The appellants, former partners of Bhoomi Infrastructure Co. (now GLM Infratech Pvt. Ltd.), issued 64 cheques to Respondent No. 1 as part payment of his retirement dues. One cheque of ₹45,84,915, deposited on 06.04.2015, was dishonoured due to insufficient funds, along with the other cheques. Respondent No. 1 filed 28 complaints under Section 138 of the NI Act, leading to the conviction of the appellants by the Judicial Magistrate on 30.10.2018. The appellants appealed and sought suspension of their sentence under Section 389 Cr.P.C., which was granted subject to furnishing bonds and depositing 25% of the compensation. Upon failing to comply, they filed another petition under Section 482 Cr.P.C., challenging the order dated 20.07.2019 passed by the Additional Sessions Judge.
Issues before the Court
- Retrospective or Prospective Effect of Section 148 of the N.I. Act The main issue was whether the amendment to Section 148 of the Negotiable Instruments Act (N.I. Act), which directs the accused to deposit 25% of the fine or compensation, applies retrospectively or prospectively, as the case arose before the amendment.
- Mandatory Nature of Section 148 The second issue was whether the word “may” used in Section 148 should be interpreted as “shall,” making it mandatory for the appellate court to direct the deposit of 25% of the fine or compensation as a condition for suspension of the sentence.
Arguments before the Court
The appellants argued that Section 148 of the N.I. Act, which mandates the deposit of 25% of the fine or compensation, should apply prospectively since the complaint was filed before the amendment. Applying it retrospectively would be unjust. The counsel contended that the word “may” in Section 148 gives the court discretion and should not be interpreted as “shall,” making the deposit mandatory. The appellate court wrongly treated it as a compulsory condition for suspending the sentence. The counsel further argued that failure to deposit 25% of the compensation should not lead to revocation of sentence suspension. Instead, the respondent (complainant) should recover the amount using the procedure in Section 421 of the CrPC. The appellants relied on case precedents to emphasize that Section 148 cannot apply to offences committed before its enactment, reinforcing the principle that laws affecting substantive rights operate prospectively.
Analysis of the Court
The Supreme Court upheld that Section 148 of the N.I. Act has retrospective application. The Court reasoned that the amendment to Section 148 was introduced by Parliament to prevent dishonest drawers from using delay tactics to prolong the proceedings after filing an appeal and obtaining a stay. Such delays defeated the purpose of Section 138 of the N.I. Act, which seeks to penalize cheque dishonor. The Court emphasized that the amendment does not infringe on the appellant’s right to appeal, and therefore, the appellants’ claim that Section 148 should not apply to cases initiated before the amendment was dismissed.
Regarding the interpretation of the word “may” in Section 148, the Court clarified that although “may” is usually discretionary, in the context of this section, it operates as “shall” and is treated as a mandatory provision. The Court ruled that, generally, the appellate court must direct the appellant to deposit at least 20% of the compensation as a condition for suspending the sentence, aligning with the amendment’s intent to protect the interests of the payee.
The Court highlighted the need for the amendment to rectify the imbalance caused by delay tactics, which often caused undue hardship to the payee. Since the payee invests significant time and resources in the legal process, the amendment to Section 148 was necessary to ensure that justice is not denied due to prolonged litigation.
