J&K High Court Rules Interim Compensation Under NI Act Section 143-A Invalid Without Accused’s Not Guilty Plea

J&K High Court Rules Interim Compensation Under NI Act Section 143-A Invalid Without Accused’s Not Guilty Plea

The Jammu and Kashmir and Ladakh High Court quashed three orders passed by the Chief Judicial Magistrate, Srinagar, which awarded interim compensation to a complainant under Section 143-A of the Negotiable Instruments Act (NI Act). The Court ruled that interim compensation can be granted only after the accused pleads not guilty and the Magistrate considers relevant factors.

In allowing the plea against the impugned interim compensation orders, Justice Sanjay Dhar observed:

"In the instant cases, the plea of the accused was yet to be recorded, but the learned magistrate proceeded to pass the order of interim compensation in favor of the complainant, which is clearly in contravention of the provisions contained in Section 143-A of the N.I. Act. On this ground also, the impugned orders are not sustainable in law."

The controversy began with three separate complaints filed by respondent Mushtaq Ahmad Wani, leading to the Chief Judicial Magistrate, Srinagar, awarding interim compensation amounting to 20% of the cheque amount to Wani under Section 143-A of the NI Act. Mubashir Manzoor, the petitioner, challenged these orders.

The petitioner argued that the magistrate's orders lacked a basis, as there were no recorded reasons justifying the maximum interim compensation. Additionally, it was contended that the accused's plea under Section 251 of the Cr. P. C had not been recorded before the orders were issued, contravening the stipulations of Section 143-A of the NI Act. The respondent, Mushtaq Ahmad Wani, did not have legal representation during the proceedings before the High Court.

The Court, after hearing the petitioner and perusing the record, observed that the Magistrate had failed to provide any justification for awarding the maximum amount of interim compensation. It emphasized that the power to award interim compensation under Section 143-A is discretionary and must be exercised based on valid reasons.

The Court referred to the Supreme Court's judgment in Rakesh Ranjan Shrivastava v. State of Jharkhand, which held that interim compensation can be granted only if the complainant makes out a prima facie case and the Court considers relevant factors like the nature of the transaction and the relationship between the accused and the complainant.

The Court further noted that Section 143-A of the NI Act explicitly states that interim compensation can be awarded only when the accused pleads not guilty. In the present case, the plea of the accused had not been recorded, rendering the magistrate's order contrary to the provisions of the law.

In view of the above, the High Court allowed the petitions and quashed the impugned orders. The matter was remanded to the Magistrate with directions to pass fresh orders after considering the Supreme Court's judgment and recording the plea of the accused.