Section 143A of NI Act not mandatory: Punjab and Haryana High Court

The Punjab and Haryana High Court has ruled that the provision allowing trial judges to award interim compensation is directory, not mandatory. A division bench asserted that the discretion was required to be exercised judiciously while deciding the issue regarding the award interim compensation. A separate well-reasoned order was required be passed in such matters.

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The assertion by the bench of Justice Sureshwar Thakur and Justice Sudeepti Sharma came on a reference from a single bench. The issue raised in the reference was whether Section 143-A of the Negotiable Instruments Act, on power to direct interim compensation, mandated the award of interim relief or left it to the discretion of the trial judge. Another ancillary issue was on the requirement of passing a separate speaking order.

After going through a plethora of judgments, the bench asserted: “The statutory provision is declared to be directory in nature.” The assertion is significant as mandatory provisions are required to be adhered to rigorously, whereas directory provisions allow for greater flexibility in compliance. Understanding the distinction between the two is crucial, as non-compliance with a mandatory provision may lead to legal repercussions, while non-compliance with a directory provision typically does not carry such consequences.

Referring to Supreme Court judgments on the issue, the bench asserted ruling in e matter provided a ready answer. The apex court held that the use of the term “may” in Section 143-A could not be construed as “shall” due to the potentially “drastic consequences” that could ensue if interim compensation were to be mandatorily awarded, particularly when an accused might ultimately be acquitted.

“The apex court concluded that the coinage ‘may’ is not required to be assigned the signification of ‘shall’ as thereby it will hold all the ill drastic consequences... Resultantly, if a tone of mandatoriness is employed, it may result in penalising an accused even before his guilt is established,” the bench quoted.

The court further observed that mandatorily imposing the provision could potentially violate Article 14 of the Constitution, as it could lead to undue hardships for the accused, especially if his movable or immovable property was affected through recovery measures before the trial concluded.

The court added that the trial judges were required to consider specific factors when deciding such applications, including the financial distress of the accused, the nature of the transaction, the relationship between the complainant and the accused, and whether the accused had a prima facie plausible defence. “A somber application of mind was required to be made qua the quantum of interim compensation to be granted,” the court noted.

The bench added the interim compensation amount, capped at 20 per cent of the cheque amount, could be less, depending on the circumstances. “The trial judge is required to be passing a justifiably able and legally sound order,” the court directed.