Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: M. Nagarprasanna J. allowed a petition filed under Section 482 of Criminal Procedure Code, 1973 (CrPC) seeking quashing of the impugned order passed by the Additional Chief Metropolitan Magistrate. Therefore, the magistrate court directed that interim compensation be given as per the “conduct of the accused” for the applications filed under Section 143-A of the Negotiable Instruments Act, 1881 (NI Act).

The observation came after the Court noticed that it was “flooded with litigation with regard to grant of compensation under Section 143-A of the NI Act by criminal courts”. Noticing that in several cases discretion is exercised for grant of compensation and in several other cases there are no reasons for exercise of such discretion, the Court found it necessary to direct Magistrates to consider the conduct of the accused at the outset while considering applications filed under Section 143-A of the Act.

“If the accused has been unnecessarily evading the proceedings by seeking adjournments, consideration of the application would become imperative as the amendment itself is introduced to compensate such payees of delay tactics adopted by unscrupulous drawers of cheques.”

Facts of the case

The petitioner and the respondent entered into an agreement in 2017 for the distribution of ice cream and frozen dessert products manufactured by the respondent. As per the agreement, the respondent had demanded the petitioner the issuance of blank cheques as security instead of the proposed supply to be made to the petitioner. Therefore, the petitioner issued several blank cheques to the respondent.

A complaint was filed invoking Section 200 of the CrPC for offences punishable under Section 138 of the NI Act when the cheque of Rs 5,56,71,208/- was dishonored on the grounds of want of sufficient funds in the account.

The trial court, after considering the facts, gave the impugned order of granting 10% interim compensation in terms of section 143-A of the NI Act.

Analysis of the court

Firstly, the court noted that Section 143-A of the Act was introduced for a specific purpose. The purport of the amendment was 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which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. Therefore, the court in such cases directs the accused to pay interim compensation under section 143-A. In circumstances when the accused would not deposit the amount directed by the Court, it is recoverable by initiating proceedings under Section 421 of the CrPC. Therefore, the provision which is a directory in the beginning snowballs into becoming mandatory and penal by the time the realization of the deposit amount is made.

The Court, further, explained the following “two-fold discretion” that are sine qua non for an order to be passed by the Magistrate while considering the application under Section 143-A of the NI Act.:

  • First: In a given case if the accused is cooperating with the trial without seeking any unnecessary adjournments, not absenting himself or his counsel on any date and cooperating with the conclusion of the trial in such cases, the learned Magistrate will have to apply his mind, exercise his discretion as to whether such applications should be entertained at all.

  • Second: In any given case, the compensation may vary from 1% to 20%. As the mandate of the statute is that it should not exceed 20%, in the cases where Magistrate proceeds to grant compensation, has to bear in mind the amount involved in the instrument, as certain transactions would run to several cores and the accused may have formidable defence against the complainant. In such cases, the Magistrate should exercise discretion in a cautious manner. Here again the conduct of the accused should be noticed.

The court opined that application of mind and passing of a reasoned order of grant of compensation becomes necessary in penal cases that ensue an accused who failed to comply with the order granting 20% compensation as the complainant is given several remedies of recovery which result in the accused being taken into custody. Hence, such orders which result in such penal consequences should be rendered by giving cogent reasons which would demonstrate the application of mind, and such orders should be passed only after hearing the accused in the matter.

Ruling on facts

In the case at hand, involving the amount of Rs. 55 Lakhs, it was observed that the order of the Magistrate did not bear any reason. Hence, the Court held that the Magistrate after analyzing the conduct of the accused should grant compensation which would vary from 1% to 20% after recording necessary reasons and therefore set aside the impugned order and remitted back the matter to the hands of themagistrate.

[V. Krishnamurthy v. Diary Classic Ice Creams Pvt. Ltd., 2022 SCC OnLine Kar 1047, decided on 01-06-2022]

Advocates who appeared in this case :

Maruthi, Joshna Hudson Samuel, Advocates, for the Petitioner;

Dinesh SK, Advocate, for the Respondent.

Case BriefsHigh Courts

Orissa High Court: R K Pattnaik, J. dismissed the petition and held that the ground on which the petition is raised is misconceived and therefore, cannot be sustained.

The facts of the case are such that the  petitioner is an accused in a complaint case filed by OP 1 pending before the court below for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 ( ‘the NI Act’) alleging therein that the former had taken a hand loan of Rs.40,000/- to meet his personal needs and when it could be paid back, some henchmen of OP 1 forcibly entered inside his residence and managed to obtain a cheque for an amount of Rs.40,000/- drawn in the UCO Bank, Khurda Branch, Khurda and thereafter, presented it before the bank for encashment but it could not be honored for insufficient funds in the account and again after five months, it was again submitted and yet dishonored with a similar endorsement dated 18th October, 2010. The cognizance was taken and now it is raised for dispute that court below could not have taken cognizance of the offence under Section 138 of the N.I. Act after it was presented for encashment once again after about five months which is not permitted under law. Hence the petitioner assailed the legality and judicial propriety of order of cognizance and invoked jurisdiction under Section 482 Cr.P.C on the grounds inter alia that it is not sustainable in law and therefore, liable to be quashed.

The issue that came for consideration is that the question is, whether on the basis of a statutory notice issued by OP 1 subsequent to dishonor of cheque about five months before, the learned court below could have entertained the complaint and taken cognizance of offence under Section 138 of the N.I. Act as against the petitioner?

The Court relied on Sadanandan Bhadran v. Madhavan Sunil Kumar, (1998) 6 SCC 514 and observed that to the extent that second and successive presentation of a cheque is legally permissible as long as it is within six months or validity of the cheque, whichever is earlier.

The Court reiterated that a prosecution based on a second or successive default in payment of the cheque amount should not be impermissible simply because no prosecution based on the first default which was followed by statutory notice and a failure to pay had not been launched. Hence no real or qualitative difference exists between a case where default is committed and prosecution immediately launched and another, where the prosecution is deferred till the cheque presented again gets dishonored for the second or successive time.

With regard to the purport of NI Act the Court observed that if the entire purpose underlined Section 138 of the N.I. Act is to compel the drawers to honor their commitments made in course of business or other transactions, there is no reason why a person who has issued a cheque which is dishonored and who failed to make payment despite statutory notice served upon him should be immune to prosecution simply because the holder of the cheque had not rushed to the court with a complaint based on such default or for the reason that the drawer has made the holder defer prosecution promising to make arrangements for funds or on account of any other similar situation.

The Court concluded after perusing various judgments on the similar point of law that such a criminal action on a subsequent statutory notice or a notice sent for the first time after dishonor of cheque previously for which prosecution was not launched on the promise of the accused to make arrangement for funds, a complaint cannot be held as not maintainable.

The Court thus observed that in the present case OP 1 did not send any statutory notice after the cheque was dishonored in the month of May, 2010 but once again presented it within the validity period of the cheque and thereafter, issued the statutory notice as required under law and under such circumstances, it cannot be said that the complaint is invalid.

The Court thus held “the contention of the petitioner vis-à-vis maintainability of the complaint on the ground raised is misconceived and therefore, cannot be sustained.”

[Gadadhar Barik v. Pradeep Kumar Jena, 2022 SCC OnLine Ori 1052, decided on 07-04-2022]


For Petitioner- Mr. A. Pattanaik

For Opposite Parties- Mr. D.R. Parida

Arunima Bose, Editorial Assistant has reported this brief.