Provision To Direct Interim Compensation Under NI Act Is Discretionary, Financial Distress On Accused Must Be Considered: P&H High Court

The Punjab & Haryana High Court made it clear that the provision under Section 143A of the Negotiable Instrument Act (NI Act) is not mandatory but discretionary in nature and parameters including financial distress which the accused will have to bear need to be considered before passing an order.

According to Section 143A of the NIA the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant but that should not exceed 20% of the compensation.

Justice Sureshwar Thakur and Sudeepti Sharma also laid down the "broad parameters", that the Court should consider before passing an order on an application cast under Section 143-A of the N.I. Act.

The division bench said that the Court needs to consider the "financial distress" which accused will have to bear in paying the interim compensation and the trial court must apply its mind on deciding the quantum of interim compensation and the same should be more than 20% of the entire alleged amount. It also added that the parameters are not exhaustive.

"The stage at which the application is filed, is also a predominant factor. If the said application is filed at the initial stage and the learned trial Judge concerned, bearing in mind the fact that, given the numerical strength of the complainant's witnesses, thereby the trial is likely to conclude in the shortest possible time, therebys the learned trial Judge concerned may proceed to expeditiously conclude the trial, wherebys justice would be done to both the complainant and the accused," added the Court.

These observations were made while answering a reference made by a single judge. The question framed for the reference was:

“Whether, provision of Section 143 A of the Act is mandatory/directory and whether, the trial Judge needs to pass a separate speaking order before awarding interim compensation thereunder?”

Reliance was placed on Apex Court's decision in Rakesh Ranjan Shrivastava V/s State of Jharkhand and another, wherein it was observed that mere filing of the cheque dishonour complaint under the Negotiable Instruments Act would not grant a right to a complainant to seek interim compensation under Section 143A (1) of the N.I. Act, as the power of the court to grant interim compensation, isn't mandatory but discretionary and needs to be decided after prima facie evaluating the merits of the case.

The division bench opined that the provision is discretionary and at the stage of passing an "objective order, after a deep application of mind being made to the factor(s) supra, the learned trial Judge is also required to be considering various other factors relating to:- (i) the nature of the transaction; (ii) the relationship, if any, between the accused and the complainant, and (iii) the financial capacity of the accused to pay the said sum."

The Court also said that the Trial should be expeditiously concluded and if the applicant seeking interim compensation is deliberately delaying the trial then the Court must take the same into consideration.

Justice Thakur speaking for the bench also noted that despite the designation of special courts under the NI Act , the pendency is increasing and delay in the trial is one of the factors which Courts need to consider, hence it may lead to "capitalisation" for seeking interim-compensation.

Consequently, the Court suggested increasing the number of special courts under the NI Act and directed to place the judgement before the Chief Justice.

Mr. Sunny K. Singla, Advocate for the petitioner (in CRM-M-14140-2023).

Mr. Digvijay Nagpal, Advocate for Mr. Vishal Mittal, Advocate for the petitioner (in CRM-M-16597-2023).

Mr. K.P. Dhaliwal, Advocate for the respondent (in CRM-M-14140-2023).

Mr. Maninderjit Singh Bedi, Addl. A.G. Punjab with Mr. Maninder Singh, Sr. D.A.G., Punjab.

Mr. Hitesh Verma, Amicus Curiae.

Title: RISHIPAL v. KULWINDER SINGH

Citation: 2024 LiveLaw (PH) 172

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