It is not mandatory for the magistrate courts to direct the accused person, who pleads not guilty, to pay interim compensation to the complainant in every case of cheque dishonour under the new provisions of the Negotiable Instruments (NI) Act, 1881, the High Court of Karnataka has said.
The High Court has also clarified that it is not the mandate of the law that a flat 20% of the amount of dishonoured cheque has to be awarded as interim compensation to the complainant in every case of Section 138 [dishonour of cheque] of the NI Act.
Justice M. Nagaprasanna made these observations on noticing that a magistrate court straight away had directed the accused to pay 20% of ₹2 crore, value of the dishonoured cheque, as an interim compensation without assigning any reason.
The purport of the amendment, which came into effect on September 1, 2018, is that the court “may in certain circumstances award interim compensation which shall not exceed 20% of the amount of the cheque...”
Thus, the High Court said, the legislature has cautiously worded the provisions of Section 143A not to make payment of interim compensation mandatory in all cases of proceedings initiated under Section 138 of NI Act.
The High Court further said that 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%,” Mr. Justice Nagaprasanna said.
The High Court said, “It is imperative for the magistrates to pass appropriate orders which bear the application of mind and record reasons as to why interim compensation is to be awarded in a given case.”
