Magistrate Should Pass Speaking Order While Fixing Quantum Of Interim Compensation Under Negotiable Instruments Act: Kerala High Court

The Kerala High Court has reiterated that Courts are required to pass a speaking order while fixing the quantum of interim compensation under the Negotiable Instruments Act ('NI Act'). 

Perusing Section 143A(2) which states that interim compensation, varying from 1% of the cheque amount, up to 20% of the cheque amount could be ordered by the Court while trying a case for dishonour of cheque, Justice P.V. Kunhikrishnan, noted that the Court would be duty-bound to state the reasons while fixing the quantum. 

"If a court of law decided to order the maximum limit prescribed in Section 143A(2) of NI Act, as far as the interim compensation is concerned, it is the duty of the court to give reasons for the same. Similarly if the learned magistrate is giving interim compensation of 1% of the cheque amount or 2% or 3% of the cheque amount as the case may be, the reason should be mentioned. A discretion is given to the learned magistrate to determine the amount that is to be ordered as interim compensation. When discretion is given to a court of law, it should be judiciously decided. In such circumstances, a speaking order is necessary especially in a case where the maximum 20% of the interim compensation is ordered by the learned magistrate as prescribed under Section 143A of the NI Act. Similarly, if the interim compensation ordered is below 20% of the cheque amount, then also a reason should be mentioned. Therefore, without giving reason for fixing 20% of the cheque amount as interim compensation, which is the maximum limit prescribed under Section 143A(2) of NI Act, that order cannot be treated as an order made after applying the mind and exercising the discretionary jurisdiction," the Court observed. 

As per the factual matrix, the petitioner/accused had approached the complainant and agreed to purchase an apartment, in respect of which the total consideration had been fixed as Rs.37 Lakhs. It was averred that an agreement had been entered into between the petitioner and the 1st respondent, pursuant to which the latter executed a registered sale deed in favour of the former. 

The 1st respondent that the complainant had made an advance amount of Rs. 9 Lakhs, and issued three cheques for Rs.10 lakhs, Rs. 10 lakhs and Rs. 8 lakhs respectively. However, it was alleged that the cheques were dishonored due to insufficiency of funds.

The Magistrate directed the petitioner to pay an interim compensation of 20% of Rs.28 Lakh which is the total amount of three cheques. 

The petitioner thus filed the present plea contending that the Magistrate had not considered the matter in detail before passing an order under Section 143A of the NI Act. The 1st respondent countered the argument by submitting that no speaking order was necessary from the side of the Magistrate while directing interim compensation under Section 143A of the Act. 

Perusing Section 143A of the NI Act, the Court ascertained that the question to be decided was as to whether an Order to pay 20% of the cheque amount could be issued without giving reasons for the same. 

On an analysis of the afore provision, as well as the decision rendered by the High Court of Jammu & Kashmir and Ladakh in Nazir Ahmad Chopan v. Abdul Rehman Chopan (2020), the Court was of the considered opinion that the Magistrate ought to pass a speaking order about the reason for fixing a specific quantum as the interim compensation.

Thus, on finding that no reason had been given by the Magistrate while fixing 20% of the cheque amount as the interim compensation, the Court set aside the impugned order and directed the matter to be reconsidered by the Magistrate. 

The plea was thus disposed. 

Counsel for the Petitioner: Advocates Sreekanth S. Nair, and Sandeep P. Johnson

Counsel for the Respondents: Advocates K. Jose Kuriakose and Blossom Mathew

Citation: 2023 LiveLaw (Ker) 691 

Case Title: Faizal Abdul Samad v. A.N. Sasidharan & Anr. 

Case Number: Crl.M.C. No. 8132 of 2023

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