Sec 143A of NI Act: Karnataka HC directs Magistrates to use 'two-fold' discretion

The High Court has directed the Magistrates to see the conduct of the accused while considering the applications under section 143A of Negotiable Instruments Act while granting interim compensation. Justice M Nagaprasanna has said that consideration of the application would become imperative if the accused has been unnecessarily evading the proceedings by seeking adjournments. Section 143A was introduced in 2018 by which the Magistrate has the power to order interim compensation to the complainant up to 20 per cent of the cheque amount.

The court noted that the purpose of the amendment was delay in proceedings due to easy filing of appeals and obtaining stay. The court said the Magistrates will have to exercise two-fold discretion while dealing with an application under section 143A. “In cases where there is complete cooperation from the hands of the accused in the trial, the Court may consider whether interim compensation has to be granted at all and in cases where there is no cooperation on the part of the accused, the court may proceed to consider the application,” the court said. The bench also said that since the mandate of the statute is that the compensation should not exceed 20 per cent, Magistrates should exercise discretion in a cautious manner.

“This court is flooded with litigation with regard to grant of compensation under Section 143A of the Act by criminal courts. In several cases discretion is exercised for grant of compensation and in several other cases there are no reasons for exercise of such discretion. Therefore, it has become necessary to direct learned Magistrates that while considering applications filed under Section 143A of the Act, to notice at the outset, the conduct of the accused,” the court said.

The petitioner in the case on hand is a retailer and the respondent complainant a producer of ice cream products. They had entered into an agreement in 2017 for distribution of ice cream and frozen dessert products in and around Coimbatore. It is the case of the petitioner that on the demand of the complainant he had handed over several blank cheques as security.

The petitioner suffered loss in the business and the complainant deposited one of the cheques for an amount of Rs 5.56 crore, which was dishonoured. When the matter was pending adjudication before the criminal court in Bengaluru, the complainant filed an application seeking interim compensation. The Magistrate allowed the application by granting interim compensation of 10 per cent to be paid within 60 days of the order. The High Court remanded the matter back to the 28th Additional Chief Metropolitan Magistrate, Bengaluru, for fresh consideration.