Repeated Defaults In Appearance, Possibility Of Evading Trial Justify Interim Compensation Under NI Act: J&K&L High Court

The Court observed that where the trial court records objective reasons reflecting application of mind to such factors, an order directing payment of interim compensation cannot be faulted merely because the accused disputes the underlying liability.

This exposition of law came while hearing a petition under Section 528 of the Bharatiya Nagarik Suraksha Sanhita seeking quashing of the order passed by the learned Chief Judicial Magistrate, Baramulla at Sopore, and the judgment Additional Sessions Judge, Sopore, whereby the application filed by the respondent under Section 143-A of the Negotiable Instruments Act, 1881 for grant of interim compensation came to be allowed and the revision against the same was dismissed.

A Single Bench of Justice Wasim Sadiq Nargal, while observing that “the order reflects due consideration of the relevant facts, the objections raised by the accused and the conduct of the parties,” held that “the learned Magistrate did not proceed solely on the basis of the complainant's claim. On the contrary, the Court remained alive to the requirement of maintaining a balance between the rights of the complainant and those of the accused and specifically observed that interim compensation cannot assume the character of punishment.”

In the instant case the respondent instituted a complaint against the petitioner under Section 138 of the Negotiable Instruments Act alleging dishonour of a cheque amounting to ₹80,00,000/-. During the pendency of the complaint proceedings, the respondent moved an application under Section 143-A of the Negotiable Instruments Act seeking grant of interim compensation. The petitioner contested the application by filing objections.

The Chief Judicial Magistrate Baramulla at Sopore allowed the application and directed payment of interim compensation. The petitioner preferred a revision petition before the Court of Additional Sessions Judge, Sopore, which was dismissed. Aggrieved, the petitioner approached the High Court.

The petitioner contended that the power under Section 143-A is discretionary and not mandatory, and that the discretion had been exercised in a routine and mechanical manner without recording any objective satisfaction. It was further argued that the petitioner had raised a consistent and plausible defence, that material contradictions had emerged during cross-examination, that the presumption under Section 139 is rebuttable, and that the financial capacity of the petitioner had not been considered.

Reliance was placed upon Rakesh Ranjan Shrivastava v. State of Jharkhand, (2024) 4 SCC 419, and judgments of the High Court in Nazir Ahmad Chopan v. Abdul Rehman Chopan and Nargees Javaid v. Ghulam Jeelani Nengroo to buttress the case of the petitioner.

Court's Observations:

Adjudicating the matter Justice Nargal first examined the scope of Section 143-A of the Negotiable Instruments Act, noting that the provision empowers the Court trying an offence under Section 138 to direct the drawer of the cheque to pay interim compensation not exceeding twenty per cent of the cheque amount. The Court observed,

“... The power, however, is discretionary in nature and not mandatory. It is, therefore, expected that such discretion be exercised on the basis of relevant considerations and supported by reasons reflecting application of mind to the facts of the case.”

Upon examining the impugned order, the Court found that the Magistrate had recorded specific findings that the cheque, dishonour memo and statutory notice stood proved on record, that the accused had admitted the issuance of the cheque and his signatures thereon, disputing only the underlying liability, that there had been repeated defaults in appearance on the part of the accused and that the permission obtained by him to travel abroad created a real possibility of him protracting the proceedings or evading trial.

The Court quoted the relevant portion of the Trial Court's order, which stated, “The Hon'ble Supreme Court in Rakesh Ranjan Shrivastava v. State of Jharkhand & Anr. clarified that Section 143-A is discretionary, not automatic. The Court must prima facie assess the merits of the complaint and the nature of defence, and consider factors such as the accused's conduct, financial capacity, and likelihood of the trial being delayed.”

The High Court held,

“.. The learned Magistrate was conscious of the legal position governing the exercise of power under Section 143-A and specifically noticed that the provision does not mandate grant of interim compensation as a matter of course. The reasons which weighed with the learned Trial Court in invoking Section 143-A are clearly discernible from the order itself. The order cannot, therefore, be termed as a non-speaking order or one suffering from non-application of mind.”

Distinguishing the judgments relied upon by the petitioner, the Court observed that in Nazir Ahmad Chopan and Nargees Javaid, the orders impugned were interfered with primarily on account of the failure of the courts concerned to record reasons. The Court held,

“... The facts of the present case stand on an entirely different footing. The learned Chief Judicial Magistrate, while allowing the application under Section 143-A of the Negotiable Instruments Act, has recorded reasons and has adverted to the relevant material available on record. Since the factual basis on which the aforesaid judgments were rendered is conspicuously absent in the present case, the same are clearly distinguishable.”

Regarding the reliance on Rakesh Ranjan Shrivastava, the Court held,

“... Far from supporting the petitioner's case, the aforesaid judgment reinforces the validity of the impugned orders. The requirement spelt out by the Hon'ble Supreme Court is that the Court must disclose reasons while exercising discretion under Section 143-A. In the case at hand, the learned Magistrate has complied with the said mandate by assigning reasons and recording satisfaction on the basis of the material available before the Court.”

The Court further noted that the quantum of interim compensation awarded at 10% of the cheque amount, i.e., ₹8,00,000/-, was well within the statutory limit prescribed under the provision. The Court also observed that the revisional court had independently examined the matter and affirmed the order by a reasoned judgment.

The High Court thus held that no arbitrariness, perversity or jurisdictional error had crept into the order warranting interference in exercise of inherent jurisdiction. The order passed by the learned Chief Judicial Magistrate, Baramulla at Sopore, and the judgment passed by the learned Additional Sessions Judge, Sopore, were upheld. The petition was dismissed as being devoid of merit.

Case Title: Mohammed Ashraf Mir v. Wazir Reshi

Citation: 2026 LiveLaw (JKL)

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