Interim Compensation In Section 138 (NI Act) Cases; Complainant's Right Or The Discretion Of A Court?

Lalit Ajmani &Sarthak Bhatia

24 Dec 2021 5:51 AM GMT

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  • Interim Compensation In Section 138 (NI Act) Cases; Complainants Right Or The Discretion Of A Court?

    Cheque bounce issues are being governed by the Negotiable Instruments Act, 1881 (for brevity "the Act"). The Act stipulates a comprehensive mechanism to deal with the cheque bounce cases. Briefly stating the mechanism, inter alia, states that where a cheque gets dishonoured due to certain reasons, then the aggrieved person has the liberty to send a legal notice to the drawer of a...

    Cheque bounce issues are being governed by the Negotiable Instruments Act, 1881 (for brevity "the Act"). The Act stipulates a comprehensive mechanism to deal with the cheque bounce cases. Briefly stating the mechanism, inter alia, states that where a cheque gets dishonoured due to certain reasons, then the aggrieved person has the liberty to send a legal notice to the drawer of a cheque asking him/her to pay the requisite amount within 15 (fifteen) days after receiving the notice. Failing which the complainant may present a complaint to the concerned magistrate within 30 (thirty) days after the expiry of the aforesaid 15 day period. Thereafter, if the concerned magistrate is satisfied with the requisite compliance of the Act, then the magistrate shall issue summons to the accused person followed by a summary trial.

    Though the procedure to deal with cheque bounce cases is summary in nature, and section 138 of the Act states that a magistrate shall endeavour to complete the cases within 6 months. However, the real picture is completely opposite to the intention of the legislature. It is often witnessed that in cheque bounce cases, accused persons use various dilatory practices to prolong the litigation. Resultantly, a complainant who is already aggrieved by a dishonoured cheque, not only forced to pay heavy litigation/ counsel fee, but also compelled to wait for many years to procure a glimpse of justice.

    In addition to the aforesaid, some accused persons further derail the case by filing appeal/ revisions against the order/ judgment of a magistrate which further aggravates the pain and ordeals of a complainant.

    To deal with aforesaid menace, the legislature has brought a few amendments in the Act in 2018[1]. The amendment primarily brought 2 (two) following major changes: -

    1. Section 143 A was inserted (interim compensation)
    2. Section 148 was inserted (Power of Appellate Court to order payment in pending appeals)

    Since the scope of the present piece of writing is restricted to interim compensation, ergo we will be discussing about section 143A only.

    Section 143 A -Interim Compensation

    It is submitted that the legislature has added the provision of interim compensation to address the aforesaid hardships of a complainant among others.

    Section 143A, inter alia, states that in case where the accused person has pleaded not guilty and the notice under section 251 of the CrpC has been framed, then in such cases the concerned court, during the pendency of the case, may direct the accused person to pay upto 20% of the cheque amount to the complainant. It is submitted that the maximum limit of interim compensation is fixed to 20% of the cheque amount under section 143 A(2) of the Act. For ready reference, section 143 A(1), and section 143 A(2) are reproduced below:-

    ''143A. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant—

    (a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and (b) in any other case, upon framing of charge.

    (2) The interim compensation under sub-section (1) shall not exceed twenty per cent. of the amount of the cheque…."

    It is submitted that the Hon'ble Supreme Court in the case of G.J. Raja vs. Tejraj Surana[2] held that the said provision is prospective in nature.

    However, the moot question in such cases is that whether a complainant has a right to procure interim compensation or does the provision lie within the domain of the discretion of a court. This very question is the gist of this piece of writing, and the same is discussed hereinbelow.

    Whether 143A Is Discretionary Or Directory In Nature?

    It is submitted that bare perusal of the aforesaid section reflects that a magistrate may order for interim compensation, but the same shall not exceed 20% of the cheque amount. It is further submitted that the legislature has used the word "may" instead of "shall" in sub section 1, whereas under sub section 2 of section 143A, the legislature has specifically used the word "shall" qua maximum amount of interim compensation in a given case. Ergo, the plain reading of the section shows that the interim compensation is not a statutory right of a complainant, rather the same is the discretion of a court.

    Without prejudice to the aforesaid, it is submitted that judiciary has often interpreted "may" as shall, and "shall" as "may" in plethora of cases. Therefore, without the judicial interpretation, any conclusion of the aforesaid question may be premature.

    2 Conflicting Views

    Law is hardly devoid of complexities as the same is heavily dependent upon the interpretation. One provision may have more than one interpretation/ meaning, and therefore an in-depth study of the relevant judgments becomes a sine qua non to allow us to understand a particular provision of law in its true sense.

    On these lines, section 143 A has been interpreted in two different ways by two different high courts. Both high courts have taken opposite views and therefore created more confusion than ever. One case law favours the literal interpretation of the provision and thereby provides discretion to a court to award interim compensation in cheque bounce cases, whereas the other judgment held that section 143 A is mandatory in nature. Both these cases are discussed herein below:

    L.G.R Enterprises vs. P. Anbazhagan[3] (2019)

    In this case, the Hon'ble High Court of Madras in the case of L.G.R Enterprises vs. P.Anbazhagan (for brevity – "LGR case") has discussed the scope and purpose of section 143A of the Act in detail.

    The ratio laid down by the Hon'ble Court in the said Judgement has clearly stipulated the manner in which the 143A (1) of the Act, should be brought into operation. The Hon'ble Court while interpreting the provision emphasise on the fact that the interim compensation in the provision is at the discretion of the Court, and it is not mandatory to grant the same in each and every case. The Court further observed that the usage of word "may" rather than "shall" in the provision specifies the intent of the legislature to secure the fundamental right of the accused persons who would otherwise have to pay 20% of the cheque amount to defend themselves in criminal cases, especially in the cases where innocent accused persons are roped in false litigations.

    It is not out of place to mention that the Court observed that the order qua section 143A must be a reasoned order, otherwise the discretion of the court will become arbitrary and the same is not in consonance with the settled principles of law. Moreover, the said order(s) is always subject to appeal/revision, therefore the order must contain reasons, else the same will become ex-facie illegal and liable to be rejected.

    Simply summing up, the Court observed that interim compensation under section 143A is the discretion of the Court which must be exercised reasonably on case-to-case basis, and the Magistrate is bound to give a reasoned order while awarding/ rejecting application under section 143A to a complainant.

    Rajesh Soni Vs. Mukesh Verma[4] (2021)

    Taking the other side of the coin, we will find that Hon'ble High Court of Chhattisgarh in the case of Rajesh Soni vs. Mukesh Verma (for brevity – "Rajesh Soni case") has taken a completely different view of section 143A of the Act.

    The Hon'ble Court is of the view that the interim compensation under section 143A of the Act is a much-needed aid to an aggrieved complainant who has already been suffering from a double-edged sword of loss i.e., (i) bounced cheque loss of receivable), and (ii) litigation cost. The compensation under section 143 A not only provides a sigh of relief to a complainant, but also act as a deterrent against the accused persons, and ergo the same will reduce the pendency of litigation. The Court, further, observed that the provision is added to uphold/ protect the interest of the complainants in such cases.

    Accordingly, the Court held that the word "may" mentioned in section 143 A must be read as "shall" thereby making the provision directory instead of discretionary. The Court relied upon the view of the Hon'ble Supreme in Bachan Devi and Another Vs. Nagar Nigam,Gorakhpur and Another[5] where the Supreme Court held that "may" and "shall" are auxiliary words which are the guiding terms in order to understand the mandate of a provision. Further, it is the duty of a court to consider the subject matter, and intent of the legislature while construing the mandate of a provision. Thus, the courts are not always bound to take the strict meanings of 'may' or 'shall' as the case may be.

    Surprisingly, in the Rajesh Soni Case, the court has referred and discussed the LGR case. But it appears that the kind attention of the court wasn't brought to the operative part of the LGR case, and therefore the moot question is still waiting for its final answer.

    The aforesaid humble observation/ opinion of the authors could be substantiated from the perusal of the following para of the Rajesh Soni case

    "The judgment cited by learned counsel for the petitioner also indicates that the Judicial Magistrate First Class has to pass a reasoned order for determining quantum of compensation, which is payable to the victim looking to the facts and circumstances each case, but does not suggest any iota that grant of compensation as per Section 143A of the Act, 1881 is of discretionary in nature."

    Whereas, In LGR case, High Court of Madras clearly held that the grand of interim compensation in such cases is discretionary in nature vide the following excerpt:-

    "The provision itself shows that the discretion is vested with the Trial Court to direct interim compensation to be paid by the complainant. It is not necessary that in all cases, the trial Court must necessarily direct the complainant to pay interim compensation and such a direction should be given only on a case to case basis, by taking into consideration the facts of each case. The legislature has intentionally not used the word "shall", since it would have prevented the accused persons, even in genuine cases, from defending themselves without paying 20% as interim compensation amount to the complainant."

    Nonetheless, the recent judgment on this subject matter stipulates that the mandate of section 143A is directory in nature, and the complainant shall get 20% of the cheque amount as per section 143A in cheque bounce cases. Whereas the LGR case, which technically has not been overruled or distinguished, says that the said provision is the subject matter of the discretion of a Magistrate, and ergo, it's not a vested statutory right of a complainant in cheque bounce cases.

    At this juncture it won't be wrong to say that the law often becomes the subject matter of an interpretation. It is further submitted that the aforesaid two different views by the two Hon'ble Courts on the nature of the interim compensation laid down under 143 A of the Act has made the issue rather unsettling.

    On one hand, the Hon'ble High Court of Madras in LGR case held that interim compensation depends upon the discretion of a trial court, and the same can't be treated as a vested right of a complainant in cheque bounce cases. On the other hand, the Hon'ble High Court of Chhattisgarh in Rajesh Soni case took the contrary view and held that section 143A is directory in nature, and it can't be taken as a subject matter of a Magistrate's discretion.

    LGR case follows the rule of literal interpretation which gives breathing space to the accused persons. Further, the LGR judgment is supported by one of the cardinal principles of criminal law i.e., innocent until proven guilty'. The said line of interpretation would protect the innocent accused persons roped in false and baseless cheque bounce cases, where the burden of proof is already on the shoulders of the accused­­ persons by the virtue of section 139 of the Act. The same is further solidified by the fact that that sub-section 2 of section 143A uses the term shall, whereas sub section 1 of the same provision, which talks about 20% interim compensation, uses the word 'may'. Thus, the LGR case though earlier in time strongly, if not completely, resonates with the intent of the legislature.

    However, the Rajesh Soni case highlights the grievance of the complainants that they have to face in long litigations, and thus tried to mitigate the pain and ordeals of the same. Ergo, the Rajesh Soni case also supported by the intent of providing justice, and therefore can't be simply ruled out.

    In the humble opinion of the authors, the aforesaid issue needs the kind intention of the Hon'ble Supreme Court for clarity on this important aspect. It is worth to mention that there are lakhs of cheque bounce cases that are pending adjudication in various parts of the country, and the interpretation of interim compensation will bring justice to lakhs of litigants, and it will further add the uniformity in the future cases pertaining to interim compensation. Till then, it will always remain a matter of interpretation for the courts whether to follow the lines of LGR case, or to treat section 143A as a mandatory provision.

    The authors are Advocates practicing at New Delhi.Views are personal.

    [1] Negotiable Instruments (Amendment) Act, 2018

    [2] Crl. Appeal No. 1160 of 2019 @ SLP Crl No. 3342 of 2019.

    [3] MANU/TN/4768/ 2019

    [4] CRMP – 562/2021; Hon'ble High Court of Chhattisgarh, Bilaspur.

    [5] (2008) 12 SCC 372

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