A) ABSTRACT / HEADNOTE

This case concerns the interpretation of Section 143A(1) of the Negotiable Instruments Act, 1881 (N.I. Act), regarding interim compensation. The central issue is whether this provision is directory or mandatory. The Supreme Court ruled that the power to order interim compensation under Section 143A is discretionary, not mandatory. The Court emphasized that the word “may” in the provision cannot be interpreted as “shall,” as it could result in unfairness and potential arbitrariness. The Court also clarified the factors that must be considered before granting interim compensation, such as a prima facie case, financial distress, and the plausibility of the defense. The case reinforces the principle of judicial discretion in cases involving Section 138 complaints while addressing concerns of fairness and justice in pre-conviction compensation orders.

Keywords: Section 143A(1); Interim Compensation; Negotiable Instruments Act; Directory or Mandatory; Judicial Discretion.

B) CASE DETAILS

i) Judgement Cause Title:
Rakesh Ranjan Shrivastava v. The State of Jharkhand & Anr.

ii) Case Number:
Criminal Appeal No. 741 of 2024.

iii) Judgement Date:
15 March 2024.

iv) Court:
Supreme Court of India.

v) Quorum:
Justices Abhay S. Oka and Ujjal Bhuyan.

vi) Author:
Justice Abhay S. Oka.

vii) Citation:
[2024] 3 S.C.R. 438; 2024 INSC 205.

viii) Legal Provisions Involved:

• Negotiable Instruments Act, 1881: Sections 138, 143A, 148.
• Code of Criminal Procedure, 1973 (CrPC): Sections 2(w), 2(x), 259, 262-265, 357, 421.
• Constitution of India: Article 14.

ix) Judgments overruled by the Case (if any):
None explicitly mentioned.

x) Case is Related to:
Criminal Law, Negotiable Instruments Act, Interim Compensation, Procedural Law.

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The appeal arose from a judgment of the Jharkhand High Court, affirming orders by the trial court and sessions court directing interim compensation under Section 143A. The appellant challenged the orders on grounds of procedural lapses and mechanical application of Section 143A. The primary question for the Supreme Court was whether Section 143A(1) conferred mandatory or discretionary power upon the court to order interim compensation.

The provision, introduced in 2018, aims to expedite proceedings in cheque dishonor cases while addressing undue delays. The legislative intent was to ensure justice for complainants without prejudicing the accused’s rights.

D) FACTS OF THE CASE

1. The second respondent (complainant) filed a complaint under Section 138 of the N.I. Act, alleging cheque dishonor.
2. The appellant, a Managing Director, had issued two cheques totaling ₹4.25 crore, with one cheque of ₹2.2 crore dishonored.
3. The complainant alleged that the cheques were issued to settle dues from multiple agreements, partnerships, and business dealings.
4. The trial court directed interim compensation of ₹10 lakh under Section 143A(1), which was upheld by the sessions court and High Court.
5. The appellant argued that the order lacked application of mind and that interim compensation was not mandatory under Section 143A(1).

E) LEGAL ISSUES RAISED

i) Is the provision under Section 143A(1) of the N.I. Act for interim compensation directory or mandatory?
ii) What factors should courts consider when exercising discretion under Section 143A(1)?

F) PETITIONER/APPELLANT’S ARGUMENTS

1. Discretionary Nature of Section 143A:
   The appellant contended that the word “may” in Section 143A(1) denotes discretion, not a mandate.

2. Prima Facie Evaluation Required:
   The trial court failed to establish a prima facie case or consider relevant factors before ordering interim compensation.

3. Prejudice to Accused:
   Mandatory interim compensation would violate principles of fairness, especially since the accused is presumed innocent until proven guilty.

4. Quantum of Compensation:
   The appellant argued that the order lacked consideration of financial capacity and relevant circumstances.

G) RESPONDENT’S ARGUMENTS

1. Legislative Intent:
   The respondent emphasized the objective of Section 143A—to deter delay tactics by the accused and safeguard the complainant’s interests.

2. Presumption under Section 139:
   Section 139 of the N.I. Act establishes a rebuttable presumption in favor of the complainant, justifying interim compensation.

3. Mandatory Interpretation:
   Interim compensation must be mandatory to prevent frustration of legislative intent.

H) RELATED LEGAL PROVISIONS

i) Negotiable Instruments Act, 1881: Sections 138, 143A, 148.
ii) Code of Criminal Procedure, 1973: Sections 2(w), 2(x), 259, 262-265, 357, 421.
iii) Constitution of India: Article 14 (Right to Equality).

I) JUDGEMENT

a. RATIO DECIDENDI

1. Discretionary Power:
   The Court held that Section 143A(1) is discretionary. The word “may” cannot be read as “shall.”

2. Factors for Consideration:
   Courts must assess:

   • Prima facie merits of the complaint and defense.
   • Financial condition of the accused.
   • Nature of the transaction and relationships involved.

3. Role of Presumption:
   The rebuttable presumption under Section 139 cannot alone justify interim compensation.

b. OBITER DICTA

The provision aims to balance competing interests. Courts must avoid mechanical application and ensure fairness.

c. GUIDELINES

1. Brief reasons must accompany orders for interim compensation.
2. Courts must weigh all relevant factors, including plausibility of the defense.
3. Interim compensation cannot exceed 20% of the cheque amount.
4. Procedural safeguards must ensure the provision’s constitutionality under Article 14.

J) REFERENCES

a. Important Cases Referred

1. Surinder Singh Deswal v. Virender Gandhi [(2019) 11 SCC 341].
2. Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation [(2023) 10 SCC 446].

b. Important Statutes Referred

1. Negotiable Instruments Act, 1881: Sections 138, 143A, 148.
2. Code of Criminal Procedure, 1973: Sections 2(w), 2(x), 259, 262-265, 421.
3. Constitution of India: Article 14.