Dishonour of Cheque | Is it mandatory for trial court to award interim compensation under S. 143-A NI Act on mere invocation thereof? Del HC decides whether S. 143-A is directory or mandatory?

Delhi High Court: Anu Malhotra, J., held that the provision of Section 143A of the NI Act, 1881 is directory in nature and not mandatory.

Petitioners were stated to be the directors as per the complaints i.e. CC NI Act 12-20 and CC NI Act 100-20 filed by the respondent before the trial court under Section 138 read with Section 142 of the NI Act, 1881 and were summoned as co-accused therein.

Both the above-said complaints were related to the dishonour of cheques.

Complainants filed an application under Section 143A of the Negotiable Instruments Act seeking grant of interim compensation pursuant to accused persons having pleaded not guilty to the notice under Section 251 CrPC. The trial court directed:

“16. In the event of acquittal of the accused persons in the present cases, the complainants shall be directed to repay the amount to the accused persons with interests at the prevailing bank rate, as provided in Section 143-A(4) of the NI Act

17. The present applications moved by the complainants seeking interim compensation stand disposed as allowed. The accused persons are jointly and severally directed to pay a consolidated amount of Rs. 26,06,400/- in the above- captioned matters. In the event of any default on the part of accused to pay the amount, the complainant is at liberty to initiate appropriate proceedings as provided u/S 143- A(5) of the Negotiable Instruments Act, 1881.”

 Trial Court observed to the effect that there is no authoritative pronouncement of the Supreme Court nor of this Court on the interpretation of Section 143A of the NI Act, 1881 and there are divergent views of the High Court of Madras and Chattisgarh High Court in relation to the nature of the provision.

Vide the present petition, petitioners contended that the impugned order was neither tenable in law nor on facts, that the trial court did not even consider that the accused i.e. the petitioners could have put forth their documents i.e. the admitted documents which could have been considered and dealt with by the MM which would have negated even the admitted documents such as bank statements, email, whatsapp chats and that the Trial Court did not even think it fit to arithmetically calculate the amounts in terms of the alleged loan agreement to make out whether on the alleged date of the agreement i.e. 30.09.2020, the amounts filled in in the cheque were actually due or outstanding from the petitioners to the respondent 2 nor did the Trial Court even consider that the respondent 2 had concealed the factum of having received substantial money from the petitioners 1 & 2.

Petitioners submitted that the Trial Court could have directed respondent 2 to file their bank statements and income tax returns to show the outstanding amount due against the petitioners and that the Trial Court acted as a mute spectator assuming that on an application under Section 143A of the NI Act, 1881, the Magistrate was only required to direct payment of 20% interim compensation and nothing else.

Analysis, Law and Decision

High Court observed that to consider whether a legislation is mandatory or directory in nature as laid down by the Supreme Court in Mohan Singh v. International Airport Authority of India, (1997) 9 SCC 132, regard must be had to the context of the said matter and the object of the provision and use of the word “shall” or “may” is not decisive. If a statutory remedy is provided for violation of the said provision, then it can be construed as a mandatory provision as laid down by the Supreme Court in State of U.P. v. Babu Ram Upadhya, AIR 1961 SC 751.

Difference between the provisions of Section 143A and 148 of the NI Act, 1881 had already been spelt out in the Bombay High Court decision of Ajay Vinodchandra Shah v. State of Maharashtra, 2019 (4) MHLJ 705.

“…it apparent that the intent of the legislature in using the word “may” in Section 143A(1) thereof for directing the drawer of the cheque to pay the interim compensation to the complainant at the stages as provided therein in Sub-Clauses (a) and (b) thereof which has mandatorily in terms of Section 143A(2) thereof been directed not to exceed 20% of the amount of the cheque, can only be termed to be directory in nature and cannot be held to be mandatory as sought to be interpreted by the learned Trial Court vide the impugned order.”

With regards the observations of the trial court to the effect that the Court at the stage of awarding the interim compensation, is not required to consider the strength of the defence of the accused and the same is immaterial at this stage and though, the arguments led on behalf of the accused may seem attractive at the first blush, the same cannot be gone into by the Court at the stage of consideration of directing payment of interim compensation in terms of Section 143A of the NI Act, 1881 as that would amount to a mini-trial, it is essential to observe that the provisions of Section 294 of the CrPC, 1973 apply to all proceedings before any Court where the Code of Criminal Procedure, 1973 is applicable

Lastly, the High Court held that the provision of Section 143A of the NI Act, 1881 has essentially to be held to be ‘directory’ and cannot be termed to be ‘mandatory’ to the effect that the trial court had mandatorily to award the interim compensation under Section 143A of the NI Act in all proceedings tried under Section 138 NI Act on the mere invocation thereof by a complainant and thereby order in terms of Section 143A(2) thereof, the interim compensation to the tune of 20% of the amount of the cheque invoked.

Applicability of Section 294 CrPC

The applicability of Section 294 of the CrPC, 1973 has been made essential in all proceedings in criminal trials and undoubtedly, the proceedings under Section 138 of the NI Act, 1881 are termed to be quasi-criminal in nature.

“…it is essential to observe that the award of interim compensation in terms of Section 143A of the NI Act, 1881 has to be after providing sufficient reasons and whilst taking the same into account, the determination of interim compensation directed to be paid by the petitioners herein to the extent of the maximum of 20% of the cheque amount to the complainants…”

In view of the above discussion, the impugned order of the Metropolitan Magistrate was set aside with the matter being remanded back to the Trial Court to dispose of the application under Section 143A of the NI Act, 1881 filed by the complainants of the said complaint cases seeking interim compensation from the faccused after the invocation of Section 294 CrPC and considering the submissions made by the petitioner in response to the applications under Section 143A of the NI Act, 1881 and taking into account that vide this verdict it is categorically held to the effect that the provision of Section 143A of the NI Act, 1881 is directory in nature and not mandatory. [JSB Cargo and Freight Forwarder (P) Ltd. v. State, 2021 SCC OnLine Del 5425, decided on 20-12-2021]


Advocates before the Court:

CRL.M.C.2663/2021

For the Petitioners: Mr. Bharat Gupta and Mr. Gunjan Arora, Advocates.

For the Respondents: Ms. Aashaa Tiwari, APP for State Mr. Ashok Mahipal, Advocate for R-2.

CRL. M.C. 2730 of 2021

For the Petitioners: Mr. Bharat Gupta and Mr. Gunjan Arora, Advocates.

For the Respondents: Mr.Mukesh Kumar, APP for State. Mr.Ashok Mahipal,Advocate for R-2.

2 comments

  • The discussion above is good one but the amended act stated that the act applicable only prospective not retrospective

  • If it is false cheque bounce case with forgery on security cheque ,
    Wat to b done n to punish the culprits

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