2022 (10) TMI 1068 - HC - Indian Laws

Court quashes interim compensation order, directs new order issuance, and emphasizes focus on valid cheques.

Reyaz Azad Versus Mohammad Irfan

The court partially allowed the petition, quashing the interim compensation order due to lack of proper reasoning and directing the Magistrate to issue a ... Dishonor of Cheque - insufficiency of funds - discharge of existing debt or not - subject matter of the impugned complaint were stale or not - initiation of prosecution on the basis of these cheques - Section 138 of NI Act - HELD THAT:- The issuance of a number of cheques by the petitioner/accused in favour of the respondent/ complainant has to be considered as a bundle of facts giving rise to a cause of action. If one of the facts alleged is not found to be correct, it does not make the whole complaint false nor does it defeat the cause of action that has arisen in favour of the respondent/ complainant against the petitioner/accused. Thus, merely because one of the cheques, which is subject matter of the impugned complaint, had become stale before its presentation for encashment would not offer a ground for quashment of the impugned complaint as a whole. However, the impugned complaint has to be restricted only to the cheques that were valid as on the date of their presentation for encashment. This aspect of the matter has to be borne in mind by the learned trial Magistrate while trying the complaint. Grant of interim compensation - HELD THAT:- It appears that the learned Magistrate has inadvertently skipped to change the date in the order and while announcing the order on 29.07.2021, the date has been recorded as 23.07.2021 - This has resulted in confusion in actual date of the impugned order. It appears to be an inadvertent error and not a deliberate one. For this inadvertent error, the impugned order is not rendered illegal. A Court trying a complaint for offence under Section 138 of NI Act has discretion to order the drawer of the cheque to pay interim compensation to the complainant. This amount of compensation has not to exceed 20% of the amount of the cheque. Thus, grant of interim compensation is a discretionary power which has to be exercised by a Magistrate trying a complaint under Section 138 of NI Act and such order has to be based on reason and logic - Although no guidelines for grant of interim compensation have been laid down in Section 143-A of the NI Act, yet it is a settled law that whenever a discretionary power is to be exercised by a Court, the same has to be exercised on well-recognized principles supported by reasons. The court has to spell out the reasons for grant of interim compensation in favour of the complainant and it has also to justify in its order with reasons the quantum of interim compensation that is being awarded by him as the said quantum can vary from 1% to 20% of the cheque amount. The learned Magistrate has, after narrating the allegations made in the complaint, simply awarded the interim compensation of Rs.5,30,000/, which constitutes 20% of the total cheque amount, in favour of the complainant. The order impugned is devoid of any reasons and no discussion is made in the impugned order as to why interim compensation is being awarded. Simply narration of allegations made in the complaint does not make an order under Section 143-A of the NI Act a reasoned one. The fact that the learned Magistrate has included even the amount of stale cheque while calculating the cheque amount shows non-application of mind on his part. Therefore, the said order is not sustainable in law. Petition allowed in part. Issues Involved:1. Validity of the complaint based on stale cheques.2. Legality of the interim compensation order dated 23.07.2021/29.07.2021.Issue-wise Detailed Analysis:1. Validity of the Complaint Based on Stale Cheques:The petitioner challenged the complaint on the ground that some cheques were not presented for encashment within their validity period. Specifically, cheques dated 01.02.2019 and 04.01.2019 were alleged to be stale. Upon review, it was found that the cheque dated 04.01.2019 was indeed presented after its validity period, making it stale. However, the cheque dated 01.02.2019 was presented within its validity period when excluding the day of presentment as per Section 24 of the NI Act. The court noted that the complaint involved six cheques, but only one was stale. The prosecution under Section 138 of the NI Act was found to be maintainable for the other five valid cheques. It was concluded that the complaint should proceed regarding the five valid cheques, and the learned trial Magistrate should consider this aspect during the trial.2. Legality of the Interim Compensation Order Dated 23.07.2021/29.07.2021:The petitioner contended that the interim compensation order was invalid because it was dated when the Presiding Officer was on leave, suggesting non-application of mind and potential tampering. The court found that the order was announced on 29.07.2021, but the date was mistakenly recorded as 23.07.2021, an inadvertent error not rendering the order illegal. Additionally, the petitioner argued that the order lacked reasons for awarding interim compensation. Section 143-A of the NI Act grants discretionary power to award interim compensation, but such discretion must be exercised with reason and logic. The court found the order devoid of reasons and noted the inclusion of the stale cheque amount, indicating non-application of mind. Consequently, the order was quashed, and the Magistrate was directed to pass a fresh order with proper reasoning after hearing the parties.Conclusion:The petition was partly allowed. The interim compensation order was quashed, and the Magistrate was directed to issue a new order considering the court's observations. The proceedings on the complaint were to continue but limited to the five valid cheques. A copy of the order was sent to the Magistrate for compliance.