Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: M. Nagarprasanna J. allowed a petition filed under Section 482 of Criminal Procedure Code, 1973 (CrPC) seeking quashing of the impugned order passed by the Additional Chief Metropolitan Magistrate. Therefore, the magistrate court directed that interim compensation be given as per the “conduct of the accused” for the applications filed under Section 143-A of the Negotiable Instruments Act, 1881 (NI Act).

The observation came after the Court noticed that it was “flooded with litigation with regard to grant of compensation under Section 143-A of the NI Act by criminal courts”. Noticing that in several cases discretion is exercised for grant of compensation and in several other cases there are no reasons for exercise of such discretion, the Court found it necessary to direct Magistrates to consider the conduct of the accused at the outset while considering applications filed under Section 143-A of the Act.

“If the accused has been unnecessarily evading the proceedings by seeking adjournments, consideration of the application would become imperative as the amendment itself is introduced to compensate such payees of delay tactics adopted by unscrupulous drawers of cheques.”

Facts of the case

The petitioner and the respondent entered into an agreement in 2017 for the distribution of ice cream and frozen dessert products manufactured by the respondent. As per the agreement, the respondent had demanded the petitioner the issuance of blank cheques as security instead of the proposed supply to be made to the petitioner. Therefore, the petitioner issued several blank cheques to the respondent.

A complaint was filed invoking Section 200 of the CrPC for offences punishable under Section 138 of the NI Act when the cheque of Rs 5,56,71,208/- was dishonored on the grounds of want of sufficient funds in the account.

The trial court, after considering the facts, gave the impugned order of granting 10% interim compensation in terms of section 143-A of the NI Act.

Analysis of the court

Firstly, the court noted that Section 143-A of the Act was introduced for a specific purpose. The purport of the amendment was that 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which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. Therefore, the court in such cases directs the accused to pay interim compensation under section 143-A. In circumstances when the accused would not deposit the amount directed by the Court, it is recoverable by initiating proceedings under Section 421 of the CrPC. Therefore, the provision which is a directory in the beginning snowballs into becoming mandatory and penal by the time the realization of the deposit amount is made.

The Court, further, explained the following “two-fold discretion” that are sine qua non for an order to be passed by the Magistrate while considering the application under Section 143-A of the NI Act.:

  • First: In a given case if the accused is cooperating with the trial without seeking any unnecessary adjournments, not absenting himself or his counsel on any date and cooperating with the conclusion of the trial in such cases, the learned Magistrate will have to apply his mind, exercise his discretion as to whether such applications should be entertained at all.

  • Second: In any given case, the compensation may vary from 1% to 20%. As the mandate of the statute is that it should not exceed 20%, in the cases where Magistrate proceeds to grant compensation, has to bear in mind the amount involved in the instrument, as certain transactions would run to several cores and the accused may have formidable defence against the complainant. In such cases, the Magistrate should exercise discretion in a cautious manner. Here again the conduct of the accused should be noticed.

The court opined that application of mind and passing of a reasoned order of grant of compensation becomes necessary in penal cases that ensue an accused who failed to comply with the order granting 20% compensation as the complainant is given several remedies of recovery which result in the accused being taken into custody. Hence, such orders which result in such penal consequences should be rendered by giving cogent reasons which would demonstrate the application of mind, and such orders should be passed only after hearing the accused in the matter.

Ruling on facts

In the case at hand, involving the amount of Rs. 55 Lakhs, it was observed that the order of the Magistrate did not bear any reason. Hence, the Court held that the Magistrate after analyzing the conduct of the accused should grant compensation which would vary from 1% to 20% after recording necessary reasons and therefore set aside the impugned order and remitted back the matter to the hands of themagistrate.

[V. Krishnamurthy v. Diary Classic Ice Creams Pvt. Ltd., 2022 SCC OnLine Kar 1047, decided on 01-06-2022]

Advocates who appeared in this case :

Maruthi, Joshna Hudson Samuel, Advocates, for the Petitioner;

Dinesh SK, Advocate, for the Respondent.

Case BriefsHigh Courts

Patna High Court: The Division Bench of Sanjay Karol, CJ and S. Kumar J., held that an order of payment of interim compensation under the Negotiable Instruments Act, 1881 can be enforced under the Bihar & Orissa Public Demands Recovery Act, 1914 as ‘public demand’.

Question for Consideration

Whether an order for payment of interim compensation under the Negotiable Instruments Act can be enforceable under the Bihar & Orissa Public Demands Recovery Act, 1914 as a public demand?

High Court noted that Section 143A of the NI Act under sub-section (5) specifically states that interim compensation payable under this Section is recoverable as a fine under Section 421 of the Criminal Procedure Code, 1881.

Section 421 (1) (b) provides for issuance of warrant to the Collector to realize amounts as arrears of land revenue from movable and immovable properties of said defaulter.

Further, clause 3 of Schedule I of the Recovery Act as already extracted hereinabove states that any money realizable as arrear of land revenue by process authorized for said purpose shall be deemed a public demand under Section 3 of the Act.

Hence, the interim compensation so ordered under Section 143A of the NI Act is recoverable as a fine under Section 421 of CrPC which then, as shown from the above discussion, clearly falls under the definition of ‘public demand’

Therefore, Lower Court was correct in issuing an order under Section 143A of the NI Act for recovery of interim compensation as land revenue.

In view of the above discussion, the petitioner was at liberty to avail of alternative remedies under the law. [Sunil Kumar v. State of Bihar, 2022 SCC OnLine Pat 1045, decided on 10-5-2022]

Advocates before the Court:

For the Petitioner/s :

Mr. Sumeet Kumar Singh, Advocate Mr. Amarendra Kumar Singh, Advocate

Mr. Nikhil Singh, Advocate Ms. Shatakshi Sahay, Advocate

For the Respondent/s :

Mr. Anil Kumar Singh (GP 26 ) Mr. Sanjay Kumar, Advocate

Case BriefsHigh Courts

Karnataka High Court: M. Nagaprasanna, J. allowed the petition and quashed the impugned order regarding attachment of property and auction notification.

The facts of the case is such that the complainant claims to have lent to the accused a sum of rupees two crores by cash in two thousand rupees denomination and the cheque alleged to have issued by the accused is dishonoured. In respect of rupees two crores transaction in cash, the trial Court invoking Section 143-A of the Negotiable Instruments Act, 1881 (‘the Act’ for short) grants interim compensation of Rupees forty lakhs to be paid by the accused to the complainant. In the meantime the complainant exercising the liberty that was granted by the order impugned, initiated process in which order of attachment of the property of the petitioner was passed and a notice of public auction was also issued to auction the property on 25-01-2022. Aggrieved, an instant petition was filed challenging the said order.

Counsel for petitioner Mr. V M Sheelavant and Mr. Mrutyunjaya Halliker submitted that the petitioner is yet to be held guilty and the trial is yet to commence. As an interim measure, 20% of the claim amount is directed to be paid which amounts to Rs.40 lakhs and it is highly improbable that the complainant has dispersed the loan of rupees two crores that too in cash. It is a subject matter of trial.

Counsel for respondents Mr. B V Somapur and Mr. R K Kulkarni submitted that that presumption is operating against the petitioner in terms of provisions of the Act. Since the petitioner has issued the cheque, the liability is admitted and, therefore, the order directing 20% is in tune with law and would seek dismissal of the criminal petition.

The Court observed that the Act was amended by the Amendment Act of 2018 and Section 143A came to be inserted. The purport of the amendment is that 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.

The Court further observed that the impugned order does not bear reason as to why 20% of the amount is awarded as interim compensation. There is no application of mind as to why the said compensation has to be awarded. 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.

The Court remarked that, the Legislature has cautiously worded sub-section (1) of Section 143A not to make it mandatory in all cases. It is the discretion conferred, as the word used is “may”. Application of mind in exercise of discretion is discernible only in an order that contains reasons, 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 will be within the counters of law.

The Court further stated that 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 therefore imperative 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.

The Court thus in the case at hand observed that there is not even a semblance of application of mind on the part of the Magistrate of Trial Court as the provision was misconstrued that in the event the accused does not plead guilty he becomes liable to pay 20% as interim compensation. This is not the purport of the Act.  What is the necessary is only application of mind and recording detailed reasons as to why such compensation is to be awarded in a given case.

The Court thus held “the order dated 10.01.2022 of attachment of property in Criminal Miscellaneous No.313 of 2021 stands quashed. Public auction notification dated 25.01.2022 in furtherance of the order dated 10.01.2022 also stands quashed.”

[Vijaya v. Shekharappa, 2022 SCC OnLine Kar 515, decided on 17-02-2022]

Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Green Tribunal (NGT): A Coram of Justice A.K. Goel (Chairperson), Justice S.P. Wangdi (Judicial Member), Justice K. Ramakrishnan (Judicial Member) and Dr Nagin Nanda (Expert Member) took a status report of the execution of directions of the Tribunal by the respondents with regard to prevention and remedying of pollution of River Ganga.

The Tribunal had issued directions to the respondents to remedy the grave problem of pollution of River Ganga. State Governments of Uttarakhand, UP, Bihar, Jharkhand and West Bengal had been directed by the Tribunal to set up sewage treatment plants to prevent untreated sewage and effluents from falling into River Ganga.

The Tribunal recorded dissatisfaction with the progress made by the concerned state governments and National Mission for Clean Ganga in implementing the Tribunal’s direction. It laid down further directions to ensure that the pollution problems of River Ganga get remedied. The Tribunal directed the Uttarakhand Government to remedy the Sewage Treatment Plants (STPs) that weren’t meeting the norms, demarcate flood plains and remove encroachments from the river banks.

The Tribunal further held that unless prompt action to control pollution of River Ganga was taken, the Tribunal may be left with no option but to recover the cost of restoration from officers responsible for the failure and also require their prosecution. Regarding flood plains, it clarified that the distance for the no-construction zone was to be measured from the Highest Flood Lane.

The Tribunal further observed that out of 31 projects undertaken by the National Mission for Clean Ganga (NMCG) only 5 had been completed and the proposed timeline for the remaining work was now extended to December, 2021. The Tribunal held it to be against the spirit of its previous orders. The Tribunal also made it clear that NMCG would be treated to be doing its duty only if there was a decrease in pollution load and improvement in water quality in the River Ganga.

The Tribunal noted the absence of the States of Bihar, Jharkhand and West Bengal from the hearing and directed them to deposit a sum of Rs 25 lakhs each by way of interim compensation for the continued damage to the River Ganga. NMCG was asked file to its action taken report in respect of progress on parameters of reduction of pollution load, improvement of water quality and further road map and also identifying the persons accountable and also stating the action taken for the past lapses within four weeks.[M.C. Mehta v. Union of India, 2019 SCC OnLine NGT 74, decided on 29-05-2019]