INTERIM COMPENSATION UNDER SECTION 143A OF NEGOTIABLE INSTRUMENTS ACT, 1881 – WHETHER MANDATORY OR DISCRETIONARY?

[Mr. M. GOVINDARAJAN]

Interim compensation

Section 143A was introduced in the Negotiable Instruments Act, 1881 (‘Act’ for short) vide Negotiable Instruments (Amendment) Act, 2018.

 Section 143A gives powers the Court to direct the accused to pay interim compensation to the complainant. Section 143A (1) of the Act provides when the court can directed to pay interim compensation. The Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant-

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

Section 143A(2) provides that the interim compensation under sub-section (1) shall not exceed 20% of the amount of the cheque. Section 143A(3) provides that date on which the interim compensation is to be paid. Section 143A(3) provides that the interim compensation shall be paid within 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque.

In case of acquittal, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the Court on sufficient cause being shown by the complainant.

Section 143A(6) of the Act provides that the amount of fine imposed under section 138 or the amount of compensation awarded under section 357 of the Code of Criminal Procedure, 1973 shall be reduced by the amount paid or recovered as interim compensation under this section.

Reasons to be adduced

In L.G.R. ENTERPRISES, SINDU @ LAKSHMI VERSUS P. ANBAZHAGAN [2019 (7) TMI 1840 - MADRAS HIGH COURT], the High Court held that the Court below has not given any reason as to why it is directing the accused persons to pay an interim compensation of 20% to the complainant. The discretionary power that is vested with the trial Court in ordering for interim compensation must be supported by reasons and unfortunately in this case, it is not supported by reasons. The attempt made by the respondent to read certain reasons into the order, cannot be done by this Court, since this Court is testing the application of mind of the Court below while passing the impugned order by exercising its discretion and this Court cannot attempt to supplement it with the reasons argued by the learned counsel for the respondent.

Directing interim compensation - mandatory

In RAJESH SONI, VERSUS MUKESH VERMA [2021 (7) TMI 386 - CHHATTISGARH HIGH COURT] the respondent in this petition is the original complainant who filed a complaint before Judicial Magistrate Court under section 138 of the Negotiable Instruments Act,1881 on the dishonor of cheque for ₹ 6,50,000/-. The Judicial Magistrate First Class took the cognizant on the complaint and issued notice to the petitioner. Later the complainant/respondent has filed an application under section 143A of the Act with the prayer to order for interim compensation since the charges have been framed against the accused/petitioner.

The Judicial Magistrate on the application of the complainant directed the accused to pay 20% of the cheque amount as compensation, failing which proceeding under sub-section (v) of Section 143A will be initiated against petitioner. Against this order the petitioner filed a criminal revision petition before the Additional Sessions Judge. The Additional Sessions Judge dismissed the criminal revision petition holding that there is no illegality or irregularity in the impugned order passed by the Judicial Magistrate. The petitioner challenged the orders of Judicial Magistrate as well as the order of Additional Sessions Judge before the High Court.

The petitioner submitted the following before the High Court-

• As per amended provision of Section 143A of the Act, 1881, grant of interim compensation is not mandatory and it is discretionary, therefore, it is not necessary in every case to grant 20% of cheque amount as interim compensation.
• Since the legislature has used the word 'may', as such, it is discretionary and trial court should have not granted 20% of cheque amount as interim compensation, therefore, orders passed by both the courts below, are not just and proper, which are liable to be quashed by the High Court.

The High Court analyzed the object the Negotiable Instruments (Amendment) Act, 2018 which inserted the section 143A for payment of interim compensation by the accused to the complainant. There are many cases pending the Courts on dishonor of cheques for a long time because of the tactics by filing of appeals and got stay on proceedings. Therefore injustice is caused to the payee of a dishonored cheque who has to spend considerable time and resources in court proceedings to realize the value of the cheque. The Amendment Act proposed with a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonored cheques and to discourage frivolous and unnecessary litigation which would save time and money.

The legislature has amended Act, 1881, which came into force on 01.09.2018 with the aim to secure the interest of the complainant along with increasing the efficacy and expediency of proceedings under Section 138 of the Act, 1881. Section 143A of the Act, 1881 stipulates that under certain stages of proceedings under Section 138 of the Act, 1881, the Court may order for the drawer to make payment up to 20% of the cheque amount during the pendency of the matter. The intent behind this provision is to provide aid to the complainant during the pendency of proceedings under Section 138 of the Act, where he is already suffering doubleedged sword of loss of receivables by dishonor of the cheque and the subsequent legal costs in pursuing claim and offence. These amendments would reduce pendency in courts because of the deterrent effect on the masses along ensuring certainty of process that was very much lacking in the past, especially enforced at key stages of the proceedings under the Act.

Then the High Court analyzed the use of the word ‘may’ in section 143A which is alleged by the petitioner that the usage of the word ‘may’ itself denotes that the interim compensation is not mandatory. Section 143A of the Act, 1881 has been drafted in such a manner that it secures the interest of the complainant as well as the accused, therefore, from perusal of aims and object of amended Section 143A of the Act, 1881, it is quite clear that the word 'may' may be treated as 'shall' and it is not discretionary but of directory.

The High Court relied on the judgment in SMT. BACHAHAN DEVI & ANR VERSUS NAGAR NIGAM, GORAKHPUR & ANR [2008 (2) TMI 869 - SUPREME COURT] in which the Supreme Court held that it is well-settled that the use of word “may” in a statutory provision would not by itself show that the provision is directory in nature. In some cases, the legislature may use the word 'may' as a matter of pure conventional courtesy and yet intend a mandatory force.

The Supreme Court held that from perusal of provisions of the Act, 1881 considering the aims behind object of the Act, 1881 and the law laid down by the Supreme Court, the High Court was of the considered view that the amendment in Section 143A of the Act, 1881 is mandatory in nature, therefore, the learned Judicial Magistrate First Class has rightly passed the order of interim compensation in favor of the respondent and has not committed any irregularity or illegality in passing such order. The Additional Sessions Judge has also not committed any irregularity or illegality in rejecting the revision filed by the petitioner, which warrants any interference by the High Court.

Conclusion

The Law Commission in its 213th Report, noted that approximately 38 lakhs Section 138 cases were pending in criminal courts nationwide while a more recent Supreme Court order put the figure closer to 35 lakhs, constituting more than 15% of criminal cases pending in District The discretionary powers given to the Courts to direct the accused to pay interim compensation will reduce the complaints on such cases to such extent, it is hoped.

Discussions to this article

[Mohit Hgede]

After the issued of the order on interim compensation upto the extent of 20% if the accused does not make the payment, the FLW is issued against the accused.

The FLW issued by the court by itself does not have the right to arrest in case the interim compensation has not been paid , hence the police finds it difficult to execut the FLW.

we are of the opinion since it's only 10 or 20 % of the total value default in payment should result in arrest of the accused till he make the payment, other wise like in my case the accused will move arround freely.

kindly request this of these powers to direct the court to issue NBW incase the accused denies the payment and disobeys the court orders.