Vijaya Vs Shekharappa (Karnataka High Court)
Legislature has cautiously worded sub-section (1) of Section 143A of Negotiable Instruments Act, 1881 not to make it mandatory in all cases where clauses (a) and (b) of sub-section (1) would empower the learned Magistrate before whom proceedings are pending consideration to award interim compensation. It is the discretion conferred, as the word used is “may”. If the order is passed, then the payment is mandatory. Therefore, the learned Magistrate who is hearing the application for interim compensation should apply his mind, record his reasons in exercise of his discretion, as to why 20% of the cheque amount is to be granted, as interim compensation in any given case.
The other side of the coin of discretion available to the learned Magistrate is that the amount should not exceed 20%. Therefore, it is not that 20% has to be the interim compensation in every case. Here again the discretion is required to be exercised by the learned Magistrate as the interim compensation can vary from 1% to 20% but shall not exceed 20%. The language of Section 143A being couched with such discretion, the discretion if not exercised in a manner known to law, becomes an arbitrary action.
Application of mind in exercise of discretion is discernible only in an order that contains reasons, and reasons can be found only if they are recorded in writing, and if reasons are recorded in writing, it is only then the order will be within the counters of law.
The consequence of non-payment of interim compensation so awarded is penal, as proceedings can be initiated by the complainant under Sections 357 and 421 of the Cr.P.C. which are recoverable as fine paid under Section 421 of the Cr.P.C. The impugned action now alleged is that in terms of the order passed by the competent Court, the proceedings for attachment of the property are initiated by the complainant and the property of the petitioner is put to auction. Therefore, the consequences of such order are grave where the petitioner whose liability is yet to be determined will have to face grave hardship in the event of non-payment. It is therefore imperative for the learned Magistrates to pass appropriate orders which bear application of mind and record reasons as to why interim compensation is to be awarded in a given case.
In the case at hand, there is not even a semblance of application of mind on the part of the learned Magistrate as the learned Magistrate misconstrues the provision that in the event the accused does not plead guilty he becomes liable to pay 20% as interim compensation. This is not the purport of the Act. But, that does not preclude the learned Magistrate to pass appropriate orders of grant of compensation in a given case. What is the necessary is only application of mind and recording detailed reasons as to why such compensation is to be awarded in a given case.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
A strange transaction is brought before this Court in which the complainant claims to have lent to the accused a sum of rupees two crores by cash in two thousand rupees denomination and the cheque alleged to have issued by the accused is dishonoured. In respect of rupees two crores transaction in cash, the trial Court invoking Section 143-A of the Negotiable Instruments Act, 1881 (‘the Act’ for short) grants interim compensation of Rupees forty lakhs to be paid by the accused to the complainant. The consequence of this order is what drives the accused to this Court seeking the following prayer:
“WHEREFORE, it is most humbly prayed, this Hon’ble Court may kindly be pleased to:
