Who Can File an Affidavit?

By Megha Mittal (resolution@vinodkothari.com)

Beware before you swear!

 

What is an Affidavit?

“Affidavit” is a term used very frequently in the common-parlance; however, the consequences it carries are highly underestimated. People file affidavits being unaware of what its repercussions might be and also unaware of the fact whether they are at all competent to make the affidavit. Before analysing who can file an affidavit, it is important to understand the duty bestowed upon a person providing affidavit. Even before that let us first understand what an affidavit is.

An affidavit is sworn, written statement, confirmed by oath or affirmation, voluntarily made by an affiant or deponent, administered or notarised by a person authorised to do so by law.

We shall now look through the different components of the different components of an affidavit:

  • Written statementan affidavit must be a written one. Oral statements sworn before law do not tantamount to affidavit. An affidavit may be used as an evidence before law and thus, must be written.
  • Oath or affirmationan oath or affirmation is a solemn promise regarding one’s actions, past, present or future.
  • Voluntarilythe most significant consequence of an affidavit is that it has a binding effect on the person making such affidavit, and thus, an affidavit must be voluntarily and cautiously made. If any aggrieved person proves that the affidavit was made as a result of coercion or undue pressure, it shall not be valid.
  • Affiant or deponent”- an affiant or a deponent is the person who makes an affidavit under oath.
  • Notarised lastly, an affidavit must be compulsorily notarised, i.e. the genuinity of the affidavit is to be certified by a notary public appointed by the state or the central government.

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Interim Compensation to the Payee of the Dishonoured Cheque

By Shreya (legal@vinodkothari.com)

Background:

Negotiable Instruments are the principal instruments for fulfilling commercial obligations and they play a very significant role in the modern trade and business community. Law relating to negotiable instruments is provided in the Negotiable Instruments Act, 1881(“the Act”) as amended from time to time.

Dishonour of cheque due to insufficiency of funds was made a penal offence by the insertion of Chapter XVII in the Act by the Banking Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. The object of criminalising dishonour of cheque was to regulate the expanding trade, commerce, business and industrial activities, to safeguard the interests of the creditors as well as to ensure greater vigilance in the matters of finance.

The Negotiable Instruments (Amendment) Act, 2017: Objects and Reasons

The Lok Sabha has passed the Negotiable Instruments (Amendment) Act, 2017 (“the Amendment Act”) on July 23, 2018. It shall come into effect on the date appointed by the Central Government by way of a notification in the Official Gazette. The amendment has inserted two provisions, sections 143A and 148 in relation to cheque dishonour cases which empower the trial court and the appellate court, as the case maybe, to order payment of interim compensation during the trial and deposit of certain minimum sum in an appeal by the drawer of cheque against conviction.

In the Statement of Objects and Reasons appended to the Amendment Bill, it was stated that “injustice is caused to the payee of a dishonoured cheque who has to spend considerable time and resources in court proceedings to realise the value of the cheque” on account of “delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings.” The Amendment Act, thus, seeks to provide relief to payees of dishonoured cheques who get caught up in lengthy litigations and to discourage frivolous and unnecessary litigation.

Salient Features of the Amendment Act:

Under the newly inserted section 143A in the Act, the trial Court has power to order payment of interim compensation by the drawer of the cheque to the complainant. Such payment can be ordered in both summary trial and a summons case (as provided under section 143 of the Act) where the accused drawer pleads not guilty to the charge made in the complaint. In other cases, it can be ordered upon framing of charges. The section has made the payment of interim compensation subject to following conditions:

  1. The interim compensation shall not exceed twenty percent of the amount of the cheque.
  2. The interim compensation is to be paid within sixty days from the date of the order of payment. A further extension of maximum thirty days can be granted if the drawer of the cheque shows sufficient cause.
  3. The interim compensation is to be recovered in accordance with section 421 of the Code of Criminal Procedure, 1973 (“the CrPC”). Section 421 prescribes two modes of recovery of fine- (a) attachment and sale of any movable property of the drawer, (b) recovery as arrears of land revenue from the movable or immovable property of the drawer by way of a warrant issued to the Collector of the concerned district.
  4. If the drawer of the cheque is acquitted, the complainant shall be directed to repay to the drawer the amount of interim compensation along with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year. The repayment has to be made within sixty days of the date of order of acquittal subject to a further extension of not more than thirty days if the complainant shows sufficient cause for delay.

While Section 143A confers power on the trial Court to order payment of interim compensation, Section 148 empowers the Appellate court to order the drawer to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court. Such deposit is in addition to the interim compensation already paid pursuant to section 143 A. The deposit is to be made subject to the following procedure and conditions laid down in the section:

  1. The amount is to be deposited within sixty days from the date of the order of payment. A further extension of maximum thirty days can be granted if the appellant shows sufficient cause.
  2. The amount deposited may be directed to be released to the complainant at any time during the pendency of the appeal.
  3. If the appellant is acquitted, the complainant shall be directed to repay to the drawer the amount of the deposit along with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year. The repayment has to be made within sixty days of the date of order of acquittal subject to a further extension of not more than thirty days if the complainant shows sufficient cause for delay.

Analysis:

As already mentioned, dishonour of cheque is a penal offence under section 138 of the Act and it attaches criminal liability to the drawer of the dishonoured cheque. The traditional view is that the object of a criminal proceeding is ‘deterrence’ whereby punishment is imposed on the accused, through fine or imprisonment or both, whereas, the award of compensation or damages is considered to be a characteristic feature of a civil proceeding.

In this regard, reference must be drawn to Section 357 of the CrPC which empowers the Criminal Courts to order payment of compensation.

“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 –

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(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;

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On this issue, the Supreme Court of India in the case of R. Vijayan v. Baby[1] observed that:

“Though a complaint under section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount, (which strictly speaking, has to be enforced by a civil suit), in practice once the criminal complaint is lodged under section 138 of the Act, a civil suit is seldom filed to recover the amount of the cheque. This is because of the provision enabling the court to levy a fine linked to the cheque amount and the usual direction in such cases is for payment as compensation, the cheque amount, as loss incurred by the complainant on account of dishonour of cheque, under section 357 (1)(b) of the Code and the provision for compounding the offences under section 138 of the Act. Most of the cases (except those where liability is denied) get compounded at one stage or the other by payment of the cheque amount with or without interest. Even where the offence is not compounded, the courts tend to direct payment of compensation equal to the cheque amount (or even something more towards interest) by levying a fine commensurate with the cheque amount.”

The Court further pointed out that the provisions of Chapter XVII of the Act strongly lean towards grant of reimbursement of the loss by way of compensation. The trial courts should, unless there are special circumstances, in all cases of conviction, uniformly exercise the power to levy fine upto twice the cheque amount (keeping in view the cheque amount and the simple interest thereon at 9% per annum as the reasonable quantum of loss) and direct payment of such amount as compensation.

It appears from the language of section 357(1)(b) of the CrPC as well as the above ruling that the intent behind awarding compensation to the payee of dishonoured cheques in a criminal proceeding instituted under section 138 is to facilitate the payee to recover the

amount of cheque without having to initiate a separate recovery suit in a civil court so that matter arising out of the same cause of action is settled in the same court.

In line with the aforesaid, the Amendment Act now expressly provides for compensatory and restitutive provisions in addition to the traditional punitive provisions as regards the dishonour of cheques.

At this juncture, it is relevant to note that section 25(5) of the Payment and Settlement Systems Act, 2007 expressly provides for applicability of Chapter XVII of the Negotiable Instruments Act, 1881 to dishonour of electronic funds transfer. The section makes the dishonour of electronic funds transfer an offence punishable with imprisonment or with fine or both, similar to the dishonour of a cheque under the Negotiable Instruments Act. The Reserve Bank of India vide its circular no. DOC/2011-12/191 DPSS. O.PD.No 497/02.12.004/2011-12 dated September 21, 2011 had clarified that section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against dishonour of electronic funds transfer instructions for insufficiency of funds in the account of the payer (remitter), as are available to the payee under section 138 of the Negotiable Instruments Act, 1881.

Thus, the payees of dishonoured electronic funds transfer shall also be entitled to the interim compensation on par with the payees of dishonoured cheques.

The Amendment Act, thus, is a welcome development for the payees of dishonoured cheques as well as dishonoured electronic funds transfer, in particular the banks and financial institutions as they will be greatly facilitated in recovery of amount by way of proceedings under section 138 of the Act. Further, this will allow them to continue to extend financing to the productive sectors of the economy leading to overall development of trade and commerce.

Concluding Remarks:

The Amendment Act is, undoubtedly, a positive step towards ensuring the credibility of cheques. However, the Amendment Act is not without its fare share of criticism. Some people are of the view that the Act is still not stringent enough to effectively deter the defaulting drawers of the cheques. As such, harsher penalties should be imposed on the repeat offenders in the form of increased fine or prohibition on issuing cheques for a specified period. Also, express provision should be inserted for expeditious trial of the cheque bouncing cases within the prescribed time period. Nonetheless, the Amendment Act will go a long way in ensuring relief to the payee of the dishonoured cheques.


[1] R. Vijayan v. Baby, (2012) 1 SCC 260 (Read judgement at: https://indiankanoon.org/doc/635335/).

RESTRICTIVE REMEDY UNDER SECTION 14 OF SARFAESI ACT

By Richa Saraf , (legal@vinodkothari.com) Read more

Guidance Note to NBFCs for nomination of counsel in Delhi High Court

By Richa Saraf, (legal@vinodkothari.com)

BACKGROUND:

  1. In exercise of its powers under sub clause (iv) of clause (m) of sub section (1) of section 2 read with section 31A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( “SARFAESI Act”), the Central Government issued a notification[1] dated August 5, 2016 notifying 196 Non- Banking Financial Companies (“Notified NBFCs”) as “Financial Institutions”, registered with the Reserve Bank of India (RBI) and having asset of Rs. 500 crore and above as per their last audited balance sheet, on which the SARFAESI Act is applicable. Read more

Legal Implication of Business Transfer Agreement, by Legal Team, on 22nd May, 2017

Business restructuring is a comprehensive process be it financial or technological or market or organisational. There are various modes by way of which it can take place such as re-organisation of capita, compromise/arrangement, merger/amalgamation, demerger, acquisition/takeover, slump sale, strategic alliance and such other similar modes. The primary motive behind undertaking any such rearrangement would be to prosper both in size and profits. The corporate restructuring process can be either be by any of the much traversed gradual way or a much faster way of selling off the business undertaking. Read more

A Two-section Ordinance, holding the key to India’s NPA crisis By Vinod Kothari

The much-awaited ordinance, expected to make a tangible impact on India’s crisis of piling non-performing loans, was signed into a law by the President on 5th May 2017. The Ordinance, consisting of barely two sections, makes amendments to the regulatory framework of banking in India, viz., the Banking Regulation Act. After reading the law, one is forced to think – if this is what was holding up the resolution of NPA crisis in the country, did it actually have to take all this time?

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Independence and Impartiality of Arbitrators: A Step Closer Towards Alternate Dispute Resolution, by Sneha Bhawnani & Swatilekha Chakraborty

In the recent times, a significant change has been noticed in the attitude and approach of the society, at large, in relation to resolution of disputes. It has been witnessed in some of the prominent Western countries, especially, the United States of America, that the Courts have adopted an approach which is clearly in favour of pro arbitration mechanisms. However, there is much scholarly debate to subject such alternate dispute mechanisms to a particular specified standard in order to avoid any conflict between the traditional way of delivering justice by means of Courts and the new method of resolving disputes by means of arbitration. Read more