Courts must evaluate complainant's claim and accused's defence before awarding interim compensation under Section 143A NI Act

The Bombay HC held that courts must conduct prima facie evaluation of complainant's claim and accused's defence before awarding interim compensation under Section 143A of NI Act. The 20% upper threshold cannot be awarded automatically. Courts must determine appropriate quantum after considering factors including plausibility of defence and accused's conduct. The HC quashed the Additional Sessions Judge's order for failing to consider quantum determination, finding the accused had provided evidence of substantial payments through cash and banking channels totaling Rs. 19,09,750 with supporting vouchers and invoices.

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Issues Involved:
1. Legality of the order directing the accused to pay interim compensation u/s 143A of the NI Act, 1881.
2. Quantum of interim compensation awarded under Section 143A of the NI Act, 1881.

Summary:

Issue 1: Legality of the order directing the accused to pay interim compensation u/s 143A of the NI Act, 1881:

This petition under Article 227 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973 takes exception to a judgment and order dated 19th August, 2023 passed by the learned Additional Sessions Judge, Greater Bombay, in Criminal Revision Application No. 400 of 2023, whereby the learned Additional Sessions Judge allowed the revision setting aside an order passed by the learned Metropolitan Magistrate, 30th Court, Kurla, on 10th April, 2023 rejecting an application (Exhibit-11) for direction to pay interim compensation under Section 143A of the Negotiable Instruments Act, 1881 ("NI Act, 1881"), and directed the petitioner - accused to deposit 20% of the amount of the cheques by way of interim compensation.

The learned Additional Sessions Judge was of the view that the learned Magistrate failed to exercise the jurisdiction conferred under Section 143A of the NI Act, 1881 in a lawful manner. The factors, which were germane for the determination of the application under Section 143A of the NI Act, 1881 were not kept in view by the learned Magistrate.

Mr. Mundargi, the learned Counsel for the petitioner, submitted that the learned Additional Sessions Judge approached the matter as if the provisions contained in Section 143A of the NI Act, 1881 are mandatory in nature. In the process, the learned Additional Sessions Judge lost sight of the fact that the learned Magistrate had declined to exercise the discretion for justifiable reasons.

The Supreme Court in the case of Rakesh Ranjan Shrivastava vs. State of Jharkhand and another 2024 SCC OnLine SC 309 ruled that the provisions under Section 143A will have to be held as a directory and not mandatory. The word "may" used in Section 143A, cannot be construed or interpreted as "shall". Thus, the power under Sub-section (1) of Section 143A is discretionary.

In the case at hand, the learned Metropolitan Magistrate had on the basis of the material on record opined that the accused had given a plausible explanation to show that the amount, as claimed by the complainant, was not due and thus there was a probability of rebuttal of the presumptions under the NI Act, 1881.

In the totality of the circumstances, in my view, the order passed by the learned Metropolitan Magistrate did not suffer from such legal infirmity as to warrant interference in exercise of the revisional jurisdiction.

Issue 2: Quantum of interim compensation awarded under Section 143A of the NI Act, 1881:

The second ground of challenge to the impugned order on the premise that the learned Additional Sessions Judge did not advert to the question of quantum of compensation while awarding interim compensation under Section 143A of the NI Act, 1881 appears to be well-merited. The impugned order singularly lacks any consideration as regards the determination of quantum of compensation.

As noted above, in the case of Rakesh Shrivastava (supra) the Supreme Court has enunciated in clear and explicit terms that even if the Court concludes that a case is made out for grant of interim compensation, the Court will have to apply its mind to the quantum of interim compensation, to be awarded. Impugned order is conspicuously silent on the said aspect of quantum of interim compensation.

Order:

(i) Writ petition stands allowed.

(ii) The judgment and order passed by the learned Additional Sessions Judge stands quashed and set aside.

(iii) Order passed by the learned Metropolitan Magistrate dated 10th April, 2023 stands restored.

(iv) Application for interim compensation (Exhibit-11) in CC No. 97/SC/2022 stands rejected.

(v) By way of abundant caution, it is clarified that the observations made hereinabove are confined to the determination of entitlement of interim compensation under Section 143A of the NI Act, 1881 and they shall not be construed as an expression of opinion on the guilt or otherwise of the accused, and the trial Court shall not be influenced by any of the observations while deciding CC No. 97/SC/2022.

Rule made absolute in the aforesaid terms.

No costs.

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