Bouncing the Boundaries: Should Section 138 NI Act Complainants be Treated as “Victims” under Section 372 CrPC? – Part 2

Introduction

Part I discussed how the legislative intent behind Section 372 Code of Criminal Procedure (“CrPC”) does not provide a scope to include complainants under Section 138 Negotiable Instruments Act (“NI Act”) within its ambit. It also discussed the pre-existing remedy available to such complainants under Section 378(4) CrPC. This piece builds upon Part I contending that Section 372 CrPC does not envisage Section 138 NI Act complainants as victims as firstly, providing the remedy under Section 372 CrPC to complainants will lead to dual appellate remedies and, secondly, a proceeding under Section 138 of the NI Act is a “civil sheep” in a “criminal wolf’s” clothing.

Dual Paths for the Same Purpose

The Supreme Court (“SC”) in M/s Celestium Financial v. A. Gnanasekaran & Ors. (“Celestium Financial”), while construing the proviso to Section 372 CrPC in light of the definition of “victim” under Section 2(wa) CrPC r/w Section 44 IPC, relied exclusively on the literal text of the provisions and overlooked the legislative intent underlying their enactment. On a superficial reading, it may appear that a complainant in a private complaint case (like Section 138 NI Act) could fall within the ambit of “victim”; however, this interpretation becomes erroneous when considered in the context of Section 372 CrPC. This section would discuss how interpreting “victim” in this broad manner would create dual remedies of appeal for private complainants within the same code, a scenario clearly never envisioned by the lawmakers.

A similar concern came before the Hon’ble Delhi High Court in Bhajanpura Cooperative Urban Thrift & Credit Society Ltd. v. Sushil Kumar [Para 13] which held that a “complainant” in proceedings under Section 138 of the NI Act cannot be treated as a “victim” for the purpose of filing an appeal under Section 372 of the CrPC. Interestingly, the Court reasoned that, at first instance, almost every complainant in such proceedings may claim to be a ‘victim’. While it is reasonable to acknowledge that complainants in private complaint cases have experienced some form of harm and could therefore be considered within the definitions of “victim” and “injury” as per the Court’s reasoning in Celestium Financial, this interpretation raises concerns. Extending the right to appeal under both Section 372 and Section 378(4) of the CrPC would introduce the very confusion and absurdity that the law seeks to avoid.

In Celestium Financial, the court seemingly declares that complainants under Section 138 of the NI Act can appeal directly under Section 372 of the CrPC. It is notable that the court does not provide the circumstances in which such complainants may pursue remedies under Section 372 before the Sessions Court or under Section 378(4) before the High Court. As a result, two remedies are created for the same grievance. The court has indicated that the complainant can elect between the two kinds of remedies [Celestium Financial, Para 7.9]. However, this is inconsistent with the landmark judgement of Transcore v. Union of India (“Transcore”).

In Transcore, the doctrine of election was being evaluated in light of Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Section 17 r/w Section 19 of the Recovery of Debts and Bankruptcy Act, 1993. It was held that since the object behind both these remedies is the same, i.e. the recovery of debt, there is no inconsistency between them. As per Transcore, the doctrine of election can only be exercised if the two remedies are inconsistent. When the same is evaluated in light of the two remedies being discussed in Celestium Financial, it can be deciphered that both Sections 372 and 378(4) of the CrPC are appellate remedies, only in different forums. Therefore, it can be safely said that there is no inconsistency between the two and the doctrine of election cannot apply herein. Thus, the reasoning given by the SC in Celestium Financial on this point is difficult to reconcile with established precedent.

Furthermore, the lack of clarity on which remedy to pursue undermines the principle of harmonious construction, creating ambiguity and risking inconsistent application of the law. It is a well-settled law of construction that the provisions of a statute should be so read as to harmonise with one another and the provisions of one section cannot be used to defeat those of another. Allowing private complainants to appeal under Section 372 would effectively nullify the purpose of Section 378(4) CrPC, which specifically provides for appeals against acquittal by private complainants in the High Court, subject to a special leave to appeal. This not only creates overlapping remedies but also disrupts the carefully crafted statutory framework.

Section 138 NI Act Proceeding is a “Civil Sheep” in a “Criminal Wolf’s” Clothing

To understand the intersection between a Section 138 NI Act proceeding and an appeal under Section 372 CrPC, one must first appreciate the nature of a Section 138 proceeding. There has been considerable debate as to whether a Section 138 proceeding is of a civil or criminal nature. This conundrum was resolved in the case of P. Mohanraj v. Shah Brother Ispat Pvt. Ltd. (“P. Mohanraj”). Although the proceeding is termed as quasi-criminal in nature, the SC in P. Mohanraj [Para 43]  laid down that a Section 138 proceeding is essentially “a ‘civil sheep’ in a ‘criminal wolf’s’ clothing”.  Interestingly, the above-mentioned judgment reinforces the intent with which Section 138 of the NI Act was laid down. The criminal punishment attached to Section 138 was introduced via Chapter XVII (Sections 138–142) of the NI Act in 1988, with the specific purpose, as highlighted in the 213th Law Commission Report, of restoring the credibility of cheques as a financial instrument. The rationale was that civil proceedings for recovery lingered profusely, thus undermining the efficacy of cheques as a speedy vehicle for commercial transactions. The criminal punishment was therefore a mechanism for deterrence.

As established above the harm involved in Section 138 of the NI Act, is purely monetary and civil in nature, not criminal. Notably, to address the issue of monetary and civil harm, the law already provides an adequate civil remedy under order XXXVII of the Civil Procedure Code i.e. suit for recovery of dues. This civil remedy can be pursued simultaneously with the remedy under Section 138 NI Act to recover the outstanding dues.

An analysis of P. Mohanraj  makes it clear that Section 138 proceedings, despite having a criminal punishment, are essentially civil in nature. Providing complainants in such cases a direct right of appeal under Section 372 (thus avoiding the threshold of special leave) is dangerous to say the least. Such an easy appellate route may lead to abuse through a flood of frivolous appeals motivated to pressurize acquitted individuals into settlement or payment.

Thus, the law already provides complainants under Section 138 of the NI Act with a statutory right to appeal against acquittals under Section 378(4) of the CrPC, along with the option of pursuing a civil remedy through a summary recovery suit under Order XXXVII of the CPC. Therefore, the extension of the remedy under Section 372 CrPC, would be unwarranted in the context of Section 138 NI Act proceedings.

Conclusion and Way Forward

The SC, in Celestium Financial tried to forge a connection between an aggrieved complainant under Section 138 of the NI Act and a “victim” under Section 372 of the CrPC. However, as it has been established in Part I and above, such a connection is against the legislative intent of the provision. While the court has decided to broaden the ambit of the term victim, the original objective of the provision, as enumerated by various reports described above, was to safeguard the rights of the voiceless victims who were the “worst sufferers of crime”. The authors have also explored the key reasons why the definition of victim cannot be substantiated to include a complainant under Section 138. This is firstly, due to a pre-existing remedy under Section 374(8) CrPC, leading to a defined route for such complainant-led appeals, which would be disturbed with this change of course. And secondly, due to the inherently civil nature of a proceeding under Section 138 of the NI Act, which envisions a completely different treatment from victims as envisioned under Section 372 of the CrPC.

This analysis reveals that Celestium Financial fails to take into consideration the very purpose of the two main provisions involved; Section 138 of the NI Act and Section 372 of the CrPC. It risks conflating the distinct objectives of civil recovery with the retributive goals of criminal law. By extending the meaning of victim to include financial complainants, it risks nullifying the original purpose, i.e. giving a special status and an easier route to the otherwise voiceless, remediless victims of crime. This could have catastrophic consequences, as this judgment could be used as a precedent to include more private complainants within the ambit of the term “victim”, thereby diluting a concept meant to be specific into something overly generic.

*Anmol Aggarwal and Ria Bansal are Final Year Students at Rajiv Gandhi National University of Law.