NI Act | In Cheque Dishonour Case, Interim Compensation Can Be Ordered To Be Paid Only After Accused Pleads Not Guilty: Supreme Court

The Supreme Court held that where a cheque is dishonoured, the interim compensation can be directed to be paid only after the accused has pleaded not guilty as per section 143A(1) of the Negotiable Instruments Act, 1881. In the present case, the court noted that the magistrate had directed to pay 10% of the cheque amount before the plea of accused was entered. The court held that such orders being passed before the plea was taken into account is unsustainable in law.

Therefore the court observed that “ In the present case, the Magistrate did not issue the order after the plea of the accused was entered, but before that i.e. after he answered the summons. The party's counsels were present at an intermediate stage of proceedings, but before the plea of “not guilty” was entered. In these circumstances, clearly, there is an infraction of Section 143A (1).”

The Supreme Court bench led by Justices Ravindra Bhat and Aravind Kumar was hearing a Special Leave Petition preferred by the petitioners against Allahabad HC’s order which did not find any illegality in the impugned summoning order. The court allowed the appeal and quashed the order passed by CJM as it was unsustainable in law.

BACKGROUND OF THE CASE

There was a financial relationship between the petitioner(in this SLP) and the complainant for which cheques were issued. The complaint was that in order to satisfy the loan as well as the benefit, the cheque was given which was dishonoured.

The trial court in its order dated 24.05.2022 directed the petitioner to deposit 10% of the amount of a dishonored cheque under Section 143A of the Negotiable Instruments Act, 1881.

ISSUE

Whether in a cheque dishonour case, Interim compensation can be granted even before the accused pleads not guilty under section 143A(1) of NI Act, 1881?

Section 143A: Power to direct interim compensation

“(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant—

(a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint”

ARGUMENTS

Senior counsel Siddharth Dave appearing for the appellant argued that the order requiring such deposit was made by the Magistrate at a stage prior to when notice under Section 251 was sent to the accused petitioner.

Devashish Bharuka, counsel appearing on behalf of the respondent argued that the trial has proceeded to its final stage. The complainant’s evidence as well as the appellant’s statements have been recorded. So, no prejudice would be caused to the appellant

SUPREME COURT’S DECISION

The Court after analyzing section 143A(1) held that direction for payment of interim compensation can only be made after the accused has pleaded not guilty. Accordingly, the trial court’s order was untenable in law and quashed.

However, it also held that the trial was at an advanced stage, therefore, the complainant can seek relief, even under section 143A since it can be claimed at any stage.

Case title: Pawan Bhasin v State of UP

Citation: 2023 LiveLaw (SC) 537

Click Here To Read/Download Order