Interim compensation order under Section 143A of the Negotiable Instruments Act, 1881 must be a reasoned order and also can be applied retrospectively

The Madras High Court held that the trial courts hearing cheque bounce cases under Section 138 of the Negotiable Instruments Act, 1881 can order payment of interim compensation of up to 20% under the newly inserted Section 143A of the Negotiable Instruments Act of 1881 retrospectively. However, it was emphasized and observed that the trial court while ordering for interim compensation must necessarily be supported by reasons.

The said ruling was held in the matter of L.G.R.Enterprises & Ors. vs P.Anbazhagan (Crl. O.P Nos. 15438 and 15440 of 2019), decided on 12.07.2019

Challenge

In the present matter the Trial Court had ordered the Accused for payment of interim compensation. However, the Trial Court did not provide any reasons for the imposition of interim compensation of 20% rather only discussed the issue of prospective/retrospective operation of the amendment.

Held

The Madras High Court firstly on the aspect of prospective/ retrospective nature of the amendment while relying on the judgment of Surinder Singh Deswal @ Col.S.S.Deswal and others Vs. Virender Gandhi (Criminal Appeal Nos.917-944 of 2019) held that amendment through which Section 143A was brought into force would be applicable even to pending proceedings because if such a purposive interpretation is not given to this provision, it will defeat the very purpose of amendment which was brought in as a beneficial piece of legislation for the complainant prosecuting a criminal complaint under Section 138 of the Negotiable Instrument Act.

Secondly, the High Court held that as Section 143A contains the word may in regard to ordering of the compensation implying that the Magistrate has the discretion to award or not award interim compensation. Therefore, whenever the trial Court exercises its jurisdiction under Section 143A(1) of the Act, it shall record reasons as to why it directs the accused person (drawer of the cheque) to pay the interim compensation to the complainant. The reasons may be varied.

For instance, the accused person would have absconded for a longtime and thereby would have protracted the proceedings or the accused person would have intentionally evaded service for a long time and only after repeated attempts, appears before the Court, or the enforceable debt or liability in a case, is borne out by overwhelming materials which the accused person could not on the face of it deny.

The other reason why the order of the trial Court under Section 143A(1) of the Act, should contain reasons, is because it will always be subjected to challenge before a superior Court and the said court while considering the petition will only look for the reasons given by the Court below while passing the order under Section 143A(1) of the Act.