2022 (7) TMI 415 - HC - Indian Laws

Dishonor of cheque - payment of interim compensation are mandatory or directory? - In case it is held that the same is directory, whether the Court has to record reasons for determining the quantum of interim compensation to be awarded? - Section 143-A of the Negotiable Instruments Act, 1881 - HELD THAT - The basic purpose for enacting Section 143-A of the N.I. Act appears to be to address the delay in decision of cheque dishonour cases and to discourage frivolous and unnecessary litigation. In SURINDER SINGH DESWAL @ COL. S.S. DESWAL ORS. VERSUS VIRENDER GANDHI ANR. 2020 (1) TMI 263 - SUPREME COURT , while considering the provisions of Section 148 of the N.I. Act, in light of the aims and objects, for its enactment, and whether the said provision was prospective or retrospective, it was held that Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to Amendment Act 20 of 2018 i.e. prior to 1/9/2018. It is thus apparent that there are inherent differences between the provisions of Section148 and Section 143-A of the N.I. Act, due to which what has been held in respect of the word may , as occurring in Section 148 of the N.I. Act in Surinder Singh Deswal, may not be true in respect of the word may , as occurring in Section 143-A(1) of the N.I. Act, specifically so when both these provisions operate in different arenas. From a plain reading of Section 143-A of the N.I. Act, it is clear that it is a provision enacted as an interim measure, during the pendency of the trial, when the guilt of the accused is still to be determined. The word may , thus used in Section 143-A (1) of the N.I. Act, has to be construed in light of the fact that the direction to award compensation, is at the trial stage and as an interim measure. The fact that even in cases under Section 138 of the N.I. Act, the presumption under Section 139 of the N.I. Act, is not absolute, but is rebuttable, also has to be borne in mind. That apart, in a particular case, given the requirement of Section 138 of the N.I. Act, it may so happen that the complaint itself may not be maintainable, for the cheque not having been presented during the period of its validity; the notice not having been issued in the stipulated time; the complaint not having been filed within the time stipulated therefor; the debt may not be a legally enforceable debt or liability; the memo/advice regarding dishonor not having been placed on record etc. - It is further material to note that the power to direct interim compensation under Section 143-A of the N.I. Act, can be equated with the provisions as contained in Order XXXVIII Rule 5 of the C.P.C., which confers a power upon the Court to direct the defendant to furnish security in such sum as may be specified, during the pendency of the suit, which provision is directory in nature and the use of the power is discretionary. It is further material to note that the legislature was aware of the provisions of Sections 138 to 147 of the N.I. Act, the purpose for which they were enacted, the delays which were being caused in the disposal of the proceedings, which is evident from the aims and object of the amending Act 20 of 2018, it was thus open for the legislature to have used an express language that in all cases under Section 138 of the N.I. Act, which were pending trial, the complainant was entitled to compensation upto 25% of the cheque amount. However, such express words, have not been used, though it was open for the Legislature to do so, which again indicates that the use of the word may , as occurring in Section 143-A(1) of the N.I. Act, was not mandatory but was directory and a discretion was conferred upon the Court, to either grant or not to grant interim compensation. It has to be held that Section 143-A of the N.I. Act, is discretionary and not mandatory and the view taken in L.G.R. ENTERPRISES, SINDU @ LAKSHMI VERSUS P. ANBAZHAGAN 2019 (7) TMI 1840 - MADRAS HIGH COURT holding that the word may , as occurring in Section 143-A(1) of the N.I. Act empowers the Court with a discretion to direct interim compensation and it is not necessary that in all cases the trial Court must necessarily direct the interim compensation to be paid and such direction should be given only on a case to case basis based upon the facts of each case - The exercise of any discretion conferred upon a Court, must be for reasons to be spelt out, indicating application of mind by the Court to the facts available before it in the application of the law to such facts. It can thus be concluded that the provisions of Section 143-A of the N.I. Act are directory and not mandatory - The Court has to record reasons for determining the quantum of interim compensation, if it comes to the conclusion based upon the fact position availing, that it is a case which deserves award of interim compensation, which can be anywhere upto 20% of the cheque amount. The matters are remanded back to the learned Special Court to decide the applications under Section 143-A of the N.I. Act afresh - Petition allowed by way of remand.

Summary

Issues Involved:
1. Whether the provisions of Section 143-A of the Negotiable Instruments Act, 1881, which empower the Court to direct payment of interim compensation are mandatory or directory.
2. If the provisions are directory, whether the Court has to record reasons for determining the quantum of interim compensation to be awarded as contemplated by Section 143-A (2) of the Negotiable Instruments Act, 1881.

Analysis:

Issue 1: Nature of Section 143-A (Mandatory or Directory)
The petitions raised the question of whether Section 143-A of the Negotiable Instruments Act (N.I. Act), 1881, which allows the Court to direct payment of interim compensation, is mandatory or directory. The Court examined various precedents and interpretations of the terms "may" and "shall" within legal provisions. The Court noted that the word "may" in Section 143-A(1) of the N.I. Act indicates discretion rather than an obligation. The Court also considered the legislative intent behind the amendment, which aimed to expedite the resolution of cheque dishonour cases and discourage frivolous litigation. The Court concluded that Section 143-A is discretionary, not mandatory, as it confers power upon the Court to direct interim compensation based on the facts and circumstances of each case.

Issue 2: Requirement to Record Reasons for Quantum of Interim Compensation
If Section 143-A is held to be directory, the Court must record reasons for determining the quantum of interim compensation. The Court emphasized that the exercise of discretion must be reasoned, indicating the application of mind to the facts available. The Court held that the reasons must be spelled out in the order to ensure transparency and accountability in judicial decision-making. Therefore, the Court must record reasons for determining the quantum of interim compensation, which can be up to 20% of the cheque amount, based on the specific facts of each case.

Conclusion:
1. The provisions of Section 143-A of the N.I. Act are directory and not mandatory.
2. The Court must record reasons for determining the quantum of interim compensation if it decides to award it, which can be up to 20% of the cheque amount.

The impugned orders were quashed and set aside, and the matters were remanded back to the learned Special Court to decide the applications under Section 143-A of the N.I. Act afresh, in light of the above conclusions. Rule was made absolute in these terms.