Section 143-A of the Negotiable Instruments Act, 1881 are directory rather than mandatory.

The Bombay High Court has said that courts don’t have a duty to grant interim compensation to the complainant in a cheque bounce case. If interim compensation is granted, the judge has to record reasons for determining the amount of interim compensation.

The court said that the provisions of section 143-A of the Negotiable Instruments Act, 1881 are directory rather than mandatory.

Justice Avinash Gharote of the Nagpur bench set aside two lower court orders which directed the petitioner-accused to give interim compensation to the respondent-complainant in a cheque bounce case. He remanded the matter back to the Special Court under NI Act to decide the case afresh.

The question before the court was – whether Section 143-A of the NI Act, which empowers the Court to direct payment of interim compensation are mandatory or directory?

The petitioner had issued two cheques of Rs.15 lakhs and 5 lakhs respectively in favour of the respondent. When presented to the bank, the cheques were dishonoured due to insufficient funds. The respondent filed a case under section 138 of the NI Act and filed an application under section 143-A requesting interim compensation. The Magistrate court directed the petitioner to pay 20% of the cheque value to the respondent within 60 days.

The High Court noted that sections 143-A and 148 (Power of Appellate Court to order payment pending appeal against conviction) were inserted via an amendment in 2018 to address the delay in disposal of cheque dishonour cases and to deter filing of frivolous cases.

The court observed that in Bachan Devi v. Nagar Nigam Gorakhpur, it was held that mere use of may or shall in a statute is not conclusive as to how it should be interpreted. There is no universal rule to figure out whether a provision is directory or mandatory. The courts have to consider the legislative intent and subject matter and object of the provisions.

The court relied on judgement in GI Raja and concluded that the sections 148 and 143-A are inherently different and what has been held with respect to ‘may’ in section 148 may not be applicable to section 143-A. “There is no ‘duty to act’, upon the Court, spelt out by the provisions of Section 143-A of the N.I. Act, considering which Frederic Guilder Julius; Jogendra Singh, Deewan Singh and judgments taking a similar view would clearly not be applicable”, the court added.

The court said that the word ‘may’ in section 143-A has to be construed in light of the fact that it is an interim measure. Many a times the complaint under section 138 itself is not maintainable. In such cases, granting compensation merely due to existence of cheque is not justifiable.

The court observed that in order to construe the word ‘may’ as mandatory it has to be coupled with a duty to act as held in Federic Guilder Julius. Section 143-A doesn’t cast any duty on court to grant interim compensation. “Section 143-A (2) of the N.I. Act, confers a discretion upon the Court to direct the deposit of the sum not exceeding 20% of the cheque amount as an interim compensation”, the court added.

The court said that the legislature could have used express words to make in mandatory if it wanted to. The power in section 143-A is wide enough to include both refusal and grant of interim compensation, hence, it is discretionary.

The court also noted that section 143-A is silent on what would be the effect if restitution under subsection 4 is not made and the legislature may have to revisit this.

“The provision of Section 143-A (5) of the N.I. Act, which permits recovery of the interim compensation as a fine, under section 421 of Cr.P.C., by itself would not make Section 143-A of the N.I. Act mandatory, as the same will come into picture only if interim compensation is awarded, and merely prescribes, what would be the mode of recovery in case, interim compensation is awarded”, the court said.

The court said that the expression “shall not exceed twenty per cent” in Section 143-A (1) merely caps the limit of the discretion which the Special Court is permitted to exercise in the matter and nothing else.

” The language of Section 143-A (1) of the N.I. Act is neither obscure, nor unambiguous as would reflect from a plain reading of the same and the intent of the legislature to make the provision directory is clearly reflected”, the court said.
The court further said that the exercise of any discretion conferred upon a Court must be for reasons to be spelt out, indicating application of mind by the Court to the facts available before it in the application of the law to such facts. Hence, the court would have to record the reasoning behind the quantum of interim compensation if it comes to the conclusion that the case deserves an award of interim compensation.

Case Title : Mr. Ashwin Ashokrao Karokar v Mr. Laxmikant Govind Joshi

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