S.143A NI Act | 'Conduct Of Accused' Relevant Consideration While Deciding Application For Interim Compensation: Karnataka High Court

A single judge bench of Justice M Nagaprasanna said,

"It has become necessary to direct learned Magistrates that while considering applications filed under Section 143A of the Act, to notice at the outset, the conduct of the accused. If the accused has been unnecessarily evading the proceedings by seeking adjournments, consideration of the application would become imperative as the amendment itself is introduced to compensate such payees of delay tactics adopted by unscrupulous drawers of cheques."

Further the court noted that section 143A of the Act was introduced for a specific purpose. The purport for introduction of the amendment was that the Government had been receiving several representations from the public including the trading community relating to pendency of cheque dishonour cases. This was because of delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings. The injustice caused to the payee of a dishonoured cheque had to be considered. Therefore, the purpose for introduction of the amendment was to delay proceedings.

The amendment came into force with effect from 01.09.2018, the purport of the amendment is that the Court may, in certain circumstances, award interim compensation which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. In the event the Court directs deposit of the amount as interim compensation in terms of Section 143A the accused will have to comply with the said direction and the complainant in terms of the statute is entitled to withdraw the same. If the accused would not deposit the amount so directed by the Court in terms of Section 143A, it is recoverable by initiating proceedings under Section 421 of the Cr.P.C.

Following which it said, "Therefore, the provision which is directory in the beginning snowballs into becoming mandatory and penal by the time the realisation of the deposit amount is made."

It added,

"Application of mind and passing of a reasoned order of grant of compensation becomes necessary in the light of penal consequences that ensue an accused who failed to comply with the order granting 20% compensation, as the complainant is given several remedies of recovery which result in the accused being taken into custody. Therefore, such orders which result in such penal consequences should be rendered giving cogent reasons which would demonstrate application of mind and such orders should be passed only after hearing the accused in the matter."

Then the court went on to say that where the Magistrate is to exercise discretion, such discretion should be based on two fold considerations—

Firstly—Where an application is so made, the Magistrate has to apply his mind whether such an application is to be considered at all, as every application that is made need not result in grant of 20% interim compensation. Several factors need be gone into for considering such applications bearing in mind the reason and backdrop of the amendment.

The Magistrate after analysing the conduct of the accused should grant compensation which would vary from 1% to 20% after recording reasons. In a given case if the accused is cooperating with the trial without seeking any unnecessary adjournments, not absenting himself or his counsel on any date and cooperating with the conclusion of the trial in such cases, the Magistrate will have to apply his mind, exercise his discretion as to whether such applications should be entertained at all.

It observed,

"Therefore, it forms two classes of litigants. One who would cooperate with the proceedings and the other who would not. In cases where there is complete cooperation from the hands of the accused in the trial, the Court may consider whether interim compensation has to be granted at all and in cases where there is no cooperation on the part of the accused, the Court may proceed to consider the application."

The second fold of discretion in any given case, the compensation may vary from 1% to 20%. It is nowhere depicted in the statute that the amount of interim compensation should be of a particular figure. It can vary from 1% to 20%. It is this variance that gives the learned Magistrate power to exercise discretion to grant such compensation. The mandate of the statute is that it should not exceed 20%.

The court opined,

"In the cases where learned Magistrate proceeds to grant compensation, has to bear in mind the amount involved in the instrument, as certain transactions would run to several cores and the accused may have formidable defence against the complainant. In such cases, the learned Magistrate should exercise discretion in a cautious manner. Here again the conduct of the accused should be noticed."

The bench expressed, "The aforesaid two fold discretion is sine qua non for an order to be passed by the learned Magistrate while considering the application under Section 143A of the Act."

The bench made the above observations while allowing a petition filed by V. Krishnamurthy against an order dated 12-10-2021 passed by Additional Chief Metropolitan Magistrate, Bangalore allowing an application filed under section 143A by the complainant Dairy Classic Ice Creams Pvt Ltd and directing deposit of 10% compensation, in a proceeding instituted for offences punishable under Section 138 of the NI Act.

The bench on going through the order passed by the Magistrate court said, "The order of the learned Magistrate impugned herein does not bear any such reason as is indicated hereinabove. The amount involved in the transaction is Rs.5,56,71,208/- and 10% of the said amount would mean Rs.55 lakhs. Therefore, it was necessary for the learned Magistrates to apply his mind, record such reasons which would demonstrate application of mind and then allow the application for grant of compensation in terms of the Act."

It then held, "In the absence of the aforesaid, I deem it appropriate to exercise my discretion under Section 482 of the Cr.P.C., set aside the order impugned and remit the matter back to the hands of the learned Magistrate to pass appropriate orders on the application, bearing in mind the observations made in the course of the order."

Case Title: V.KRISHNAMURTHY v. DIARY CLASSIC ICE CREAMS PVT. LTD

Case No: CRIMINAL PETITION No.632 OF 2022

Citation: 2022 LiveLaw (Kar) 223

Date of Order: June 1, 2022

Appearance: Advocate MARUTHI, For Advocate JOSHNA HUDSON SAMUEL, for petitioner; Advocate DINESH S.K for respondent

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