Supreme Court: Interim Compensation in Cheque Dishonour Cases Not Mandatory
Supreme Court clarified that the mere filing of a cheque dishonor complaint under the Negotiable Instruments Act (N.I. Act) does not automatically entitle the complainant to seek interim compensation under Section 143A(1) of the N.I. Act. The court emphasized that the power of the court to grant interim compensation is discretionary and should be exercised after a prima facie evaluation of the case’s merits.
The court set aside the findings of both the High Court and Trial Court, stating that the power to grant interim compensation should not be exercised at the outset of the proceedings. It highlighted the potential adverse consequences if the word “may” in Section 143A(1) were interpreted as “shall,” as it would obligate the accused to pay interim compensation in every complaint under Section 138.
According to the court, Section 143A of the N.I. Act provides the court with the authority to direct interim compensation to the complainant, aiming to address the issue of undue delay in resolving cheque dishonour cases. However, the court laid down broad parameters for exercising discretion under this provision:
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- Prima Facie Evaluation: The court must evaluate the merits of the case made by the complainant and the defense pleaded by the accused before deciding on interim compensation. Financial distress of the accused may also be considered.
- Prima Facie Case: Interim compensation can only be granted if the complainant establishes a prima facie case.
- Plausible Defense: If the accused’s defense appears prima facie plausible, the court may refuse to grant interim compensation.
- Quantum of Compensation: If the court decides to grant interim compensation, it must determine the appropriate amount considering various factors such as the nature of the transaction and the relationship between the parties.
The court emphasized that the parameters provided are not exhaustive and that each case may present unique factors to be considered.
In conclusion, the Supreme Court’s ruling clarified that the decision to grant interim compensation in cheque dishonour cases is discretionary and should be based on a careful evaluation of the case’s merits, with brief reasons recorded for the decision. The judgment set aside an earlier order directing the accused to pay interim compensation and directed the trial court to reconsider the application for interim compensation with proper evaluation.
Case Title: RAKESH RANJAN SHRIVASTAVA VERSUS THE STATE OF JHARKHA
