Supreme Court rules Section 143A interim compensation in cheque dishonour cases is discretionary, not mandatory for courts

The SC held that Section 143A(1) of the Negotiable Instruments Act, 1881 granting interim compensation in dishonour of cheque cases is discretionary, not mandatory. The word "may" cannot be interpreted as "shall" as it would result in drastic consequences and manifest arbitrariness. Courts must prima facie evaluate merits of complainant's case and accused's defence before granting interim compensation. The presumption under Section 139 alone is insufficient grounds for directing payment. The Trial Court mechanically ordered deposit without considering prima facie case and relevant factors. The impugned orders were set aside, directing fresh consideration of the application while maintaining the deposited amount with the Trial Court.

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Issues Involved:
1. Whether the provision of sub-section (1) of Section 143A of the Negotiable Instruments Act, 1881, which provides for the grant of interim compensation, is directory or mandatory.
2. Factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act.

Summary:

Issue 1: Directory or Mandatory Nature of Section 143A(1)
1. The primary issue was whether sub-section (1) of Section 143A of the N.I. Act, which allows for the grant of interim compensation, is directory or mandatory. The Court noted that the word "may" in the provision indicates discretion rather than obligation. The provision was held to be directory and not mandatory, meaning the power to grant interim compensation is discretionary.

2. The Court emphasized that interpreting "may" as "shall" would have drastic consequences, potentially penalizing an accused before guilt is established, which could be unjust and contrary to fairness and justice. Thus, the word "may" used in Section 143A cannot be construed as "shall."

Issue 2: Factors to be Considered While Exercising Discretion
1. The Court outlined that when dealing with an application under Section 143A, the Court must prima facie evaluate the merits of the complainant's case and the defense pleaded by the accused. The presumption under Section 139 of the N.I. Act is rebuttable and does not justify an automatic grant of interim compensation.

2. Factors such as the financial distress of the accused, the nature of the transaction, the relationship between the accused and the complainant, and the paying capacity of the accused must be considered. If the defense is prima facie plausible, the Court may refuse to grant interim compensation.

3. The Court must record brief reasons indicating consideration of all relevant factors while deciding on the application for interim compensation. The parameters for exercising discretion are not exhaustive, and other relevant factors may also be considered.

Conclusion:
The Court set aside the impugned orders and directed the Trial Court to reconsider the application for interim compensation afresh, taking into account the guidelines provided in the judgment. The amount of Rs. 10,00,000/- already deposited by the appellant shall remain with the Trial Court and be invested in a fixed deposit until the application is disposed of.

Main Conclusions:
a. The exercise of power under sub-section (1) of Section 143A is discretionary and directory, not mandatory.
b. The Court must record brief reasons indicating consideration of all relevant factors while deciding the prayer under Section 143A.
c. Broad parameters for exercising discretion include prima facie evaluation of the complainant's case, financial distress of the accused, and the nature of the transaction, among other factors.

The appeal was partly allowed based on these terms.

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