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2024 (4) TMI 783 - HC - Indian LawsDishonour of Cheque - Scope of interim compensation - Liability of the Director the Company - Provisions of Section 143A of the NI Act is mandatory in nature or not - HELD THAT - In the present case, the Impugned Order dated 24.07.2021 reflects that the learned Trial Court was of the opinion that Section 143A of the NI Act, is mandatory in nature and interim compensation has to be granted to the complainant in terms of the same as a rule and not as an exception. This view of the learned Trial Court cannot be upheld in view of the judgment of the Supreme Court in RAKESH RANJAN SHRIVASTAVA VERSUS THE STATE OF JHARKHAND ANR. 2024 (4) TMI 719 - SUPREME COURT . The Impugned Orders do not reflect any consideration of the learned Trial Court to the plea of the petitioners that the respondent no. 2 also holds security in form of the flats and in form of a statement made in the course of the proceedings before the High Court of Judicature at Bombay that the said company will not be disposing of the flats or creating any third-party rights in the plot of land which is the subject property. This was an important consideration which should have been taken into account by the learned Trial Court while deciding on the application filed by the respondent no. 2 under Section 143A of the NI Act. What is also relevant is that Section 143A of the NI Act empowers the Court to pass a direction for payment of interim compensation only against the drawer of the cheque . In the present case, admittedly, the drawer of the cheques is the company and not the petitioners. The petitioners have been arrayed as accused invoking Section 141 of the NI Act. The Impugned Order dated 11.03.2022, however, relies upon Section 141 of the NI Act to hold that a direction to pay the interim compensation under Section 143A of the NI Act can be made even against persons who, though are not the drawer of the cheque , are still deemed to have committed the offence under Section 138 of the NI Act. This view of the learned Trial Court cannot be sustained. The Impugned Orders, having been premised on incorrect appreciation of law and having ignored vital and relevant considerations for passing an order under Section 143A of the Act, cannot be sustained - petition allowed.
Issues Involved:
1. Applicability and interpretation of Section 143A of the Negotiable Instruments Act, 1881. 2. Whether the order directing interim compensation under Section 143A can be issued against persons other than the drawer of the cheque. Summary: Issue 1: Applicability and Interpretation of Section 143A of the NI Act The petitions challenge orders directing interim compensation under Section 143A of the NI Act. The petitioners argue that Section 143A is discretionary, not mandatory, and the trial court must consider the facts of each case. They contend that the respondent already holds sufficient security in the form of flats and that the trial court should have stayed proceedings against them in the absence of the company, the prime accused. The respondent argues that Section 143A should be treated as mandatory, citing various judgments. They claim the petitioners have been abusing the court process by not complying with the Consent Terms. The court held that Section 143A is discretionary, not mandatory, as clarified by the Supreme Court in Rakesh Ranjan Shrivastava v. State of Jharkhand & Anr., 2024 SCC OnLine SC 309. The court must prima facie evaluate the merits of the case and the defense, considering factors like financial distress and the nature of the transaction. The trial court's orders did not reflect such consideration and were based on an incorrect interpretation of the law. Issue 2: Interim Compensation Against Non-DrawersThe court noted that Section 143A empowers the court to direct interim compensation only against the "drawer of the cheque." In this case, the drawer is the company, not the petitioners, who are accused under Section 141 of the NI Act. Section 141 contains a deeming provision making certain persons liable for the company's offense but does not make them the drawer of the cheque. The trial court's reliance on Section 141 to direct interim compensation against the petitioners was incorrect. The court cited Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1, and N. Harihara Krishna v. J. Thomans, (2018) 13 SCC 663, which clarify that only the drawer of the cheque is the offender under Section 138, and other persons are deemed guilty due to Section 141. The court concluded that the trial court's orders were based on an incorrect appreciation of law and ignored relevant considerations. Therefore, the orders directing interim compensation against the petitioners were set aside. Conclusion:The petitions are allowed, and the impugned orders directing interim compensation under Section 143A of the NI Act are set aside. The court emphasized that Section 143A is discretionary and cannot be applied to persons other than the drawer of the cheque.
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