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Section 143A of The Negotiable Instrument Act: Whether Mandatory or Directory?

Section 143-A of The Negotiable Instrument Act, 1881 deals with the power of the Court to grant interim compensation to the complainant. Section 143-A was introduced on the statue book by Act No. 20 of 2018 with effect from September 01, 2018. It states that:
  1. Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the Court trying an offence under Section 138 may order the drawer of the cheque to pay interim compensation to the complainant:
    1. in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and
    2. in any other case, upon framing of charge.
  2. The interim compensation under sub-section (1) shall not exceed twenty per cent of the cheque amount.
  3. The interim compensation shall be paid within sixty days from the date of the order under sub-section (1), or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the drawer of the cheque.
  4. If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant.
  5. The interim compensation payable under this section may be recovered as if it were a fine under Section 421 of the Code of Criminal Procedure, 1973 (2 of 1974).
  6. The amount of fine imposed under Section 138 or the amount of compensation awarded under Section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or recovered as interim compensation under this section.

The primary contention behind introduction of this legislature was to provide some interim relief to the complainant as many dishonest cheque drawers extend the duration of a Section 138 complaint by filing appeals and getting a stay of execution. As a result, the payee of a dishonored cheque suffers injustice since they entangled into legal proceedings and end up wasting a lot of time and money in order to get their money back. It was also noted that these delays jeopardize the integrity of the cheque transactions. In order to solve the issue of undue delay in the ultimate determination of the cheque dishonor instances, an amendment to the N.I. Act was recommended.

The fundamental issue that was posed before the judiciary was whether the power of the court to grant interim compensation was discretionary or mandatory. In the case of Rakesh Ranjan Shrivastava versus The State of Jharkhand & Anr. (Criminal Appeal No. 741 of 2024), Honorable Apex Court held that "The exercise of power under sub-section (1) of Section 143A is discretionary. The provision is directory and not mandatory. The word "may" used in the provision cannot be construed as "shall." The court while deliberating upon this issue, the Court observed that "There is no doubt that the word "may" ordinarily does not mean "must". Ordinarily, "may" will not be construed as "shall". But this is not an inflexible rule.

The use of the word "may" in certain legislations can be construed as "shall", and the word "shall" can be construed as "may". It all depends on the nature of the power conferred by the relevant provision of the statute and the effect of the exercise of the power. The legislative intent also plays a role in the interpretation of such provisions. Even the context in which the word "may" has been used is also relevant". Similar position has been taken by the Honorable Bombay High Court in the case of Ashwin Ashokrao Karokar vs Laxmikant Govind Joshi (Criminal Writ Petition No. 48 of 2022).

Also, in the case of Himanshu Gupta vs V Narayana Reddy (Criminal Petition No. 3555 of 2022), Honorable Karnataka High Court held that the court can event grant interim compensation pursuant to Section 143-A even without the complainant making an application praying for the same. However, the court has to adhere to the principles of natural justice while granting such interim compensation under section 143-A.

In the case of Rajesh Soni versus Mukesh Verma (CRMP No. 562 of 2021), Honorable Chhattisgarh High Court was of the view that that the amendment in Section 143A of the Act, 1881 is mandatory in nature. In this case, the court was of the opinion that the word "may" is advantageous to the complainant because the complainant has already suffered because of the accused's mass deed of failing to pay the amount; thus, it is in both parties' best interests if the accused pays the remaining 20% of the check amount. The accused will be safer because the money has already been deposited in accordance with the order made pursuant to Section 143A of the Act, 1881, and the complainant may use the funds for his own purposes.

However, the judgment of the apex court in Rakesh Ranjan Shrivastava versus The State of Jharkhand & Anr. (Criminal Appeal No. 741 of 2024) supersedes this judgment. Also, in the case of Biju Kumar Roy vs The State Of Assam And Anr (Crl.Rev.P./485/2022, Honorable Gauhati High Court decided the issue on the lines of the judgment of the apex court in the case of Rakesh Ranjan Shrivastava versus The State of Jharkhand & Anr.

Moreover, the Honorable Supreme Court of India laid down broad parameters for exercising discretion under section 143-A, and these are as follows:
  • The Court is required to document brief reasoning demonstrating that all pertinent factors were taken into account when deciding the prayer made under Section 143A.
  • The merits of the complaint presented by the complainant and the accused's defense must be initially considered by the court. The accused's financial hardship may also be taken into account.
  • Only in the event that the complainant establishes a prima facie case, an order for interim compensation may be granted.
  • If the court is of the opinion that the defence forwarded by an accused is prima facie reasonable, then it may decline to give an order directing for grant of interim compensation.
  • In the event the court concludes that a case is made for grant of interim compensation, it will also have to apply its mind in deciding the quantum of compensation. Consequently, the court has to take note of various ancillary factors such as the nature of the transaction, the relationship, if any between the accused and the complainant, etc.

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