J&K High Court Clarifies That Interim Compensation Under Section 143A NI Act Is Discretionary, Not Automatic
The Jammu & Kashmir and Ladakh High Court has reiterated that while Section 143A of the Negotiable Instruments Act empowers courts to direct payment of interim compensation in cheque dishonour cases, such power is discretionary and not automatic.
The Court held that once a trial court demonstrates due application of mind, records reasons, and considers relevant circumstances before granting interim compensation, its order would not warrant interference merely because the accused disputes the conclusions drawn.
Justice Wasim Sadiq Nargal dismissed a petition challenging concurrent orders of the Chief Judicial Magistrate, Sopore, and the Additional Sessions Judge, Sopore, which had directed the accused to pay interim compensation amounting to 10% of the cheque value in a prosecution under Section 138 of the Negotiable Instruments Act.
The Court observed that the trial court had exercised its discretion judiciously after considering the material available on record, the conduct of the accused, the stage of the proceedings, and the possibility of delay in conclusion of the trial.
The Court emphasized that Section 143A does not create a mandatory obligation upon courts to award interim compensation in every cheque dishonour case.
Rather, the legislature has consciously used the expression "may", indicating that the power is discretionary and must be exercised on the basis of relevant considerations supported by reasons reflecting proper application of judicial mind.
Background of the Dispute
The case arose from a complaint instituted by the respondent alleging dishonour of a cheque worth ₹80 lakh.
During the pendency of proceedings under Section 138 of the Negotiable Instruments Act, the complainant moved an application under Section 143A seeking interim compensation.
The Chief Judicial Magistrate, Sopore, allowed the application and directed payment of interim compensation. The accused unsuccessfully challenged the order before the revisional court, following which he approached the High Court invoking its inherent jurisdiction under Section 528 of the Bharatiya Nagarik Suraksha Sanhita.
Before the High Court, the petitioner argued that the impugned orders were arbitrary and legally unsustainable. It was contended that the power under Section 143A is discretionary and cannot be exercised mechanically.
The petitioner maintained that the courts below had failed to consider his objections, overlooked the defence raised during trial, ignored his financial incapacity, and passed non-speaking orders without assigning reasons.
It was further argued that the presumption under Section 139 of the Negotiable Instruments Act is rebuttable and could not be invoked automatically to justify grant of interim compensation.
Assistance By Amicus Curiae
Considering the importance of the legal issue concerning the scope of Section 143A, the High Court sought assistance from Senior Additional Advocate General Mohsin-ul-Showkat Qadri as Amicus Curiae.
The Amicus submitted that judicial interpretation of Section 143A consistently recognises the provision as discretionary in nature.
According to him, the provision requires courts to undertake a prima facie assessment of the complaint, examine the defence raised by the accused, and consider other relevant circumstances before directing payment of interim compensation.
Mere institution of a complaint under Section 138 or framing of notice against an accused does not automatically entitle a complainant to interim compensation.
Court's Analysis
Undertaking an extensive examination of Section 143A, the High Court held that although the provision authorises payment of interim compensation up to twenty percent of the cheque amount, the discretion conferred by the legislature must be exercised judiciously and for reasons recorded.
The Bench observed that courts must assess whether relevant factors have been taken into account while exercising the jurisdiction.
Such factors may include the prima facie merits of the complaint, the defence raised by the accused, the conduct of the parties, financial circumstances, and the possibility of delay in trial proceedings.
Applying these principles to the facts of the present case, the Court found that the trial court had not acted mechanically.
On the contrary, the Magistrate had expressly referred to the governing precedents of the Supreme Court, including Rakesh Ranjan Shrivastava v. State of Jharkhand and G.J. Raja v. Tejraj Surana, and thereafter evaluated the factual circumstances of the case before exercising discretion.
The High Court noted that the Magistrate had recorded specific findings that:
- The cheque, dishonour memo and statutory demand notice stood prima facie established.
- The accused had admitted issuance of the cheque and his signatures thereon while disputing only the liability.
- There were repeated defaults in appearance by the accused during the proceedings.
- Permission granted to the accused to travel abroad created a possibility of delay or protraction of the proceedings.
According to the Court, these were relevant considerations directly connected with the exercise of discretion under Section 143A and could not be characterised as extraneous factors.
The Bench further observed that the Magistrate had consciously balanced the competing rights of both parties.
While protecting the complainant's interests, the trial court had also recognised that interim compensation could not assume the character of punishment.
It was only after considering the stage of proceedings, the conduct of the accused and the likelihood of delay that the court awarded interim compensation limited to 10% of the cheque amount, namely ₹8 lakh.
Distinguishing Earlier Judgments
The petitioner relied upon the High Court's earlier decisions in Nazir Ahmad Chopan v. Abdul Rehman Chopan and Nargees Javaid v. Ghulam Jeelani Nengroo to contend that the impugned orders deserved to be set aside.
However, Justice Nargal distinguished those judgments, observing that interference in those cases had been necessitated because the courts concerned had passed cryptic and non-speaking orders without recording reasons.
In contrast, the impugned order in the present case contained detailed reasons and reflected proper application of mind.
Therefore, the factual foundation on which those precedents were decided was absent in the present matter.
The Court similarly held that the Supreme Court's decision in Rakesh Ranjan Shrivastava actually supported the validity of the impugned orders.
The Supreme Court had merely mandated that courts record reasons while exercising powers under Section 143A. Since the Magistrate had complied with that requirement by assigning reasons and recording satisfaction on relevant material, the judgment could not assist the petitioner.
Conclusion
Dismissing the petition, the High Court held that the trial court had exercised its discretion under Section 143A upon consideration of relevant circumstances and for reasons duly recorded.
The Court found no arbitrariness, perversity, jurisdictional error or non-application of mind in the orders passed by the courts below.
The Bench also observed that the amount awarded as interim compensation, 10% of the cheque value, was substantially below the statutory ceiling of 20% prescribed under Section 143A and therefore could not be termed excessive or disproportionate.
Accordingly, the challenge to the orders directing payment of interim compensation was rejected.
Case Details
Case Title: Mohammed Ashraf Mir v. Wazira Reshi
Court: High Court of Jammu & Kashmir and Ladakh at Srinagar
Case No.: CRM(M) No. 278/2026, CrlM No. 663/2026
Judge: Justice Wasim Sadiq Nargal
Decision Date: 06 June 2026
Counsel for Petitioner: Mr. Aazim Pandith, Advocate
Amicus Curiae: Mr. Mohsin-ul-Showkat Qadri, Senior AAG
Statutes Involved: Sections 138, 139 and 143A, Negotiable Instruments Act, 1881; Section 528, Bharatiya Nagarik Suraksha Sanhita.
Citation: Judgment dated 06.06.2026.