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Order for Interim Compensation Under NI Act Can Be Enforced As 'Public Demand' Under Bihar & Orissa Public Demands Recovery Act: Patna High Court

Jyoti Prakash Dutta
12 May 2022 6:13 AM GMT
Order for Interim Compensation Under NI Act Can Be Enforced As Public Demand Under Bihar & Orissa Public Demands Recovery Act: Patna High Court
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Image By: Siddharth Anand

In a significant decision, the Patna High Court has ruled that an order for payment of interim compensation under the Negotiable Instruments Act, 1881 ('the NI Act') can be enforced under the Bihar & Orissa Public Demands Recovery Act, 1914 ('the Recovery Act') as a 'public demand'. A Division Bench of Chief Justice Sanjay Karol and Justice S. Kumar held,

"The interim compensation so ordered under Section 143A of the NI Act is recoverable as a fine under Section 421 of Cr.P.C. which then, as shown from the above discussion, clearly falls under the definition of 'public demand'. The petitioner's contention of non-applicability of the Recovery Act, therefore, necessarily has to be negated."

Factual Background:

The respondent No. 4, namely Arun Kumar ("the private respondent") trader of paddy, wheat etc. allegedly delivered goods worth Rs. 1,26,75,600/- to the petitioner, namely Sunil Kumar in the period between 23.08.2018 and 30.08.2018. The petitioner issued a cheque on 15.03.2019 as the consideration. However, the same was dishonoured on presentation. Therefore, the private respondent sent a legal notice. But the petitioner failed to comply, subsequent to which, the private respondent filed a complaint case on 16.04.2019 before the Chief Judicial Magistrate, Aurangabad under Section 138 of the NI Act.

The Additional Chief Judicial Magistrate III, Aurangabad vide order dated 21.11.2019, upon consideration of facts and the record, passed an order of interim compensation of Rs. 25,00,000/- under Section 143A of the NI Act to be paid by the petitioner herein to the private respondent within a period of sixty days from the date of order.

Subsequently, an order for execution was passed on 28.01.2021. Therein it was noted that sufficient time had passed since the original order. Therefore, extension could not be granted and Section 421(1)(b) of the Code of Criminal Procedure (Cr.P.C.) was invoked and a warrant was issued to the Collector, Aurangabad authorizing him to realize the above stated amount from the moveable and immovable of the petitioner.

Pursuant to the above order, the Collector, Aurangabad forwarded the same to the District Certificate Officer, Aurangabad for suitable action, who registered a certificate case and issued notice dated 03.12.2021 calling upon the petitioner to pay the said amount within a period of thirty days. The petitioner has challenged the same before the High Court.

Issue for Consideration:

Whether an order for payment of interim compensation under the Negotiable Instrument Act can be made enforceable under the Bihar & Orissa Public Demands Recovery Act, 1914 as a 'public demand'?

Court's Observations:

The Court noted that sub-section (5) to Section 143A of the NI Act specifically states that interim compensation payable under the Section is recoverable as a fine under Section 421 of the Cr.P.C. Further, Section 421(1)(b) provides for issuance of warrant to the Collector to realize amounts as arrears of land revenue from movable and immovable properties of said defaulter. Again, clause 3 of Schedule I of the Recovery Act states that any money realizable as arrear of land revenue by process authorized for said purpose shall be deemed a 'public demand' under Section 3 of the Act.

Therefore, the Court held that the interim compensation so ordered under Section 143A of the NI Act is recoverable as a fine under Section 421 of the Cr.P.C., which clearly falls under the definition of 'public demand'. The Court rejected the petitioner's contention of non-applicability of the Recovery Act and observed,

"Once the above question is answered positively, that is to say that interim compensation ordered under the NI Act falls within the ambit of Schedule I of the Recovery Act, realization thereunder cannot be stopped. The learned Court below was correct in issuing an order under Section 143A of the NI Act for recovery of interim compensation as land revenue."

Accordingly, the petition was disposed of.

Case Title: Sunil Kumar v. The State of Bihar & Ors.

Case No.: Civil Writ Jurisdiction Case No. 73 of 2022

Judgment Dated: 10th May 2022

Coram: Chief Justice Sanjay Karol and Justice S. Kumar

Judgment Authored By: Chief Justice Sanjay Karol

Counsel for the Petitioner: Mr. Sumeet Kumar Singh, Advocate; Mr. Amarendra Kumar Singh, Advocate; Mr. Nikhil Singh, Advocate; Ms. Shatakshi Sahay, Advocate

Counsel for the Respondents: Mr. Anil Kumar Singh (GP 26) and Mr. Sanjay Kumar, Advocate

Citation: 2022 LiveLaw (Pat) 14

Click Here To Read/Download Judgment


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