January 20, 2025

The government had amended the Negotiable Instruments Act in 2018 to insert two new sections which provided for the drawer of a bounced cheque to pay interim compensation to the payee if the drawer pleaded not guilty of the charges (under sec. 143A) and on appeal, the appellate court was empowered to order deposit of an amount that was at least 20 percent of the fine or compensation imposed by the trial court (under sec. 148).

This was done, as the government said it had 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." The said amendments came into force on the first of September, 2018.

Since there were lakhs of cheque bouncing cases pending at that time, there was no clarity whether these two sections could be applied retrospectively. Now, the Supreme Court has ruled that sec. 148 can be applied with retrospective effect. In the case Surinder Singh Deswal @ Col. S.S. Deswal vs. Virender Gandhi, the question before the court was whether the section could be applied to cases where the accused were convicted before it came into force.

The court upheld the Punjab and Haryana High Court order, which in turn had upheld the First Appellate Courts’ order directing the appellants/convicts to deposit 25% of the amount levied as fine/compensation by the trial court. The appellants had argued that since their conviction was confirmed before the amendment came into force, they were not liable to deposit the amount. But the apex court dismissed their plea. It said that “considering the Statement of Objects and Reasons of the amendment in Section 148 of the N.I. Act stated hereinabove, on purposive interpretation of Section 148 of the N.I. Act as amended, we are of the opinion that Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to amendment Act No. 20/2018 i.e., prior to 01.09.2018. If such a purposive interpretation is not adopted, in that case, the object and purpose of amendment in Section 148 of the N.I. Act would be frustrated.”

As for section 143A, while the Punjab and Haryana High Court has held that it cannot be applied with retrospective effect, a Special Leave Petition is pending before the Supreme Court to decide on the subject. One feels that if the purpose of the legislation was to prevent unscrupulous drawers of cheques from prolonging the cases and harass the payees, then sec 143A should also be applied with retrospective effect in order to let the drawers prove their good intentions by paying interim compensation to the payee and then contesting the case.