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Introduction
In a recent judgment RAKESH RANJAN SHRIVASTAVA VERSUS THE STATE OF JHARKHAND & ANR, the Supreme Court has clarified that awarding interim compensation under Section 143A of the Negotiable Instruments Act (“NI Act”) is not mandatory for courts. The court laid down broad parameters for exercising discretion while considering such applications.
BACKGROUND
Section 143A was introduced to address the issue of delays in cheque dishonor cases. This provision empowers courts to direct the accused to pay interim compensation to the complainant during the pendency of the proceedings.
The case in question involved a cheque dishonor of Rs. 2,20,00,000. The complainant sought interim compensation of 20% of the cheque amount under Section 143 A (1). Both the trial court and the High Court allowed the application and directed the accused to pay Rs. 10,00,000 as interim compensation.
Ruling
The Supreme Court set aside the orders of the lower courts. The court held that the word “may” used in Section 143 A (1) should not be construed as “shall.” This means that awarding interim compensation is discretionary and not mandatory.
Factors
The Court outlined the following factors for courts to consider while deciding on interim compensation applications:
- Prima facie case:The court will assess the merits of the case presented by the complainant and the defense of the accused.
- Financial hardship of the accused:The court may consider the financial strain an interim compensation payment would cause the accused.
- Nature of the transaction and relationship between parties:The type of business dealing and the connection between the complainant and the accused are relevant factors.
- Quantum of compensation:If interim compensation is awarded, the court will determine the appropriate amount based on the factors mentioned above.
- Other relevant factors: The court can consider other pertinent details specific to each case.
conclusion
The Supreme Court’s judgment clarifies the discretionary nature of interim compensation under Section 143A of the NI Act. This ensures a more balanced and nuanced approach to these applications. Courts are now required to carefully consider the merits of each case, including the strength of the complainant’s claim, the potential hardship to the accused, and other relevant factors. Well-reasoned orders that address these considerations will promote fairness and efficiency in the adjudication of cheque dishonor cases. This judgment provides much-needed clarity on the discretionary nature of interim compensation under the NI Act. It prevents the mechanical awarding of interim compensation and ensures a more balanced approach that considers the merits of each case.
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