Section 143A Imposes a Substantive Obligation and Cannot be Applied Retrospectively: Rajasthan High Court

Rajasthan High Court has held that Section 143A of the Negotiable Instruments Act, 1881, which mandates interim compensation in cheque dishonor cases, applies prospectively and cannot be imposed on complaints filed before its enactment on September 1, 2018. Justice Anoop Kumar Dhand observed: “The provision under Section 143A imposes a substantive obligation by requiring the accused to pay interim compensation even before a conviction, which was not envisioned in the unamended law. Such a provision, absent clear legislative intent, cannot be applied retrospectively.”

The petitioner, Rashmi Khandelwal, challenged orders passed by the trial court directing her to pay interim compensation under Section 143A of the Negotiable Instruments Act for three complaints filed under Section 138 of the Act in 2017, prior to the introduction of Section 143A. The petitioner argued that Section 143A, inserted via the Negotiable Instruments (Amendment) Act, 2018, applies prospectively and could not be enforced in cases initiated before September 1, 2018.

The respondents, on the other hand, contended that the amendment aimed to expedite compensation in cheque dishonor cases and should apply retrospectively to pending complaints to serve its legislative purpose.

The Court reiterated the established principle that substantive provisions in statutes are presumed to operate prospectively unless the legislature explicitly indicates otherwise. Citing the Supreme Court’s decision in Commissioner of Income Tax v. Vatika Township Pvt. Ltd., (2015) 1 SCC 1, Justice Dhand emphasized:
“Law passed today cannot apply to events of the past. A current law governs current activities, and substantive rights cannot be retrospectively altered unless the statute unequivocally provides so.”

The judgment clarified the distinction between substantive and procedural provisions. While procedural laws can have retrospective application, substantive laws affecting rights or obligations cannot be applied to past events. Section 143A, the Court noted, imposes a new obligation on the accused to pay interim compensation prior to a conviction, a liability that did not exist under the previous framework.

“Every litigant has a vested right in substantive law, but no such right exists in procedural law. Section 143A introduces a new liability and thus qualifies as substantive, warranting only prospective application,” the Court stated, relying on Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 SCC 602.

"Supreme Court's Judgment in G.J. Raja Clarifies Prospective Nature of Section 143A"
The Court placed significant reliance on the Supreme Court's landmark ruling in G.J. Raja v. Tejraj Surana, AIR 2019 SC 3817, which held:
“Section 143A of the Act must be held to be prospective in nature and confined to cases where offences were committed after the introduction of Section 143A.”

Justice Dhand distinguished Section 143A from Section 148 of the Act, which allows appellate courts to order deposit of compensation after conviction. Unlike Section 143A, Section 148 was deemed procedural and thus capable of retrospective application by the Supreme Court in Surinder Singh Deswal v. Virender Gandhi, 2019 (8) SCALE 445. The Court explained:
“Section 148, operating post-conviction, builds upon existing procedural mechanisms for recovery. In contrast, Section 143A, applicable during the trial stage, creates a new pre-conviction liability and thus cannot be construed to have retrospective effect.”

The Court noted that the complaints in the current case were filed in 2017, before the enactment of Section 143A on September 1, 2018. Since the provision imposes a substantive obligation, the trial court erred in applying it to pre-enactment complaints. The Court held:
“Section 143A cannot retrospectively alter the rights and obligations of parties in complaints filed prior to its introduction. The impugned orders of the trial court directing interim compensation under Section 143A are unsustainable in law.”

Quashing the trial court's orders, the High Court directed: “The impugned orders passed by the trial court stand quashed and set aside. Any amounts deposited by the petitioners pursuant to the orders shall be refunded with interest within four weeks from the date of receipt of this order.”

This ruling underscores the principle that substantive legal provisions imposing new liabilities cannot be retrospectively applied unless explicitly stated. By upholding the prospective nature of Section 143A, the Rajasthan High Court reaffirmed the Supreme Court’s interpretation in G.J. Raja v. Tejraj Surana.

Decision Date: January 16, 2025