Section 143-A NI Act Interim Compensation is Discretionary Based on Prima Facie Evaluation of Merits

The complainant (Opposite Party No. 2) filed a complaint under Section 138 of the Negotiable Instruments (N.I.) Act, 1881, alleging that the applicant issued three cheques totaling Rs. 10,00,000/- to discharge a real estate business liability.

The cheques were dishonored with remarks "Funds Insufficient" and "Account Inoperative".

Under Section 143-A of the N.I. Act, the Trial Court directed the applicant to pay 20% of the cheque amount (Rs. 2,00,000/-) as interim compensation on 20.11.2025.

This order was challenged and upheld by the Revisional Court on 14.05.2026.

The applicant approached the High Court seeking to quash these orders, arguing that the transaction lacked documentary proof, the debt was not legally enforceable, and that the provision is discretionary, not mandatory.

Section 143-A of the Negotiable Instruments Act, which empowers a court to direct the drawer to pay interim compensation not exceeding 20% of the cheque amount.

The Supreme Court’s interpretation in Rakesh Ranjan Shrivastava v. State of Jharkhand (2024), which established that Section 143-A is directory/discretionary rather than mandatory, requiring courts to record reasons and evaluate the prima facie merits of the complaint and the defense.

The doctrine of "prima facie" evidence as defined in Balvir Singh v. State of Uttarakhand and Sunil Bharti Mittal v. CBI, holding that a judge must ensure a genuine offense is disclosed without conducting a "mini-trial".

The statutory presumptions under Sections 118 and 139 of the N.I. Act regarding the existence of consideration and debt.

The High Court observed that the "prima facie" standard does not require proof beyond reasonable doubt but an initial reliable impression.

In the present case, the applicant admitted the cheques belonged to him and bore his signatures.

The Court found the applicant's defense—that the cheques were misused—to be highly improbable at the preliminary stage because his bank account was already "inoperative" and "out of money" during the relevant period.

The Court reasoned that since the signatures were admitted and the complaint disclosed the nature of the liability, the essential ingredients for Section 143-A were satisfied.

It further held that deep appreciation of evidence and the determination of a "legally enforceable debt" are matters for trial, not for the stage of granting interim compensation.

The Court found that the Trial Court had properly considered the relevant factors, including the admitted signatures and the nature of the allegations, before awarding the 20% compensation.

The Court affirmed that while Section 143-A is discretionary, a prima facie case was clearly established by the complainant.

Consequently, the application was dismissed and the court upheld the direction for the applicant to pay 20% of the cheque amount as interim compensation.