Negotiable Instruments Act, 1881 (“NI”) was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. Central Government had been receiving several representations from public at large particularly trading community due to the various loopholes in extant provisions of NI resulting into payees of dishonoured cheques waiting for an inordinately long period for realisation of their cheque values and /or prosecuting the person responsible for dishonour of cheques thereby compromising the entire cheque transaction. With a view to strengthen the credibility of cheque transactions and to facilitate trade and commerce, Central Government sought to introduce Section 143-A by virtue of Negotiable Instruments (Amendment) Act, 2018. 1

Ingredients of Section 143-The newly inserted Section 143-A of NI stipulates that where the offence is tried under section 138 of the NI Act, the trial courts may order the drawer of the cheque to give the complainant interim compensation not exceeding 20% of the cheque amount in a summary trial or summons case where accused pleads not guilty and in other cases after framing of charge 2 .

The amount of interim compensation is to be recovered as a fine under section 421 of the Criminal Procedure Code, 1973 (“CRPC”). The amount of fine imposed under section 138 of NI or the amount of compensation awarded under Section 357 of CRPC, shall be reduced by the amount paid or recovered as interim compensation under this section.

In the event of acquittal of the accused, the interim compensation is to be repaid to the accused along with interest at the prevalent Reserve Bank Rate within 60 days of the order of acquittal or after 30 days where sufficient cause has been shown by the complainant for the non-repayment.

Adjudication of its scope by various courts: Granting of interim compensation as provided under this section has been a subject of conflicting decisions between the various courts in India. The Hon’ble Bombay High Court has held that the interim compensation sought to be granted under section 143-A of the NI Act “can only be termed to be directory in nature and cannot be held to be mandatory” 3 . Same view has been reiterated by Hon’ble High Courts of Karnataka and Delhi which have also adopted a liberal view and held that the Trial Court is at a discretion to grant interim compensation in terms of Section 143-A of NI. However, Hon’ble Chhattisgarh High Court has taken a contrary view and has held that the amendment in Section 143A of NI is mandatory in nature 4 . The Conflicting position taken by Hon’ble Bombay High Court and Chhattisgarh has not yet been settled by the Hon’ble Supreme Court. However, in our view the use of word “may” would clearly mean that grant of interim compensation is at the discretion of the court which would be based on the facts of each matter.

Contours of granting interim compensation under Section 143-A of NI

Further the Hon’ble High Court of Karnataka 5 has held that the power to grant interim compensation has to be exercised judiciously keeping in mind the facts and circumstances of the case in hand.

The Hon’ble Madars High Court has held that an order of interim compensation passed under section 143-A of NI Act must be by a speaking order, well-reasoned, and providing reasons as to why such an order has been passed against the accused. Mere invocation of an application by the complainant shall not be a reason upon which the trial court is deemed to pass such an order 6 . Further Hon’ble Delhi High Court 7 has held that while deciding the application under section 143-A of the NI Act, the trial court must ensure it is not conducting a mini-trial as that would frustrate and defeat the intent of the Legislature in enacting the said provision.

Though the intention of the legislature is laudable, however, recovery of interim compensation as a fine under section 421 of the Criminal Procedure Code, 1973 completely belies the efforts of the Legislature. In terms of Section 421 of the Criminal Procedure Code 1973, the procedure of recovery of fine entails that when the offender fails to pay such a compensation, the trial Court may issue a warrant for the levy of the amount by attachment and sale of any movable property belonging to the offender or issue a warrant to the Collector of the district, authorising him to realise the amount as arrears of land revenue from the movable or immovable property, or both, of the defaulter. However, the same shall not be executed by the arrest or detention in prison of the offender. From the process set out above, it is clear that the entire process of recovering the said fine is very cumbersome and tiresome and hence not providing any quick remedy to the complainant.

Conclusion: In view of above legislative position, it appears that the Section 143-A requires to be further fine-tuned to meet the needs of the dynamic business scenario in this fast-paced business world and thereby prevent the same to be abused and to ensure that the justice reaches the lowest common denominator and the sanctity of cheque transactions in upheld.