Rakesh Ranjan Shrivastava v. State of Jharkhand (2024): Section 143A interim compensation is discretionary, not mandatory

When a complainant prosecutes a dishonoured cheque under Section 138 of the Negotiable Instruments Act, Section 143A permits the trial court to order the drawer to pay interim compensation of up to twenty per cent of the cheque amount even before the trial concludes. The question in Rakesh Ranjan Shrivastava v. State of Jharkhand was deceptively narrow: when the section says the court "may" direct such payment, is that a genuine discretion, or is the court bound to award compensation the moment a complaint is filed? A Division Bench of Justices Abhay S. Oka and Ujjal Bhuyan held, on 15 March 2024, that the power is discretionary, set aside the orders below for non-application of mind, and laid down the factors that must guide a court before it makes so drastic an order.

The facts in brief

The appellant was the accused in a complaint under Section 138 of the Negotiable Instruments Act. During the pendency of the trial, the complainant invoked Section 143A and sought interim compensation. The trial court directed the appellant to pay interim compensation of Rs. 10,00,000 — an amount fixed without any reasoned evaluation of the rival contentions. The Jharkhand High Court declined to interfere, treating the award as a routine incident of the prosecution. The appellant carried the matter to the Supreme Court, contending that an order under Section 143A is not automatic and that the courts below had mechanically imposed a substantial liability on a person whose guilt had not been established.

The question

Two questions of construction lay at the heart of the appeal. First, is sub-section (1) of Section 143A directory or mandatory — does the word "may" confer a true discretion, or must it be read as "shall" so that compensation follows as of course once a Section 138 complaint is registered? Second, if the power is discretionary, what principles ought to structure its exercise, so that the discretion is neither refused as a matter of routine nor granted as a matter of routine?

What the Court held

The Court held that the power conferred by Section 143A(1) is discretionary. Its central reason was temporal: unlike Section 148, which permits an appellate court to order a deposit after a conviction has been recorded, Section 143A allows interim compensation to be ordered before any finding of guilt, against an accused who continues to enjoy the presumption of innocence. To read "may" as "shall" in that setting would compel a presumptively innocent person to part with a substantial sum on the mere filing of a complaint.

Reading the provision as mandatory, the Bench observed, would expose it to the vice of manifest arbitrariness under Article 14 of the Constitution, since it would impose a drastic monetary burden without any adjudication of merits. Having settled the character of the power, the Court laid down broad parameters to guide its exercise. A court must prima facie evaluate the merits of the complainant's case and the merits of the defence pleaded in the accused's reply; interim compensation may be directed only where the complainant makes out a prima facie case, and may be refused where the defence appears prima facie plausible. The financial distress of the accused is a relevant consideration, as is the conduct of the parties. The quantum, capped by the statute at twenty per cent of the cheque amount, must itself be fixed with reasons rather than at large. On these principles the Court found the orders below unsustainable for non-application of mind and remitted the matter for fresh consideration.

Analysis

The decision settles a question on which the High Courts had divided. Several benches had already insisted that a magistrate must exercise a judicious, reasoned discretion before ordering interim compensation, and had declined to treat Section 143A as automatic; others had leaned towards near-mandatory application. Rakesh Ranjan Shrivastava resolves the conflict authoritatively in favour of discretion, and it does so through a structural reading of the Negotiable Instruments Act rather than through abstract canons of interpretation. The pairing of Section 143A with Section 148 is the analytical hinge. Both empower courts to order a payment pending final outcome, but they sit at different stages of the proceeding — one before conviction, the other after — and the presumption of innocence that survives until conviction is what denies the earlier power any mandatory force.

The ruling also fits the larger arc of how the Court has characterised cheque-dishonour jurisdiction. The Section 138 regime is increasingly understood as compensatory in object, designed to make the payee whole and to sustain commercial confidence in the cheque as an instrument, rather than as a vehicle of punishment. Interim compensation under Section 143A advances that compensatory purpose by giving the complainant early relief — but only, the Court now makes clear, after a genuine, reasoned weighing of the competing prima facie cases. Discretion structured by stated factors, rather than an automatic levy, is what keeps the provision faithful both to its compensatory aim and to the accused's constitutional protections.

Why it matters

For practitioners the consequences are immediate and practical. A complainant can no longer treat an order under Section 143A as a formality to be obtained on the strength of the complaint alone; the application must demonstrate a prima facie case and ordinarily be supported by material that justifies both the grant and the quantum. For the defence, the judgment is a tool: a substantiated reply that renders the defence prima facie plausible, or that establishes financial hardship, can defeat or reduce an interim award. For trial courts and magistrates, the decision is a discipline — an order under Section 143A must now record reasons engaging with the merits of both sides and with the statutory ceiling, and an order that simply fixes a figure without that engagement is vulnerable to being set aside for non-application of mind, exactly as the awards in this case were. By insisting that interim compensation be earned on the merits rather than imposed by default, the Court has tempered a powerful pre-conviction remedy with the safeguards that its drastic character demands.

Related on Valkya

• In Re: Expeditious Trial of s.138 NI Act Cases: the Constitution Bench's pendency reforms
• Mediaone Global v. Ad Bureau (2026): Section 138 as a compensatory, not punitive, jurisdiction
• Meters and Instruments v. Kanchan Mehta: Section 138 as a compensatory remedy
• Dashrath Rupsingh Rathod v. State of Maharashtra: territorial jurisdiction in cheque-dishonour cases

Sources

• Verdictum, "Power To Grant Interim Compensation In Cheque Bounce Cases U/S 143A NI Act Discretionary: SC Issues Guidelines"
• SCC Online Blog, "S. 143-A NI Act | Factors laid down by SC for exercising discretion in payment of interim compensation in cheque dishonour cases"