Vivek Sahni And Another vs Kotak Mahindra Bank Ltd

CRM-M-29187-2019 (O&M) -1-

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

(1) CRM-M-29187-2019 (O&M) Date of Order:18.07.2019

Vivek Sahni and another ..Petitioners

Versus

Kotak Mahindra Bank Ltd. ..Respondent

(2) CRM-M-29188-2019 (O&M)

Vivek Sahni and another ..Petitioners

Versus

Kotak Mahindra Bank Ltd. ..Respondent

CORAM: HON'BLE MR. JUSTICE ANIL KSHETARPAL

Present: Mr. Nitin Jain, Advocate, for the petitioners Mr. D.K.Singal, Advocate, for the respondent.

ANIL KSHETARPAL, J.

Courts are required to rediscover itself when they face

unprecedented challenges particularly in absence of clear statutory mandate.

These cases also throw such challenge. Let me take an attempt to do justice.

By this order, CRM-M-29187 and CRM-M-29188 of 2019

shall stand disposed of. Counsel for the parties are also agreed that the

issues involved for decision are common in both the petitions.

Following questions needs determination:-

(1) "Whether a convict under Section 138 of the Negotiable

Instruments Act (hereinafter referred to as 'the NI Act')

while in appeal against the conviction is entitled to pray

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for adjustment of the amount already recovered under

the Securitisation and Reconstruction of Financial

Assets and Enforcement of Securities Interest Act, 2002

(hereinafter referred to as 'the SARFAESI Act') towards

directions of the appellate court to deposit certain

percentage of the compensation or fine under Section

148 of the NI Act or not particularly when it is not

disputed that amount involved proceedings under the

SARFAESI Act and the NI Act 1881 are arising out of

same transaction?

(2) Whether on non-deposit of the amount as directed under

Section 148 of the Negotiable Instrument Act, 1881, bail

granted to the appellant is liable to be

automatically/consequently cancelled?

Some facts are required to be noticed.

Petitioners herein (2 in number, one individual and second

incorporate company ) had allegedly taken two credit facilities from Capital

First Limited. Since, it is alleged that petitioners did not adhere to the

financial discipline, defaulted in re-payment of monthly installments,

therefore, petitioners issued cheques in favour of M/s Capital First Limited

towards re-payment of the entire credit facility. Cheques were dishonored

by the bank when presented for encashment resulting in filing of two

complaints under Section 138 of the NI Act. Subsequently, Kotak

Mahindra Bank was substituted being assignee. Along with the proceedings

under Section 138 of the NI Act proceedings under the SARFAESI Act

were also initiated.

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Learned Judaical Magistrate convicted the petitioners of

offence under Section 138 of the NI Act and sentenced to imprisonment for

a period of two years in 2 separate cases and they were also directed to pay

compensation equivalent to the cheque amount to the complainant.

In the proceedings under SARFAESI Act, it is undisputed that

in the meanwhile two mortgaged properties have been sold through

different auctions and respondent bank has already recovered Rs.1.73

crores.

Aggrieved by the conviction and sentence in proceedings under

section 138 of the NI Act, 2 separate appeals were filed, concession of bail

was granted by the first appellate Court. Simultaneously, petitioners-

convicts were directed to deposit 20% of the compensation amount under

Section 148(2) of the NI Act as introduced by amendment Act of 2018.

Petitioners filed applications in both the cases for adjustment of

the amount directed to be paid by the appellate Court as interim

compensation, noticed above, against the amount recovered under

SARFAESI Act which have been dismissed by the Court by passing

separate similarly worded orders on the ground that the appellants have

failed to point out any provision of law permitting such

adjustment/arrangement. It may be noted here that while granting bail vide

order dated 02.04.2019, petitioners-convicts were directed to deposit 20%

of the compensation awarded by the trial court which in both the appeals

comes to Rs.60,00,000/-. It is undisputed that after 02.04.2019 when

petitioners were directed to deposit 20% of the amount of compensation,

respondent-bank has recovered Rs.1,21,00,000/- by sale of showroom on

16.04.2019 besides Rs.52,00,000/- recovered earlier thereto.

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This Court has heard learned counsels for the parties at length

and with their able assistance gone through the paper books.

In the considered view of this court, learned first appellate

court has erred in addressing the issue raised by the petitioners from a

wrong direction. It is fundamental rule of law that if more than one

proceedings are pending for recovery of the same or connected or

interlinked amount, the court would normally adjust the amount which has

been paid/recovered in one proceeding. For example, in the cases of grant

of maintenance under different statutes, like proceedings under Section 125

Cr.P.C., Protection of Women from Domestic Violence Act, Hindu

Marriage Act, payment in one proceeding is accounted for in another

proceeding unless there is order to the contrary. Still further it is also well

settled that no one can be called upon to pay more than what is due, even, if

under different proceedings judgments and decrees or orders have been

passed. Here is a case where parallel proceedings have been initiated under

SARFAESI Act and the NI Act. Of course, proceedings under NI Act is

not for recovery but provision for payment of interim compensation has

been made to achieve recovery of some part of the amount. Appellate Court

in the proceedings under NI Act has ordered deposit of 20% of the

compensation amount in both the appeals, the sum total whereof, comes to

Rs.60,00,000/-, whereas respondent admittedly has recovered much more

amount while selling mortgaged property belonging to the petitioners even

after direction was issued by the appellate court.

Now let's make an attempt to answer the questions framed in

the beginning.

Q.NO.1:

"Whether a convict under Section 138 of the Negotiable

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Instruments Act (hereinafter referred to as 'the NI Act')while in appeal against the conviction is entitled to pray for adjustment of the amount already recovered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act') towards directions of the appellate court to deposit certain percentage of the compensation or fine under Section 148 of the NI Act or not particularly when it is not disputed that amount involved proceedings under the SARFAESI Act and the NI Act 1881 are arising out of same transaction?

Negotiable Instrument Act, 1881 has been amended in 2018.

Two significant provisions have been added, i.e., Section 143A and Section

148 which are extracted as under:-

''143A. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant-

(a) in a summary trial or a summons case, where he pleads 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 sub-section (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

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of the Code of Criminal Procedure, 1973.

(6) The amount of fine imposed under section 138 or the amount of compensation awarded under section 357 of the Code of Criminal Procedure, 1973, shall be reduced by the amount paid or recovered as interim compensation under this section.''.

''148. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, in an appeal by the drawer against conviction under section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent. of the fine or compensation awarded by the trial Court:

Provided that the amount payable under this sub- section shall be in addition to any interim compensation paid by the appellant under section 143A.

(2) The amount referred to in sub-section (1) shall be deposited 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 appellant.

(3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:

Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, 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.''.

Sections 357 and 421 of the Code of Criminal Procedure, which

are relevant, are extracted as under:-

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357. Order to pay compensation.

(1) When a Court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part, the Court may, when passing judgment, order the whole or any part of the fine recovered to be applied-

(a) in defraying the expenses properly incurred in the prosecution;

(b) in the payment to any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the Court, recoverable by such person in a Civil Court;

(c) when any person is convicted of any offence for having caused the death of another person or of having abetted the commission of such an offence, in paying compensation to the persons who are, under the Fatal Accidents Act, 1855 (13 of 1855 ), entitled to recover damages from the person sentenced for the loss resulting to them from such death;

(d) when any person is convicted of any offence which includes theft, criminal misappropriation, criminal breach of trust, or cheating, or of having dishonestly received or retained, or of having voluntarily assisted in disposing of, stolen property knowing or having reason to believe the same to be stolen, in compensating any bona fide purchaser of such property for the loss of the same if such property is restored to the possession of the person entitled thereto.

(2) If the fine is imposed in a case which is subject to appeal, no such payment shall be made before the period allowed for presenting the appeal has elapsed, or, if an appeal be presented, before the decision of the appeal. (3) When a Court imposes a sentence, of which fine does not form a part, the Court may, when passing judgment, order the accused person to pay, by way of

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compensation, such amount as may be specified in the order to the person who has suffered any loss or injury by reason of the act for which the accused person has been so sentenced.

(4) An order under this section may also be made by an Appellate Court or by the High Court or Court of Session when exercising its powers of revision. (5) At the time of awarding compensation in any subsequent civil suit relating to the same matter, the Court shall take into account any sum paid or recovered as compensation under this section.

421. Warrant for levy of fine.

(1) When an offender has been sentenced to pay a fine, the Court passing the sentence may take action for the recovery of the fine in either or both of the following ways, that is to say, it may-

(a) issue a warrant for the levy of the amount by attachment and sale of any movable property belonging to the offender;

(b) issue a warrant to the Collector of the district, authorising him to realise the amount as arrears of land revenue from the movable or immovable property, or both, of the defaulter: Provided that, if the sentence directs that in default of payment of the fine, the offender shall be imprisoned, and if such offender has undergone the whole of such imprisonment in default, no Court shall issue such warrant unless, for special reasons to be recorded in writing, it considers it necessary so to do, or unless it has made an order for the payment of expenses or compensation out of the fine under section 357. (2) The State Government may make rules regulating the manner In which warrants under clause (a) of sub- section (1) are to be executed, and for the summary determination of any claims made by any person other than the offender in respect of any property attached in

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execution of such warrant.

(3) Where the Court issues a warrant to the Collector under clause (b) of sub- section (1), the Collector shall realise the amount in accordance with the law relating to recovery of arrears of land revenue, as if such warrant were a certificate issued under such law:

Provided that no such warrant shall be executed by the arrest or detention in prison of the offender.

Section 143A of the NI Act enables the trial courts to award

interim compensation in the cases arising out of dishonor of the cheques. It

is provided that the interim compensation shall be paid within sixty days

from the date of the order under sub-section (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. Sub-section (5)

of Section 143A of the NI Act provides that interim compensation if not

paid as provided in sub-section (3) it may be recovered as if it were a fine

under section 421 of the Code of Criminal Procedure, 1973. However, such

procedure delineating the consequence of default of payment of the

percentage of fine or compensation awarded is conspicuously absent in

Section 148 of the NI Act. If we carefully examine provision of Section 357

of the Code of Criminal Procedure, it is apparent that sub-section (3) lays

down that when a Court impose sentence, of which fine does not form a

part, the Court may, when passing judgment, order the accused person to

pay, by way of compensation, such amount as may be specified in the order

to the person who has suffered any loss or injury by reason of the act for

which the accused person has been so sentenced.

Another relevant provision is in sub-section (5) of Section 357

of the Code of Criminal Procedure providing that while awarding

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compensation in any subsequent civil suit relating to the same matter, the

Court shall take into account any sum paid or recovered as compensation

under this section.

Section 421Cr.P.C. deals with the procedure for execution of

the fine. It provides that the Court can adopt any of the procedure

prescribed in Section 421(1) Cr.P.C.. First option with the court is to issue

a warrant for the levy of the amount by attachment and sale of any movable

property belonging to the offender. Second option is to issue a warrant to

the Collector of the district, authorising him to realise the amount as arrears

of land revenue from the movable or immovable property, or both, of the

defaulter.

In view of the aforesaid provisions, it is clear that the interim

compensation or compensation ordered by the Court while dealing with

criminal case is liable to be accounted for in any subsequent civil suit or

proceedings. Even otherwise, this court did not find that there is any

prohibition or impediment in ordering adjustment.

Let's try to examine this question from another angle. The

intention of the legislature is to introduce provision for speedy recovery of

some part of the amount representing the cheque amount as an interim

measure. It is not the intention of the legislature that if some part of the

cheque amount has already been recovered in a separate proceedings, may

be civil proceedings, the amount ordered to be deposited as interim

compensation or fine shall still liable to be deposited in the appeal or the

trial Court.

Let's evaluate the situation from another angle. As per proviso

to sub-section (3) of Section 148 of the NI Act, it is provided that after

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deposit of the compensation, if the appellant is acquitted, the Court shall

direct the complainant to repay to the appellant the amount so released, with

interest at the bank rate. However, in any other situation there is no

provision for refund. Hypothetically, there can be situation when in the

civil proceedings, entire amount has already been recovered and then if the

convict-appellant is forced to pay the additional amount as ordered by the

Court under Section 148 of the NI Act, apart from being inequitable, there is

no remedy in the Act to recover the amount deposited because the amount

of interim compensation can be directed to be paid to the holder of the

cheque.

Another aspect of the matter is that the intention of the

legislature is to ensure that at least certain percentage of the defaulted

cheque amount or compensation ordered is recovered as an interim measure

because decision in the trial of such cases and appeal take lot of time.

However, the intention of legislature cannot be that the interim

compensation is bonanza to the complainant.

Learned counsel for the petitioners has made reference to a

judgment passed by the Hon'ble Supreme Court in the case of

D.Purshotama Reddy and another vs. K. Sateesh, (2008) 8 SCC 505. In

that case, Hon'ble Supreme Court was examining a situation where in the

proceedings under Section 138 of the NI Act compensation amount ordered

by the court stood paid. For recovery of some amount including the cheque

amount, a civil suit had been filed which was decreed along with interest.

Question which arose before the Hon'ble Supreme Court was whether such

amount is liable to be adjusted. The Court found that the provisions of the

Act have to be given purposive interpretation and construction, therefore,

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the amount of compensation already recovered shall be liable to be adjusted

in the decree of the Civil court as per the provisions of sub-section (5) of

Section 357 of the Code of Criminal Procedure.

Taking support from the aforesaid judgment, this Court is of the

view that the facts of each case particularly when the amount under cheque

and recovery proceedings under any other provision is same and

interconnected, the Courts are well within their power to order adjustment.

Accordingly Question No.1 is answered in favour of the

petitioners.

Q.No.2

Whether on non-deposit of the amount as directed under Section 148 of the Negotiable Instrument Act, 1881, bail granted to the appellant is liable to be automatically/consequently liable to be cancelled?

On careful examination of Sections 143A and Section 148 of

the NI Act, it is nowhere, specifically provided that if the payment as

ordered has not been deposited, the bail granted shall be liable to be

consequently cancelled. Section 143 do provide that recovery can be made

of such defaulted amount as if it is a fine under Section 421 Cr.P.C.,

therefore, obviously during the trial of the case, the Court should not cancel

the bail already granted on this ground alone. The offence under Section

138 of the NI Act is bailable. Still further, although, there is no provision in

Section 148 of the NI Act for recovery of defaulted amount against

appellant, however, the words used are "fine or compensation" awarded by

the trial Court. Default in payment of certain percentage of compensation

or fine, would not ipso facto result in cancellation of the bail. There are

long series of judgments passed by the Hon'ble Supreme Court that

normally conditions for grant of bail cannot be made onerous for the

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accused. Once the legislature or framers of the NI Act have not made any

specific provision for automatic cancellation of the bail granted by the trial

court or the appellate court on account of default of payment of interim

compensation or certain percentage of compensation or fine, it would not be

appropriate to hold it otherwise.

Accordingly, Q. No.2 is also answered in favour of the

petitioners.

For the reasons recorded, the order under challenge is set aside,

the amount recovered under the SARFAESI Act shall be deemed to have

been adjusted towards 20% of the compensation as ordered by the Court.

The Appellate Court would proceed to decide the appeal in accordance with

law.

18th July, 2019 (ANIL KSHETARPAL) nt JUDGE

Whether speaking/reasoned : Yes/No Whether reportable : Yes/No

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