Cheque Dishonour Litigation: Interim compensation authorised by the Supreme Court

CASE TITLE- Rakesh Ranjan Shrivastava Vs The State of Jharkhand & Anr.

CASE NUMBER- Criminal Appeal No. 741 Of 2024

DATED ON- 15.03.2024

QUORUM- Hon’ble Justice Abhay S. Oka


The appellant and the respondent formed various companies regarding profit sharing. The appellant issued an appointment letter and an offer was given to the respondent on a post of Managing Director of the company M/s Thermotech Synergy Pvt. Ltd. and on behalf of a proprietary concern, M/s Tech Synergy. The appellant formed a partnership with Rahul Kumar Basu, in which the respondent was shown as an indirect partner. There was an agreement to pay the respondent, 50 per cent of the profit. One more partnership firm came into existence wherein the appellant, respondent, and Rahul Kumar were shown as partners. The appellant agreed to give a 50 per cent share in the profits of another company but, he did not pay the amounts due to the respondent. Therefore, a legal notice was issued to the appellant by the respondent. The appellant was liable to pay the total amount of Rs. 4,38,80,000/- to the respondent, a civil suit was filed by the respondent in the Civil Court at Bokaro for recovery of the said amount. Thereafter, after a meeting, the appellant agreed to pay a sum of Rs. 4,25,00,000/- to the respondent, and two cheques in the sum of Rs. 2,20,00,000/- and 2,05,00,000/- respectively were handed over to the appellant. The first cheque was dishonoured and a complaint was filed for commission of an offence punishable under Section 138 of the N.I. Act on which the learned Magistrate took cognizance of the offence. The respondent moved an application under Section 143A of the N.I. Act against the appellant/accused to pay 20 per cent of the cheque amount as compensation. The learned Judicial Magistrate directed the appellant to pay an interim compensation of Rs. 10,00,000/- to the respondent within 60 days. The Sessions Court affirmed the order in a revision application. The said orders were challenged before the High Court. The Jharkhand High Court dismissed the petition and these orders are the subject matter of challenge in the present criminal appeal.


Whether the provision of sub-section (1) of Section 143A of the Negotiable Instruments Act, 1881 (for short, ‘the N.I. Act’), which provides for the grant of interim compensation, is directory or mandatory?


Section 138 of The Negotiable Instruments Act, 1881

Section 143A (1) of The Negotiable Instruments Act, 1881


The learned counsel appearing for the appellant pointed out that sub-section (1) of Section 143A of the N.I. Act uses the word ‘may’. Therefore, the provision is discretionary. The Trial Court cannot pass an order to pay interim compensation mechanically. The Court must apply its mind to the facts of the case before passing the drastic order of deposit. The existence of a prima facie case is essential for exercising the power under Section 143A. Only after prima facie consideration of the merits of the complainant’s case and defence of the accused, the Court must conclude whether a case is made out for the grant of interim compensation. In every case, the Court cannot grant 20 per cent of the cheque amount as interim compensation.


The learned counsel appearing for the respondent submitted that considering the object of Section 138 of the N.I. Act, Section 143A (1) will have to be held as mandatory. He submitted that there is a presumption under Section 139 of the N.I. Act that unless a contrary is proved, the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or liability. The question of rebutting the said presumption would arise only after the evidence is adduced. In every case, an order of payment of interim compensation must follow. Unless it is held that Section 143A (1) is mandatory, the very object of the legislature of enacting this provision will be frustrated. It was proposed to amend the N.I. Act to address the issue of undue delay in the final resolution of the cheque dishonour cases.


It was summarized by the Court that first, the Court will have to prima facie evaluate the merits of the case made out by the complainant and the merits of the defence pleaded by the accused in the reply to the application. The financial distress of the accused can also be a consideration. A direction to pay interim compensation can be issued, only if the complainant makes out a prima facie case. If the defence of the accused is found to be prima facie plausible, the Court may exercise discretion in refusing to grant interim compensation. If the Court concludes that a case is made out to grant interim compensation, it will also have to apply its mind to the quantum of interim compensation to be granted. While doing so, the Court will have considered several factors such as the nature of the transaction, the relationship, if any, between the accused and the complainant, etc., but the parameters are not exhaustive. Therefore, the appeal was partly allowed by the court.

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Judgement Reviewed By- Shreyasi Ghatak

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