2022 (7) TMI 415 - HC - Indian Laws

Court's Discretion on Interim Compensation under Section 143-A of Negotiable Instruments Act

The Court determined that Section 143-A of the Negotiable Instruments Act is discretionary, not mandatory, granting the Court the power to direct interim ... Power to direct interim compensation under Section 143-A of the Negotiable Instruments Act - mandatory or directory nature of statutory provision - exercise of judicial discretion - recording of reasons for exercise of discretion - interim compensation not exceeding twenty per cent of the cheque amount - recovery of interim compensation as if it were a fine under Section 421 Cr.P.C.Power to direct interim compensation under Section 143-A of the Negotiable Instruments Act - mandatory or directory nature of statutory provision - interim compensation not exceeding twenty per cent of the cheque amount - Section 143-A of the Negotiable Instruments Act is directory and confers a discretion upon the Court to direct interim compensation and is not mandatory in all cases. - HELD THAT: - The Court analysed the language, object and scheme of the 2018 amendment inserting Section 143-A and contrasted it with Section 148. Section 143-A operates at the trial stage (pre-conviction) and creates a new interim liability only if the Court, on the facts of each case, chooses to exercise the power. The use of the word 'may' in Section 143-A(1), read with 'shall not exceed twenty per cent' in Section 143-A(2), indicates a capped discretion exercisable by the trial Court (range 0%-20%) rather than a mandatory duty to order deposit in every case. The Court observed that the presumption under Section 139 N.I. Act is rebuttable and various factual deficiencies may render a complaint unsuitable for directing interim compensation. Comparative analysis with Section 148 (post conviction/appellate stage) and analogy to Order XXXVIII Rule 5 CPC supported the conclusion that Section 143-A is discretionary. Consequently, prior authorities holding the provision to be directory were followed, and decisions holding it mandatory were not accepted. The exercise of the discretion must be fact sensitive and may result in either grant or refusal of interim compensation. [Paras 9, 10]Section 143-A is directory; the Court trying the offence has discretion whether to order interim compensation up to 20% of the cheque amount.Exercise of judicial discretion - recording of reasons for exercise of discretion - When the Court exercises its discretion under Section 143-A to award interim compensation it must record reasons, including reasons determining the quantum awarded. - HELD THAT: - The Court held that any judicial discretion must reflect application of mind and be accompanied by reasons so that the parties and any appellate forum can understand the basis of the order. Orders either granting or refusing interim compensation under Section 143-A must therefore set out reasons for the decision and, where compensation is awarded, the reasons for fixing the particular quantum (up to the statutory ceiling). This requirement is rooted in settled principles that reasons are the heart of an order and are necessary to enable meaningful challenge and review. [Paras 11, 12]The trial Court must record reasons when it decides to grant (or refuse) interim compensation under Section 143-A, and must state reasons for the quantum if compensation is awarded.Remand for fresh consideration - The impugned orders directing payment of interim compensation were quashed and the matters remanded for fresh consideration in light of the principles laid down. - HELD THAT: - Finding that the trial Court had not addressed the exercise of discretion with adequate application of mind and reasons, the High Court set aside the two orders directing 20% interim compensation and remanded the matters to the Special Court to decide the Section 143-A applications afresh applying the legal principles stated in the judgment (i.e., discretion to be exercised, factors to be considered, and reasons to be recorded). [Paras 13]Impugned orders quashed; matters remanded to the Special Court to decide the Section 143-A applications afresh in accordance with the judgment.Final Conclusion: The High Court held that Section 143-A of the Negotiable Instruments Act is directory and confers a discretion on the trial Court to award interim compensation up to twenty per cent of the cheque amount; the trial Court must record reasons when exercising that discretion and for the quantum awarded. The impugned orders granting interim compensation were quashed and the matters remanded for fresh consideration in accordance with these principles. Issues Involved:1. Whether the provisions of Section 143-A of the Negotiable Instruments Act, 1881, which empower the Court to direct payment of interim compensation are mandatory or directory.2. If the provisions are directory, whether the Court has to record reasons for determining the quantum of interim compensation to be awarded as contemplated by Section 143-A (2) of the Negotiable Instruments Act, 1881.Analysis:Issue 1: Nature of Section 143-A (Mandatory or Directory)The petitions raised the question of whether Section 143-A of the Negotiable Instruments Act (N.I. Act), 1881, which allows the Court to direct payment of interim compensation, is mandatory or directory. The Court examined various precedents and interpretations of the terms 'may' and 'shall' within legal provisions. The Court noted that the word 'may' in Section 143-A(1) of the N.I. Act indicates discretion rather than an obligation. The Court also considered the legislative intent behind the amendment, which aimed to expedite the resolution of cheque dishonour cases and discourage frivolous litigation. The Court concluded that Section 143-A is discretionary, not mandatory, as it confers power upon the Court to direct interim compensation based on the facts and circumstances of each case.Issue 2: Requirement to Record Reasons for Quantum of Interim CompensationIf Section 143-A is held to be directory, the Court must record reasons for determining the quantum of interim compensation. The Court emphasized that the exercise of discretion must be reasoned, indicating the application of mind to the facts available. The Court held that the reasons must be spelled out in the order to ensure transparency and accountability in judicial decision-making. Therefore, the Court must record reasons for determining the quantum of interim compensation, which can be up to 20% of the cheque amount, based on the specific facts of each case.Conclusion:1. The provisions of Section 143-A of the N.I. Act are directory and not mandatory.2. The Court must record reasons for determining the quantum of interim compensation if it decides to award it, which can be up to 20% of the cheque amount.The impugned orders were quashed and set aside, and the matters were remanded back to the learned Special Court to decide the applications under Section 143-A of the N.I. Act afresh, in light of the above conclusions. Rule was made absolute in these terms.