Ashwin Ashokrao Karokar Vs Laxmikant Govind Joshi (Bombay High Court)
Held that the provisions of section 143-A of the Negotiable Instruments Act, 1881 are directory and not mandatory as a discretion was conferred upon the Court, to either grant or not to grant interim compensation.
Facts- The respondent/Complainant filed proceedings u/s. 138 of NI Act, in respect of two cheques one 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.
Accordingly, the petitions raise two interesting questions :
(i) Whether the provisions of Section 143-A of the NI Act, 1881, which empower the Court to direct payment of interim compensation are mandatory or directory and<
(ii) In case it is held that the same is directory, whether the Court has to record reasons for determining the quantum of interim compensation to be awarded as contemplated by Section 143-A (2) of the NI, 1881 ?
Conclusion- Held that the use of the word ‘may’, as occurring in Section 143-A(1) of the N.I. Act, was not mandatory but was directory and a discretion was conferred upon the Court, to either grant or not to grant interim compensation.
Held that the Court has to record reasons for determining the quantum of interim compensation, if it comes to the conclusion based upon the fact position availing, that it is a case which deserves award of interim compensation, which can be anywhere upto 20% of the cheque amount.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard Mr. Madhur Deo, learned Counsel for the petitioner and Mr. Bhushan Mohta, learned Counsel for the respondent. Rule. Rule made returnable forthwith. Heard finally with the consent of the learned Counsel for the rival parties.
2. The petitions raise two interesting questions :
(i) Whether the provisions of Section 143-A of the Negotiable Instruments Act, 1881, which empower the Court to direct payment of interim compensation are mandatory or directory and
(ii) In case it is held that the same is directory, whether the Court has to record reasons for determining the quantum of interim compensation to be awarded as contemplated by Section 143-A (2) of the Negotiable Instruments Act, 1881 ?
3. The facts in the instant matter, 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 Section 143-A(1) of the N.I. Act uses the word ‘may’ in the matter of directing an interim compensation to be paid. It is further contended, that use of the word “shall”, as occurring in Section 143-A(2) of the N.I. Act, is also directory as it merely indicates the limits, within which the interim compensation can be awarded by the Court, 20% of the cheque amount being the outer limit. It is also contended, that though the presumption under Section 139 of the N.I. Act, is attracted in a proceeding under Section 138 of the N.I. Act, however, that by itself, cannot be construed to indicate that the provisions of Section 143-A of the N.I. Act are mandatory in nature, for the reason that there would arise cases where the Court, even on a prima facie reading of the complaint may come to a conclusion that the presumption stood rebutted and in such cases, the question of directing interim compensation would not arise at all. He therefore submits, that in a given case, it would be permissible for the Court to even reject the application under Section 143-A of the N.I. Act for interim compensation.
4.1. Reliance for the above proposition is placed on L.G.R. Enterprises Vs. P. Anbazhagan, AIR Online 2019 Mad 801 (para 6 and 8), which holds that the word “may”, as occurring in Section 143-A(1) of the N.I. Act is discretionary. Reliance is also placed on Ajay Vinodchandra Shah Vs. State of Maharashtra and another, 2019 (4) Mh.L.J. 705, in which it is held that Section 143-A(1) of the N.I. Act leaves it to the discretion of the Court to pass an order of interim compensation upto the ceiling limit of 20% of the cheque amount.
4.2. Further reliance is placed upon K. Ranjithkumar Vs. K. Mathivanan, AIR Online 2021 Mad 2542, which reiterates the position in L.G.R. Enterprises (supra). Reliance is also placed upon JSB Cargo and Freight Forwarder Pvt. Ltd. and Others Vs. State and Another, 2021 SCC Online Del 5425, wherein a learned Single Judge after considering Surinder Singh Deswal Alias Colonel S.S. Deswal and Others Vs. Virender Gandhi and another, (2020) 2 SCC 514, L.G.R. Enterprises (supra) and Ajay Vinodchandra Shah (supra), held that the provisions of Section 143-A(1) of the N.I. Act, were directory and not mandatory (para 62). Further reliance is also placed upon Mr. D.L. Sadashiva Reddy S/o Late Lakshmana Reddy D Vs. Mr. V.G. Kona Reddy s/o Govinda Reddy Konareddy, 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 India and others, AIR 2002 SC 1351 (para 9) ; Padma Sundara Rao (Dead) and others Vs. State of T.N. and others, 2002 (3) SCC 533, (para 12); Commissioner of Income-tax, Orissa Vs. M/s. N. C. Budharaja and Company and another, 1993 AIR SCW 3317, (para 13); D. Saibaba Vs. Bar Council of India and another, AIR 2003 SC 2502, (para 17) ; S.S. Bola and others Vs. B. D. Sardana and others, AIR 1977 SC 3127 (para 178); (viii) Mardia Chemicals Ltd. and others Vs. Union of India and others, 2004 (4) SCC 311 (paras 55 to 64) and (ix) Kunhayammed and Others Vs State of Kerala and Another, (2000) 6 SCC 359 (para 45).
5. Mr. Bhushan Mohta, learned counsel for the respondent opposes the petitions and submits, that the amendment to the provisions to the N. I. Act was effected on 2nd August 2018, by way of a Notification published in the official gazette and it came into effect on 1st September, 2018. Inviting my attention to the statement of object and reasons, he submits that the purpose for enacting the Section 143-A and 148 of the N.I. Act, was to obviate, the delay as occasioned in the decision of the matters of Section 138 of the N.I. Act. He submits that use of the word ‘may’, does not mean that the provision is discretionary by relying upon Bachahan Devi and another Vs. Nagar Nigam, Gorakhpur and another, 2008 (12) SCC 372 (paras 31 to 33) ;Dilip K. Basu Vs. State of West Bengal and Ors, 2015 (8) SCC 744 (para 9); Surinder Singh Deswal @ Col. S. S. Deswal and others Vs. Virender Gandhi and another, 2019 (11) SCC 341.
5.1. Further reliance is placed upon, (i) Rajesh Soni s/o Shri R. Soni Vs. Mukesh Verma s/o Late Shri J. P. Verma, CRMP No.562 of 2021, decided on 30/06/2021 by the learned Single Judge of Chhattisgarh High Court, holding that Section 143-A(1) is mandatory in nature (para 19) and Modi Cements Vs. Kuchil Kumar Nandi, 1988 (3) SCC 249, which dilates upon the reasons and objects and the purpose behind enacting Section 138 of the N. I. Act; (ii) Deewan Singh and others Vs. Rajendra PD. Ardevi and others, 2007 (10) SCC 528 (paras 32 to 35, 43 and 44) ; (iii) State of Uttar Pradesh Vs. Jogendra Singh, AIR 1963 SC 1618, (para 8) ; (iv) State (Delhi Admn.) Vs. I. K. Nangia and another, 1980 (1) SCC 258 (para 15); State of Uttar Pradesh and others Vs. Babu Ram Upadhya, AIR 1961 SC 751 (para 28 and 29); (v) Municipal 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 of arguments placed by him on record, a tabular chart has been given, which it would be appropriate to reproduce as under :-
