Interim Compensation in Cheque Cases Needs Reasons: Rajasthan High Court Sets Aside Cryptic Section 143A Order

In N.I. Case No. 353/2021, the complainant, Mahaveer Trading Company, applied under Section 143A of the Negotiable Instruments Act for interim compensation. On 23.07.2023 the Additional Chief Judicial Magistrate, Gangapur, District Bhilwara allowed the application and directed the accused, Gariya Ba Shyam Enterprises acting through its proprietor, to pay 20% of the cheque amount as compensation to the complainant (paras 1-2). The order said only that the arguments of both parties had been heard, the case file examined, and the application was therefore accepted (para 2). The accused firm challenged that order before the High Court at Jodhpur in a criminal miscellaneous petition (para 1).

The High Court found the magistrate's order "very cryptic to say the least" (para 2). It had been passed mechanically, without apparent application of mind and without recording why the petitioner-accused should pay interim compensation (para 3). The Court then set out the conclusions of the Supreme Court in Rakesh Ranjan Shrivastava v. State of Jharkhand, (2024) 3 SCR 438 (para 4). Under them, the power under Section 143A(1) is discretionary and directory, not mandatory; the court must record brief reasons showing that all relevant factors were considered; it must prima facie evaluate the complainant's case and the defence in the reply, and may consider the accused's financial distress; compensation can be directed only on a prima facie case and may be refused if the defence is prima facie plausible; and the quantum needs separate application of mind to factors such as the nature of the transaction and the parties' relationship (para 4). None of these parameters had been taken into consideration (para 5). Though the trial court is vested with the power to pass such orders, it cannot do so without complying with that ratio (para 6), so the order of 23.07.2023 was not sustainable (para 7).