Interim Compensation u/s 143A, Negotiable Instruments Act 1881

While the maxim Ei Incumbit Probatio, Qui Dicit, Non Qui Negat remains ensconced in the obedience of the principle 'innocent until proven guilty', the relatively newly announced amendment under the Negotiable Instruments Act, 1881 ('Act') envisages a process that is debated to negate the salience of assumed innocence in the judicial process.

Indisputably, negotiable instruments have played a monumental role in the commercial sector as a convenient and accepted medium of transferring money. With the advent and subsequent growth of cheques in the commercial segment, it has always been incumbent upon the legislative organ of the country to pre-empt and accordingly provide for instances wherein cheques are issued without sufficient amounts in the account.

With that concern in mind, Sections 138 – 142 of the Act were injected into the legal domain of the commercial sector to punish drawers in case of a cheque being bounced due to insufficient funds in the bank account and consequently promote creditor faith in the issuance of cheques and vigilance in the commercial sector.

Section 143A of the Negotiable Instruments Act

As opposed to the erstwhile mechanism under the Act, the amendment postulated under Section 143A of the Act contains a non-obstante clause empowering the Court to order the drawer of the cheque in a suit under Section 138 to pay interim compensation amounting to 20% of the cheque amount within a period of 60 days to the complainant in cases wherein the drawer of the cheque pleads not-guilty in summary trials or summons cases as well as any other instance once charges have been framed.

Interestingly, Section 143A (1) of the Act employs the usage of the prefix 'may', thereby making the interim relief postulated under Section 143A of the Act subject to judicial scrutiny and discretion on a case to case basis as opposed to offering a mandatory relief under the aegis of the Act as well as criminal law. The same was underscored by the Supreme Court in the recent case of Pawan Bhasin vs. State of U.P and Anr., wherein the apex Court while adjudicating upon a claim of infraction of Section 143A opined and reaffirmed the discretionary nature of such a relief that can only be granted once an accused has pleaded 'not guilty', thereby striking an equilibrium between the right of a complainant and presumption of innocence under Ei Incumbit Probatio, Qui Dicit, Non Qui Negat.

The discretionary nature of Section 143A of the Act was further expounded upon by Courts in a plethora of cases. For instance, the Madras High Court, in the case of L.G.R. Enterprises vs. P. Anbazhagan clarified that interim compensation under Section 143A of the Act is not in the nature of a mandatory relief, instead should be supported by reasons for its award.

Similarly, in the case of Rajesh Soni vs. Mukesh Verma, the Chhattisgarh High Court, while drawing reliance on the dictum propounded by the Supreme Court in the case of Smt. Bachahan Devi & Anr. vs. Nagar Nigam & Anr, reaffirmed the purposive intent behind the usage of the prefix 'may' in opining and reaffirming the discretionary nature of the provision. More importantly, the Court passed an obiter clarifying the legislative intent and purpose behind Section 143A of the Act.

In its obiter the Court opined that the relatively new mechanism of interim compensation envisioned under Section 143A of the Act plays a pivotal role in assuaging the burden of Courts in dealing with a wave of cases under Section 138 of the Act. Since most claims for dishonour under Section 138 of the Act often succumb to dilatory proceedings, the amendment not only provides relief to the aggrieved complainants who are already subjected to the debacle of the cheque amount being dishonoured and litigation costs, it also acts as deterrent to the populous at large.

Moreover, Section 143A (5) of the Act further stipulates that the interim compensation payable under the aegis of this section would be pari materia with Section 421 of the Code of Criminal Procedure, 1973 ('CrPC'). Thereby making its abrogation subject to further criminal action and increasing the propensity of criminal action in a suit for cheque-dishonour.

The Section further maintains a balance between the interim compensation granted under Section 143A and fine imposed under Section 138 of the Act and Section 357 of the CrPC, if any. As per Section 143A(6) of the Act any fine/amount paid under Section 138 of the Act or under Section 357 of the CrPC shall be reduced by the amount paid or recovered as interim compensation under the aegis of the provision.

Conclusion

While there is much deliberation on the insertion of Section 143A, it is fairly evident that the provision envisages a level playing field for both complainants and accused in a suit under Section 138 of the Act. While the mechanism for interim compensation stands favourable for a complainant, the law is equally responsive towards the accused by way of incorporating Section 143A (4) of the Act that mandates that the Court shall ask the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within 60 days from the order of acquittal.