2023 (3) TMI 1532 - HC - Indian Laws

Dishonour of Cheque - Grant of interim compensation under Section 143A of the Negotiable Instrument Act, 1881 - non-speaking order - non-application of mind - violation of principles of natural justice - exercise of extraordinary jurisdiction of this Court - HELD THAT - Section 143A of the N.I. Act was inserted by Act 20 of 2018 and was brought into effect from 01.09.2018. It is also important to understand the intent behind introduction of said section to the Act as there is a huge backlog of pendency of cases pertaining to dishonour of cheques and it is because of delaying tactics of the drawers of cheques due to easy filing of appeals and obtaining stay on proceedings. Thus, it is necessary to provide relief during pendency of the proceedings to the complainants who are waiting for years on account of undue delays and dilatory tactics, the provision has been inserted by amending the Act. It is settled position of law that, when there is a discretionary power, the Court has to exercise it by assigning proper reasons of the conclusion, failing which the exercise of discretion will become arbitrary. Whether case is made out for exercising extraordinary jurisdiction of this Court warranting interference with the impugned order? - HELD THAT - This Court is of considered view that, the discretion having not been properly exercised by the trial Court while awarding 20% amount of compensation. The learned trial Court has not assigned any reasons as to why the complainant has been awarded interim compensation @ 20% of the cheque amount and not less than 20%. It is the discretion of the Court to award interim compensation from 1% to 20%, but subject to recording of proper reasons. On the facts of the present case, the learned trial Court has rightly did not discussed with the issue of defense raised by the accused herein as the question of disputed facts require to be tried after full fledge of the trial. However, the trial Court while determining the percentage of interim compensation, he or she should have assigned proper reasons stating that why the interim compensation amount @ 20% is required to be paid by the accused. It is mandatory on the part of the trial Court that whenever the Court exercise its jurisdiction under Section 143A of the Act, it shall record reasons as to why it directs the accused person to pay the interim compensation to the complainant. There is no straight jacket formula for assigning reasons, but it may vary case to case and depends upon facts of each case. This Court is in complete agreement with the contention raised by learned counsel for the applicants that, discretionary order without reasons is not sustainable in the eye of law. This Court is of considered opinion that, the impugned order is devoid of any reasons as conclusion arrived at by the trial Court for awarding 20% of the cheque amount, is without assigning proper and sufficient reasons and discretionary power having not been properly exercised by the Court, as a result, the impugned order is not sustainable in the eye of law. The impugned order dated 13.04.2022 is quashed and the matter is remanded back to the trial Court with a direction to decide the application Exh.14 within a period of 30 days from the date of receipt of this order, in accordance with law - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Legality of the interim compensation order under Section 143A of the Negotiable Instrument Act, 1881.
2. Whether the trial court's order was a non-speaking order lacking reasons.
3. The discretionary nature of Section 143A and the requirement for assigning reasons.
4. Maintainability of the petition under Articles 226/227 of the Constitution of India.

Detailed Analysis:

1. Legality of the Interim Compensation Order:
The applicants challenged the order of the Additional Chief Metropolitan Magistrate, which directed them to pay 20% of the cheque amount as interim compensation under Section 143A of the Negotiable Instrument Act, 1881. The applicants contended that the criminal complaint was filed maliciously and that there was no debt or liability warranting such proceedings. The trial court, however, allowed the application for interim compensation, stating that the objections could not be considered at this stage as they were matters of evidence.

2. Non-speaking Order and Lack of Reasons:
The applicants argued that the trial court's order was a non-speaking order, devoid of reasons, which is contrary to the principles of natural justice. The court emphasized that reasons are the "heart and soul" of an order and necessary for its execution. The trial court failed to provide reasons for granting 20% compensation, which the applicants argued was a violation of legal principles. The court agreed with this contention, noting that the trial court did not exercise its discretion properly and did not explain why the interim compensation was set at 20%.

3. Discretionary Nature of Section 143A:
Section 143A of the N.I. Act allows the court to order interim compensation up to 20% of the cheque amount. This provision is discretionary, not mandatory, and requires the court to provide reasons when exercising this discretion. The judgment highlighted that the trial court must record reasons for directing interim compensation, which can vary depending on the case's circumstances. The court cited examples from other judgments illustrating when such discretion might be exercised, emphasizing that the trial court failed to provide such reasoning in this case.

4. Maintainability of the Petition:
The respondent argued that the application under Articles 226/227 was not maintainable, citing precedents that restrict the High Court's power under Article 227 to correct errors of law or fact. However, the court found this contention unpersuasive, noting that the petition was filed under Article 226, which allows for broader judicial review. The court concluded that the trial court's order lacked proper reasoning and was not sustainable, thus warranting interference.

Conclusion:
The High Court quashed the impugned order dated 13.04.2022 and remanded the matter back to the trial court, directing it to decide the application for interim compensation afresh within 30 days, in accordance with the law. The judgment clarified that this decision does not affect the merits of the case and instructed the Registrar General to circulate the judgment to all Judicial Officers in the State for guidance.