Interim compensation under the Negotiable Instruments Act is discretionary and must be supported by reasons when quantified.

The Bombay HC held that the power to award interim compensation under Section 143-A of the Negotiable Instruments Act is discretionary, not mandatory, because the provision uses permissive language, operates at the pre-conviction stage, and is capped by statute. The Court distinguished Section 143-A from post-conviction Section 148 and noted that the rebuttable presumption under Section 139 and possible failure at the threshold also support discretion. It further held that reasons must be recorded when interim compensation is awarded and its quantum fixed, to show application of mind and justify the amount. The orders granting interim compensation were set aside and the applications remitted for fresh consideration.

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Issues: (i) Whether the power under Section 143-A of the Negotiable Instruments Act, 1881 to direct interim compensation is mandatory or directory; (ii) whether reasons must be recorded while determining the quantum of interim compensation under Section 143-A(2) of the Negotiable Instruments Act, 1881.

Issue (i): Whether the power under Section 143-A of the Negotiable Instruments Act, 1881 to direct interim compensation is mandatory or directory.

Analysis: Section 143-A operates at the trial stage, before guilt is determined, and creates a pre-conviction interim liability. The language uses the word "may" in sub-section (1), while sub-section (2) caps the compensation at twenty per cent of the cheque amount. The scheme, object and context of the provision show that the legislature intended to confer a discretion on the trial court, not impose an invariable duty to award interim compensation in every case. The provision is distinct from Section 148, which applies post-conviction and stands on a different footing. The rebuttable nature of the presumption under Section 139 and the possibility that a complaint may fail on threshold requirements also support a discretionary construction.

Conclusion: The power under Section 143-A is directory and not mandatory.

Issue (ii): Whether reasons must be recorded while determining the quantum of interim compensation under Section 143-A(2) of the Negotiable Instruments Act, 1881.

Analysis: Since the power under Section 143-A is discretionary, its exercise must be accompanied by reasons. The record of reasons is necessary to show application of mind, to explain why interim compensation is warranted on the facts, and to justify the quantum chosen within the statutory ceiling. Without reasons, the exercise of discretion would be opaque and vulnerable to challenge for non-application of mind.

Conclusion: Reasons must be recorded when interim compensation is awarded and its quantum determined.

Final Conclusion: The impugned orders granting interim compensation were set aside and the applications under Section 143-A were remitted for fresh consideration in accordance with the declared principles.

Ratio Decidendi: Where a statutory power to award interim compensation is conferred at the pre-conviction stage and the provision uses permissive language within a capped range, the power is discretionary and must be exercised on relevant facts by a reasoned order.

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