The Aryavarth Express
Agency (New Delhi): In a landmark judgment, the Supreme Court has brought much-needed clarity and guidance to the application of Section 143A of the Negotiable Instruments Act, 1881, which empowers courts to direct interim compensation in cases involving dishonored cheques. The apex court’s ruling addressed the contentious issue of whether the provision is mandatory or directory and set forth guiding principles for its judicious exercise, striking a delicate balance between safeguarding the rights of accused individuals and ensuring the efficacy of the legislative intent behind the provision.
The case before the Supreme Court arose from an appeal filed by Rakesh Ranjan Shrivastava, challenging the orders of the Jharkhand High Court and lower courts, which had directed him to pay interim compensation of Rs. 10,00,000 to the respondent in a cheque dishonor case. The appellant contended that the provision of Section 143A, which employs the word “may,” is discretionary, and courts cannot mechanically order interim compensation without considering the facts and circumstances of the case.
Delving into the crux of the matter, the Supreme Court bench, comprising Justices Abhay S. Oka and Ujjal Bhuyan, meticulously examined the legislative intent and implications of Section 143A. The court observed that interpreting the word “may” as “shall” would have drastic consequences, effectively mandating interim compensation in every cheque dishonor case, even before the accused’s guilt is established. Such an interpretation, the court noted, would expose the provision to the vice of manifest arbitrariness and potential violation of Article 14 of the Constitution, which enshrines the right to equality before law.
Emphasizing the principles of fairness and justice, the court underscored that penalizing an accused through interim compensation before their guilt is established would be unjust and contrary to well-settled legal concepts. The Supreme Court unequivocally held that the exercise of power under sub-section (1) of Section 143A is discretionary, and the provision is directory, not mandatory.
However, the court recognized the need for guiding principles to ensure the judicious exercise of discretion under Section 143A. In a comprehensive analysis, the bench delved into the implications of non-payment of interim compensation, highlighting the drastic consequences it could have on the accused. The court noted that non-payment of interim compensation does not take away the accused’s right to defend the prosecution, but it can lead to the recovery of the amount through the attachment and sale of the accused’s movable or immovable property, treating it as a fine under Section 421 of the Code of Criminal Procedure.
Acknowledging the gravity of such consequences, the Supreme Court outlined the following broad parameters for exercising discretion under Section 143A:
1. Prima facie evaluation: The court must prima facie evaluate the merits of the complainant’s case and the accused’s defense, as pleaded in response to the application under Section 143A. The presumption under Section 139 of the Negotiable Instruments Act, by itself, is insufficient grounds for directing interim compensation, as the presumption is rebuttable. The financial distress of the accused can also be a consideration.
2. Threshold for interim compensation: A direction to pay interim compensation can be issued only if the complainant establishes a prima facie case. If the accused’s defense is found to be prima facie plausible, the court may exercise discretion in refusing to grant interim compensation.
3. Quantum determination: If the court concludes that a case for interim compensation is made out, it must apply its mind to determine the quantum of interim compensation. Factors such as the nature of the transaction, the relationship between the accused and the complainant, and the accused’s paying capacity must be considered.
4. Case-specific considerations: The court acknowledged that there could be several other relevant factors in the peculiar facts of a given case, which cannot be exhaustively stated. The parameters outlined are not exhaustive, and courts must consider all relevant circumstances, including the pendency of civil suits or other proceedings related to the matter.
Emphasizing the importance of reasoned decision-making, the Supreme Court directed that when deciding prayers under Section 143A, courts must record brief reasons indicating consideration of all relevant factors.
In the present case, the Supreme Court found that the Trial Court and the High Court had mechanically passed orders for the deposit of interim compensation without applying their minds to the factual matrix. The court noted that the Trial Court had merely directed the appellant to deposit Rs. 10,00,000 as interim compensation, representing less than 5% of the cheque amount, without considering the issue of a prima facie case or other relevant factors.
Consequently, the Supreme Court set aside the impugned orders and remanded the matter to the Trial Court for fresh consideration of the application for interim compensation in light of the guiding principles enunciated in the judgment. The apex court directed the Trial Court to hear and decide the application afresh, evaluating the prima facie merits of the case, the accused’s defense, and other relevant factors, including the quantum of interim compensation, if deemed appropriate.
Furthermore, the Supreme Court drew a clear distinction between the exercise of discretion under Section 143A and Section 148 of the Negotiable Instruments Act, which empowers Appellate Courts to order the appellant/accused to deposit a minimum of 20% of the fine or compensation awarded by the Trial Court. The court clarified that the tests applicable for the exercise of jurisdiction under Section 148 can never apply to the exercise of jurisdiction under Section 143A, as the latter provision can be invoked even before the accused’s conviction.