Jharkhand High Court Sets Aside Appellate Order for Retrospective Application of Section 143A (of Income Tax Act, 1961) N.I. Act

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Case Name

Nokibuddin Shekh vs. The State of Jharkhand & Md. Mikail Firdaus (High Court of Jharkhand)

Criminal Revision No. 135 of 2020

Date: 18th March 2025

Key Takeaways

• Section 143A of the N.I. Act cannot be applied retrospectively: The court clarified that this section, which allows courts to order interim compensation, only applies to offences committed after its introduction on 01.09.2018.
• Appellate courts cannot demand the entire fine as a precondition for hearing an appeal: Even under the amended law, only up to 20% of the cheque amount can be ordered as interim compensation, not the full amount.
• The appeal is revived: The High Court set aside the order dismissing the appeal and directed the lower court to hear the appeal on its merits, without insisting on a security deposit.
• Reference to Supreme Court precedent: The judgment relies heavily on the Supreme Court’s decision in G.J. Raja vs. Tejraj Surana (2019 SCC OnLine SC 989), which held that Section 143A (of Income Tax Act, 1961) is prospective, not retrospective.

Issue

Can Section 143A of the Negotiable Instruments Act, 1881 (inserted in 2018), be applied retrospectively to require an accused to deposit the entire fine amount as a precondition for hearing an appeal, when the alleged offence occurred before the section came into force?

Facts

• Parties: Nokibuddin Shekh (petitioner) vs. The State of Jharkhand and Md. Mikail Firdaus (opposite party no. 2).
• Background: The petitioner was convicted under Section 138 of the N.I. Act for issuing a cheque that bounced. The trial court sentenced him to one year’s simple imprisonment and a fine of Rs. 4,37,500/- with 4% simple interest per annum from the date of the cheque.
• Appeal: The petitioner appealed the conviction. The appellate court (Principal District and Sessions Judge, Pakur) ordered him to deposit the entire fine amount as a precondition for hearing the appeal, citing Section 143A of the N.I. Act.
• Timeline:
• Complaint filed: 06.03.2017
• Trial court judgment: 19.06.2018
• Appellate court order for deposit: 14.08.2018
• Section 143A (of Income Tax Act, 1961) came into force: 01.09.2018
• Appellate court dismissed appeal for non-deposit: 03.12.2019
• High Court Revision: The petitioner challenged the appellate court’s order in the High Court, arguing that Section 143A (of Income Tax Act, 1961) could not be applied retrospectively.

Arguments

Petitioner (Nokibuddin Shekh)

• The order requiring deposit of the entire fine is illegal and arbitrary.
• Section 143A of the N.I. Act, which allows for interim compensation, was introduced after the offence and cannot be applied retrospectively.
• Even under Section 143A (of Income Tax Act, 1961), only 20% of the cheque amount can be ordered as interim compensation, not the full amount.
• Relied on the Supreme Court’s decision in G.J. Raja vs. Tejraj Surana (2019 SCC OnLine SC 989), which held Section 143A (of Income Tax Act, 1961) is prospective.

State & Opposite Party No. 2

• Opposed the bail and supported the appellate court’s order.
• However, the counsel for O.P. No. 2 admitted that Section 143A (of Income Tax Act, 1961) is effective only from 01.09.2018 and agreed that necessary orders should be passed accordingly.

Key Legal Precedents

• G.J. Raja vs. Tejraj Surana (2019 SCC OnLine SC 989): The Supreme Court held that Section 143A of the N.I. Act is prospective and applies only to offences committed after its introduction on 01.09.2018. The court explained that laws are presumed not to have retrospective effect unless expressly stated, and Section 143A (of Income Tax Act, 1961) creates a new liability and exposes the accused to coercive recovery methods, so it cannot be applied to past offences.
• Section 143A of the N.I. Act: Allows courts to order interim compensation up to 20% of the cheque amount during the pendency of proceedings, but only for offences after 01.09.2018.

Judgement

• The High Court set aside the appellate court’s order dated 03.12.2019, which had dismissed the appeal for non-deposit of the entire fine amount.
• The appeal (Cr. Appeal No. 23 of 2018) is revived and remitted to the Principal District and Sessions Judge, Pakur, for a fresh hearing on merits, without requiring any security deposit.
• Both parties are directed to appear before the lower court for a fresh hearing.
• The High Court also allowed the petitioner’s bail application, considering his custody and the nature of the dispute.
• The court emphasized that Section 143A (of Income Tax Act, 1961) cannot be applied retrospectively and, even if it were applicable, only 20% of the cheque amount could be ordered as interim compensation, not the full amount.

FAQs

Q1: What is Section 143A of the N.I. Act, and why was it important in this case?

A: Section 143A (of Income Tax Act, 1961) allows courts to order interim compensation (up to 20% of the cheque amount) to the complainant during the pendency of proceedings. The appellate court wrongly applied this section retrospectively to require the accused to deposit the entire fine, which the High Court found to be incorrect.

Q2: Why did the High Court set aside the appellate court’s order?

A: Because Section 143A (of Income Tax Act, 1961) was introduced after the alleged offence and cannot be applied retrospectively. Also, even under this section, only 20% of the cheque amount can be ordered as interim compensation, not the full amount.

Q3: What happens next in the case?

A: The appeal is revived and will be heard afresh by the appellate court, without requiring any security deposit from the petitioner.

Q4: What precedent did the High Court rely on?

A: The Supreme Court’s decision in G.J. Raja vs. Tejraj Surana (2019 SCC OnLine SC 989), which held that Section 143A (of Income Tax Act, 1961) is prospective and cannot be applied to offences committed before 01.09.2018.

Q5: Was the petitioner granted bail?

A: Yes, the High Court granted bail to the petitioner, considering his custody and the facts of the case.