2022 (3) TMI 1095 - HC - Indian Laws

Dishonor of Cheque - grant of interim compensation - whether the Criminal Court hearing could have passed the order directing payment of 20% without recording any reason for grant of such interim compensation? - Section 143A of the Negotiable Instruments Act, 1881 - HELD THAT - This amendment has come into force with effect from 1.9.2018 on its publication in the official gazette. The purport of the amendment is that the Court may in certain circumstances award interim compensation which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. It is invoking the afore-quoted provision of law an application was filed by the complainant seeking interim compensation of 20% of the amount involved. Section 143A is completely misread that once the accused does not plead guilty, the complainant becomes automatically entitled to 20% of the cheque amount as interim compensation. Sub-section (1) of Section 143A reads that notwithstanding anything contained in the Cr.P.C. the Court trying an offence under Section 138 may order drawer to pay interim compensation to the complainant. If an order is passed for payment of interim compensation, it shall be paid within 60 days from the date of the order. The Legislature has cautiously worded sub-section (1) of Section 143A not to make it mandatory in all cases where clauses (a) and (b) of sub-section (1) would empower the learned Magistrate before whom proceedings are pending consideration to award interim compensation. It is the discretion conferred, as the word used is may . If the order is passed, then the payment is mandatory - it is not that 20% has to be the interim compensation in every case. Here again the discretion is required to be exercised by the learned Magistrate as the interim compensation can vary from 1% to 20% but shall not exceed 20%. he language of Section 143A being couched with such discretion, the discretion if not exercised in a manner known to law, becomes an arbitrary action. In the case at hand, there is not even a semblance of application of mind on the part of the learned Magistrate as the learned Magistrate misconstrues the provision that in the event the accused does not plead guilty he becomes liable to pay 20% as interim compensation. This is not the purport of the Act. But, that does not preclude the learned Magistrate to pass appropriate orders of grant of compensation in a given case - Petition allowed.

Summary

Issues Involved:
1. Legality of the interim compensation order under Section 143A of the Negotiable Instruments Act, 1881.
2. Validity of the attachment and public auction of the petitioner's property.
3. Requirement for the trial court to provide reasons for granting interim compensation.

Detailed Analysis:

1. Legality of the interim compensation order under Section 143A of the Negotiable Instruments Act, 1881:

The primary issue in this case is whether the Criminal Court hearing C.C.No.67 of 2021 could have passed the order directing payment of 20% of the cheque amount as interim compensation without recording any reason for such grant. The court noted that Section 143A of the Negotiable Instruments Act, 1881, inserted by the Amendment Act of 2018, allows the court to order the drawer of the cheque to pay interim compensation to the complainant. However, it is not mandatory in all cases. The court emphasized that the word "may" in sub-section (1) of Section 143A indicates discretion, and therefore, the Magistrate must apply his mind and record reasons for granting interim compensation. The order passed by the lower court did not bear any reason for awarding 20% of the amount as interim compensation, which the High Court found to be a misreading of the provision. The High Court held that the Magistrate must exercise discretion and provide written reasons for awarding interim compensation, which was not done in this case.

2. Validity of the attachment and public auction of the petitioner's property:

The petitioner challenged the order of attachment of her property and the subsequent public auction notification. The High Court observed that the consequences of non-payment of interim compensation are severe, as proceedings can be initiated under Sections 357 and 421 of the Cr.P.C. for recovery as a fine. The court quashed the order of attachment dated 10.01.2022 and the public auction notification dated 25.01.2022, noting that the Magistrate had not applied his mind or recorded reasons for awarding interim compensation. The High Court directed the Principal District and Sessions Judge, Koppal, to hear the Criminal Revision Petition No.48 of 2021 on its merits within four weeks and to pass appropriate orders in accordance with law after affording adequate opportunity to the parties.

3. Requirement for the trial court to provide reasons for granting interim compensation:

The High Court highlighted the importance of recording reasons when exercising discretion under Section 143A of the Negotiable Instruments Act. The court stated that application of mind in exercise of discretion is discernible only in an order that contains reasons, and reasons can be found only if they are recorded in writing. The High Court found that the lower court's order lacked any application of mind, as it misconstrued the provision to mean that the accused must pay 20% interim compensation if they do not plead guilty. The court clarified that the Magistrate must apply his mind and pass appropriate orders based on the averments in the claim, recording detailed reasons for granting interim compensation.

Conclusion:

The High Court allowed the criminal petition, quashing the order of attachment and the public auction notification. It directed the Principal District and Sessions Judge, Koppal, to hear the Criminal Revision Petition No.48 of 2021 on its merits and to pass appropriate orders in accordance with law. The court emphasized the need for the trial court to apply its mind and record reasons when granting interim compensation under Section 143A of the Negotiable Instruments Act. The trial in C.C.No.67 of 2021 was not stayed, and the trial court was directed to proceed with further proceedings in accordance with law.