S.143A NI Act | Interim Compensation In Cheque Dishonour Cases Isn't Mandatory : Supreme Court Lays Down Broad Parameters

The Supreme Court on Friday (March 15) observed that mere filing of the cheque dishonor complaint under the Negotiable Instruments Act would not grant a right to a complainant to seek interim compensation under Section 143A (1) of the N.I. Act, as the power of the court to grant interim compensation, isn't mandatory but discretionary and needs to be decided after prima facie evaluating the merits of the case.Setting aside the findings of the High Court and Trial Court, the Bench Comprising Justices Abhay S. Oka and Ujjal Bhuyan observed that the power to grant interim compensation to the complainant by the courts shouldn't be exercised at the threshold. Moreover, if the word 'may' in Section 143A (1) NI Act is interpreted as 'shall', then will have a drastic consequence leading to a scenario whereby in every complaint under Section 138, the accused will have to pay interim compensation up to 20 percent of the cheque amount. “Considering the drastic consequences of exercising the power under Section 143A and that also before the finding of the guilt is recorded in the trial, the word “may” used in the provision cannot be construed as “shall”. The provision will have to be held as a directory and not mandatory. Hence, we have no manner of doubt that the word “may” used in Section 143A, cannot be construed or interpreted as “shall”. Therefore, the power under sub-section (1) of Section 143A is discretionary.”, the Judgment authored by Justice Abhay S. Oka said. Section 143A of N.I. Act provides a power to the court to direct interim compensation to the complainant. The provision was inserted through an amendment to address the issue of undue delay in the final resolution of the cheque dishonor cases. In the statement of objects and reasons, it was stated that unscrupulous drawers of the cheques prolong the proceedings of a complaint under Section 138 by filing appeals and obtaining a stay. Therefore, 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. The broad parameters for exercising the discretion under Section 143A The Court laid down the following parameters : i. The Court will have to prima facie evaluate the merits of the case made out by the complainant and the merits of the defence pleaded by the accused in the reply to the application. The financial distress of the accused can also be a consideration.ii. A direction to pay interim compensation can be issued, only if the complainant makes out a prima facie case.iii. If the defence of the accused is found to be prima facie plausible, the Court may exercise discretion in refusing to grant interim compensation.iv. If the Court concludes that a case is madeout to grant interim compensation, it will also have to apply its mind to the quantum of interim compensation to be granted. While doing so, the Court will have to consider several factors such as the nature of the transaction, the relationship, if any, between the accused and the complainant, etc.v. There could be several other relevant factors in the peculiar facts of a given case, which cannot be exhaustively stated. The parameters stated above are not exhaustive.The gist of the dispute was that the complainant/respondent No. 2 had registered a complaint under Section 138 N.I. Act against the Appellant/Accused after a cheque amounting to Rs. 2,20,00,000/- was dishonored by the bank. During the pendency of the proceedings, the complainant moved an application under Section 143A (1) of N.I. Act seeking direction against the accused to pay 20% of the cheque amount as compensation. The trial court allowed the application and directed the Accused to pay Rs. 10,00,000/- to the respondent no.2/complainant as interim compensation. The decision of the trial court was upheld by the High Court. Aggrieved by the High Court's decision, the appellant/accused preferred a criminal appeal before the Supreme Court. Before the Supreme Court, it was contended by the accused that both the High Court and Trial Court erred in allowing the application of the complainant directing him to pay interim compensation to the complainant. According to the accused, the order directing the accused to pay interim compensation was passed mechanically without stating any reasons thereof. The accused pleaded that the mere filing of the complaint under the NI Act doesn't empower the court to direct the accused to pay interim compensation to the complainant, as the word 'may' used in Section 143A (1) shouldn't be construed as 'shall', and the decision regarding paying compensation should be based on the facts and circumstances of each case. Finding force in the Appellant/accused submission, the Supreme Court held that the word 'may' used in Section 143A (1) shouldn't be construed as 'shall', and the payment of interim compensation to the complainant isn't mandatory but directory in nature. The Court also noted that if ...

S.143A NI Act | Interim Compensation In Cheque Dishonour Cases Isn't Mandatory : Supreme Court Lays Down Broad Parameters

Yash Mittal

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