TMI Blog2024 (4) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... lea of the petitioners that the respondent no. 2 also holds security in form of the flats and in form of a statement made in the course of the proceedings before the High Court of Judicature at Bombay that the said company will not be disposing of the flats or creating any third-party rights in the plot of land which is the subject property. This was an important consideration which should have been taken into account by the learned Trial Court while deciding on the application filed by the respondent no. 2 under Section 143A of the NI Act. What is also relevant is that Section 143A of the NI Act empowers the Court to pass a direction for payment of interim compensation only against the drawer of the cheque . In the present case, admittedly, the drawer of the cheques is the company and not the petitioners. The petitioners have been arrayed as accused invoking Section 141 of the NI Act. The Impugned Order dated 11.03.2022, however, relies upon Section 141 of the NI Act to hold that a direction to pay the interim compensation under Section 143A of the NI Act can be made even against persons who, though are not the drawer of the cheque , are still deemed to have committed the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anced by the parties, they are being disposed of by this common judgment. Factual Background 4. The respondent no. 2/complainant has filed the above complaints under Section 138 of the NI Act inter alia against the petitioners herein, alleging that:- (a) M/s Shivalik Ventures Private Limited (in short, M/s SVPL ), is a company incorporated under the Companies Act, 1956 (in short, Companies Act ), and claims to be working as a Service Provider in the field of slum rehabilitation. The petitioner nos. 1 to 3 herein are the Directors of M/s SVPL and are responsible for the day-to-day affairs and management of M/s SVPL, while petitioner nos. 4 and 5 are the Authorised Signatories of M/s SVPL; (b) M/s SVPL had entered into two agreements, dated 16.07.2009 and 12.08.2009, with respondent no. 2 / Complainant, whereunder, the respondent no. 2 was to purchase built-up commercial and residential area for a total consideration of a sum of Rs. 750 Crores. An advance amount of Rs. 187.50 Crores was also paid by the respondent no. 2 to M/s SVPL in terms of the agreements; (c) Due to certain disputes that arose between the parties on account of the non-fulfilment of the contractual obligations, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Terms dated 23.05.2019, which inter alia once again amended the schedule for repayment. M/s SVPL also issued post dated cheques in terms of the payment schedule. (j) M/s SVPL also paid a sum of Rs. 5.25 Crores in terms of the Consent Terms, making a total payment made to the respondent no. 2 as Rs. 116.25 Crores, and, in view of payments so made, the respondent no. 2 also released 33 more flats in favour of the petitioners. (k) M/s SVPL could not adhere to the new repayment scheme as well, which led to the respondent no. 2 to file contempt petitions, being Contempt Petition No. 136 of 2019 and 137 of 2019 before the High Court of Judicature at Bombay. (l) Thereafter, the company, that is, M/s SVPL paid a further sum of Rs.4 crores to the respondent no. 2, thereby making a total payment of Rs. 120.25 crores, leaving a sum of Rs. 87.25 crores in balance and interest thereon. A further sum of Rs. 2.40 crores was paid by the company, leaving a balance of Rs. 84.85 crores and interest thereon. (m) By an order dated 04.11.2019, the High Court of Judicature at Bombay also recorded the statement of the Advocate of M/s SVPL that the said company shall not be creating any third party righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strate disposed of the said applications directing the petitioners to make the payment of 12% / 10% of the cheque amount as interim compensation within a period of 60 days of the said orders. (u) Aggrieved of the Impugned Orders, the petitioners filed the present petitions. SUBMISSION OF THE PETITIONERS 5. The learned counsel for the petitioners submits that the provisions of Section 143A of the NI Act is not mandatory in nature. It vests a discretion with the learned Trial Court to direct deposit of the interim compensation keeping in view the facts of each case. 6. He submits that in the present case, the learned Metropolitan Magistrate has failed to appreciate that the respondent no. 2 already had a sufficient security of 120 flats, value of each flat being Rs. 62.50 lakhs, which if totalled is much more than the total outstanding amount of Rs. 67.25 crores. 7. He submits that a statement has already been made on behalf of the company before the High Court of Judicature at Bombay, that it will not alienate or create any third party rights in the flats mentioned hereinabove. Placing reliance on the judgment of this Court in JSB Cargo and Freight Forwarder Pvt. Ltd. and Others v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads not guilty to the accusation made in the complaint; and (b) in any other case, upon framing of charge. (2) The interim compensation under sub- section (1) shall not exceed twenty per cent. of the amount of the cheque. (3) The interim compensation shall be paid within sixty days from the date of the order under subsection (1), or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque. (4) If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant. (5) The interim compensation payable under this section may be recovered as if it were a fine under section 421 of the Code of Criminal Procedure, 1973 (2 of 1974). (6) The amount of fine imposed under section 138 or the amount of compensation awarded unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of framing charge. Therefore, clause (b) of sub-section (1) of Section 143A will apply only when the case is being tried as a warrant case. In the case of a summary or summons trial, the power under sub-section (1) of Section 143A can be exercised after the plea of the accused is recorded. xxxx 13. Non-payment of interim compensation by the accused does not take away his right to defend the prosecution. The interim compensation amount can be recovered from him treating it as fine. The interim compensation amount can be recovered by the Trial Court by issuing a warrant for attachment and sale of the movable property of the accused. There is also a power vested with the Court to issue a warrant to the Collector of the District authorising him to realise the interim compensation amount as arrears of land revenue from the movable or immovable property, or both, belonging to the accused. For recovery of the interim compensation, the immovable or movable property of the accused can be sold by the Collector. Thus, non-payment of interim compensation fixed under Section 143A has drastic consequences. To recover the same, the accused may be deprived of his immovable and movable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the power under sub-section (1) of Section 143A is discretionary. 17. Even sub-section (1) of Section 148 uses the word may . In the case of Surinder Singh Deswal v. Virender Gandhi , this Court, after considering the provisions of Section 148, held that the word may used therein will have to be generally construed as rule or shall . It was further observed that when the Appellate Court decides not to direct the deposit by the accused, it must record the reasons. After considering the said decision in the case of Surinder Singh Deswa, this Court, in the case of Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited Ors., in paragraph 6, held thus: 6. What is held by this Court is that a purposive interpretation should be made of Section 148 NI Act. Hence, normally, the appellate court will be justified in imposing the condition of deposit as provided in Section 148. However, in a case where the appellate court is satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal of the appellant, exception can be made for the reasons specifically recorded. (Emphasis added) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt must record brief reasons indicating consideration of all relevant factors. c. The broad parameters for exercising the discretion under Section 143A are as follows: i. The Court will have to prima facie evaluate the merits of the case made out by the complainant and the merits of the defence pleaded by the accused in the reply to the application. The financial distress of the accused can also be a consideration. ii. A direction to pay interim compensation can be issued, only if the complainant makes out a prima facie case. iii. If the defence of the accused is found to be prima facie plausible, the Court may exercise discretion in refusing to grant interim compensation. iv. If the Court concludes that a case is made out to grant interim compensation, it will also have to apply its mind to the quantum of interim compensation to be granted. While doing so, the Court will have to consider several factors such as the nature of the transaction, the relationship, if any, between the accused and the complainant, etc. v. There could be several other relevant factors in the peculiar facts of a given case, which cannot be exhaustively stated. The parameters stated above are not exhaustiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers the Court to pass a direction for payment of interim compensation only against the drawer of the cheque . In the present case, admittedly, the drawer of the cheques is the company and not the petitioners. The petitioners have been arrayed as accused invoking Section 141 of the NI Act. 23. Section 141 of the NI Act contains a deeming provision wherein, though offence under Section 138 of the NI Act is committed by a company, the persons mentioned in the said Section are deemed to be guilty of that offence and are liable to be proceeded against and punished accordingly. Section 141 of the NI Act is quoted herein below: 141. Offences by companies.-( 1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub- section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NI Act would have expressly stipulated the same. 26. A learned Single Judge of the High Court of Judicature at Bombay in Lyka Labs Ltd. Anr. v. State of Maharashtra Anr, 2023 SCC OnLine Bom 560, rightly so, also has held that the power to direct interim compensation cannot be traced under Section 141 of the NI Act in addition to Section 143A of the NI Act. 27. The Impugned Order dated 11.03.2022, however, relies upon Section 141 of the NI Act to hold that a direction to pay the interim compensation under Section 143A of the NI Act can be made even against persons who, though are not the drawer of the cheque , are still deemed to have committed the offence under Section 138 of the NI Act. This view of the learned Trial Court cannot be sustained. 28. In view of the above discussion, the Impugned Orders, having been premised on incorrect appreciation of law and having ignored vital and relevant considerations for passing an order under Section 143A of the Act, cannot be sustained. 29. The petitions are accordingly allowed. The Impugned Orders dated 24.07.2021 and 11.03.2022 passed by the learned Trial Court are hereby set aside. There shall be no order as to costs. 30. Pending applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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