matter of  Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika Township Private Limited [2015 (1) SCC 1] held that out of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. This principle of law is known as lex prospicit none respicit: law looks forward not backward.

Further, the Apex Court explained that the provisions contained in Section 143A have two dimensions. First, the Section creates a liability in that an accused can be ordered to pay over up to 20% of the cheque amount to the complainant. Such an order can be passed while the complaint is not yet adjudicated upon and the guilt of the accused has not yet been determined. Secondly, it makes available the machinery for recovery, as if the interim compensation were arrears of land revenue. Thus, it not only creates a new disability or an obligation but also exposes 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.

In conclusion, the Court observed that prior to the insertion of Section 143A in the NI 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 143A 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.

Therefore, at the ultimate analysis the Apex Court holds is that Section 143A is prospective in operation and that the provisions of said Section 143A can be applied or invoked only in cases where the offence under Section 138 of the Act was committed after the introduction of said Section 143A in the statute book.