Case Analysis: Prospective Application of Section 143A, NI Act | Rajasthan High Court

Posted On - 8 February, 2025 • By - Aurelia Menezes

Summary

The Rajasthan High Court, in the case of Rashmi Khandelwal v. Kanhiyalal and Ors.[1], examined the relevance of Section 143A of the Negotiable Instruments Act, 1881, which permits courts to order the accused to pay interim compensation in cases of cheque bouncing. The Court determined that Section 143A, which was introduced on September 1, 2018, is applicable only going forward and cannot be enforced for complaints that were filed before its enactment. This ruling was based on the Supreme Court’s decision in G.J. Raja v. Tejraj Surana [2]and emphasized the principle that new substantive laws imposing liabilities cannot be applied retroactively.

Case Timeline

  1. 2017: The complainant filed three complaints under Section 138 of the Negotiable Instruments Act, alleging dishonour of cheques issued by the petitioners.
  2. 2018: Section 143A of the NI Act was introduced through an amendment, effective from September 1, 2018.
  3. Trial Court Order: The trial court directed the petitioners to pay interim compensation to the complainant under Section 143A.
  4. Petition Filed: The petitioners challenged the trial court’s order before the Rajasthan High Court, arguing against the retrospective application of Section 143A.

Issue Raised

  • Whether Section 143A of the NI Act, 1881, which empowers courts to direct interim compensation to the complainant, can be applied retrospectively to complaints filed before September 1, 2018.

Petitioner’s Arguments

  1. Violation of Substantive Rights: Section 143A imposes a new obligation on the accused to pay interim compensation, which constitutes a substantive provision. Retrospective application would violate the accused’s rights.
  2. Precedent from Supreme Court: The petitioners relied on G.J. Raja v. Tejraj Surana, wherein the Supreme Court held that Section 143A applies only to cases where the offence occurred after September 1, 2018.
  3. Principle of Non-Retrospectivity: They argued that laws affecting substantive rights cannot have retrospective effect unless expressly provided by the legislature.

Complainant’s Arguments

  1. Compensatory Nature: Section 143A was enacted to ensure financial relief to complainants during the pendency of proceedings. Its application to earlier cases would achieve the legislative objective.
  2. Legislative Intent: The complainant contended that the absence of an express prohibition on retrospective application provided courts the discretion to apply Section 143A to pending cases.

Judgment

  • The Rajasthan High Court held that Section 143A of the NI Act applies prospectively and cannot be enforced for complaints filed prior to its enactment on September 1, 2018.
  • The Court quashed the trial court’s order directing the petitioners to pay interim compensation.
  • It directed the refund of any amount deposited by the petitioners within four weeks.

The Court’s decision relied heavily on the Supreme Court’s ruling in G.J. Raja v. Tejraj Surana, which established that Section 143A introduces a substantive liability and cannot be applied retrospectively.

Analysis

The Rajasthan High Court’s ruling reinforces the principle that statutory provisions should not be applied retroactively. Section 143A introduces a new liability for the accused and should not be enforced for complaints that were filed prior to its enactment. This is consistent with established legal precedents from cases like Hitendra Vishnu Thakur v. State of Maharashtra and G.J. Raja v. Tejraj Surana. Although Section 143A is designed to offer relief to complainants in cheque bounce cases, its application only moving forward ensures fairness and protects the rights of those accused. The ruling also emphasizes the judiciary’s responsibility to uphold constitutional values and the intent behind legislation. By ruling against the retroactive application of Section 143A, the Court helped prevent potential misuse of this provision and preserved a balance between the rights of complainants and those of the accused. This decision highlights the importance of clear legislative drafting, especially concerning the timing of amendments.

[1] Rashmi Khandelwal v. Kanhiyalal and Ors.

[2] G.J. Raja v. Tejraj Surana, (2019) 19 SCC 469

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