In cheque bounce cases, the court is not compelled to direct the payment of interim compensation: Bombay High Court

The Bombay High Court on 26th July 2022 ruled that in a cheque bounce case, the courts are not required to provide interim compensation to the complainant. If interim compensation is granted, the court must document the grounds for determining the amount, through the single bench of Justice Avinash G. Gharote in the case of Mr Ashwin Ashokrao Karokar vs Mr Laxmikant Govind Joshi (Criminal Writ Petition No. 48 of 2022).



According to the facts of the present case, the petitioner had issued two cheques in the amount of Rs.15 lakhs and Rs.5 lakhs in favour of the respondent. When the cheques were submitted to the bank, they were dishonoured owing to insufficient funds. The respondent filed a complaint under Section 138 of the NI Act and an application for interim compensation under Section 143-A. The Magistrate court ordered the petitioner to pay the respondent 20% of the cheque amount within 60 days.

The court had to determine whether Section 143-A of the NI Act, which allows the Court to order the payment of interim compensation, was mandatory or directory.


The single bench noted that sections 143-A and 148 (Power of Appellate Court to require payment pending appeal against conviction) were included in 2018 as part of an amendment to alleviate the delay in the disposition of cheque dishonour cases and to discourage the filing of frivolous cases.

The bench relied on the judgement of Bachan Devi v. Nagar Nigam Gorakhpur [2008 (12) SCC 372], wherein it was determined that the mere presence of the words “may” or “shall” in a statute is not conclusive as to how it should be understood. There is no general rule for determining whether a provision is a directory or mandatory. The legislative intent, subject matter, and goal of the laws must all be considered by the courts. The court further paid reliance on the judgment of G. J. Raja vs. Tejraj Surana [2019 (19) SCC 469] and stated that sections 148 and 143-A are inherently distinct, and what has been held in section 148 may not be relevant to section 143-A.

The bench stated that the term “may” in section 143-A must be interpreted because it is an interim measure. Often, the complaint under Section 138 is not maintainable. In such cases, paying compensation only based on the existence of a cheque is unjustifiable. The court ruled that the legislature might have made it mandatory by using plain language. Section 143-A’s power is broad enough to cover both refusal and grant of interim compensation; hence, it is discretionary.

The court stated that the phrase “must not exceed twenty per cent” in Section 143-A (1) only limits the amount of discretion that the Special Court may use in the matter. The court further stated that any discretion granted to a Court must be exercised for specific reasons.  As a result, the bench held that the case deserves interim compensation, it must record the justification for the quantum of interim compensation.

Accordingly, the impugned orders were quashed and set aside.

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Read the full judgement.

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