VERDICTUM.

IN

2024 INSC 205

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 741 OF 2024

RAKESH RANJAN SHRIVASTAVA … APPELLANT

VERSUS

THE STATE OF JHARKHAND & ANR. … RESPONDENTS

JUDGMENT

ABHAY S. OKA, J.
1. The issue involved in this criminal appeal is whether the
provision of sub-section (1) of Section 143A of the Negotiable
Instruments Act, 1881 (for short, ‘the N.I. Act’), which provides
for the grant of interim compensation, is directory or
mandatory. If it is held to be a directory provision, the question
that arises is, what are factors to be considered while exercising
powers under sub-section (1) of Section 143A of the N.I. Act.

FACTUAL ASPECTS

The case of the 2nd respondent in the Complaint

2. The 2nd respondent (hereinafter referred as ‘the

respondent’) is the complainant in a complaint under Section
138 of the N.I. Act. The complaint was filed in the Court of the
Chief Judicial Magistrate at Bokaro. The case in the complaint
is that the appellant and the respondent formed various

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companies on different terms and conditions regarding profit

sharing. On 23rd September 2011, an appointment letter was
issued by the appellant in his capacity as the Managing
Director of the company M/s Thermotech Synergy Pvt. Ltd. and
on behalf of a proprietary concern, M/s Tech Synergy, by which
the post of Executive Director was offered by the appellant to
the respondent on consolidated salary of Rs. 1,00,000/- per
month.

3. On 1st June 2012, the appellant formed a partnership

with one Rahul Kumar Basu, in which the respondent was
shown as an indirect partner. According to the respondent's
case, M/s Tech Synergy was merged with another company -
M/s Megatech Synergy Pvt. Ltd. It is alleged by the respondent
that in August 2012, there was an agreement to pay him 50
per cent of the profit. One more partnership firm came into
existence on 3rd June 2013, wherein the appellant, respondent,
and Rahul Kumar were shown as partners. It is the case of the
respondent that the appellant agreed to give a 50 per cent share
in the profits of another company, Geotech Synergy Pvt. Ltd. It
is alleged that the appellant did not pay the amounts due and
payable to the respondent. Therefore, a legal notice was issued
to the appellant by the respondent. According to the case of the
respondent, the appellant was liable to pay the total amount of
Rs. 4,38,80,000/- to the respondent, and in fact, a civil suit
has been filed by the respondent in the Civil Court at Bokaro
for recovery of the said amount. After that, on 13th July 2018,
there was a meeting between parties at Ranchi when the

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appellant agreed to pay a sum of Rs. 4,25,00,000/- to the

respondent, and two cheques in the sum of Rs. 2,20,00,000/-
and 2,05,00,000/- dated 6th August 2018 and 19th September
2018 respectively were handed over to the appellant. As the
first cheque in the sum of Rs. 2,20,00,000/- was dishonoured,
a complaint was filed after the service of a statutory notice
alleging the commission of an offence punishable under
Section 138 of the N.I. Act on which the learned Magistrate took
cognizance of the offence.

Application under Section 143A of the NI Act

4. Before the Court of the learned Magistrate, the
respondent moved an application under Section 143A of the
N.I. Act seeking a direction against the appellant/accused to
pay 20 per cent of the cheque amount as compensation. By the
order dated 7th March 2020, the learned Judicial Magistrate
allowed the application and directed the appellant to pay an
interim compensation of Rs. 10,00,000/- to the respondent
within 60 days. The Sessions Court affirmed the order of the
learned Magistrate in a revision application. The said orders
were subjected to a challenge before the High Court. The
learned Judge of Jharkhand High Court dismissed the petition
by the impugned judgment. These orders are the subject
matter of challenge in the present criminal appeal.

SUBMISSIONS

5. The learned counsel appearing for the appellant pointed

out that sub-section (1) of Section 143A of the N.I. Act uses the
word ‘may’. Therefore, the provision is discretionary. He

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submitted that the Trial Court cannot pass an order to pay

interim compensation mechanically. He submitted that the
Court must apply its mind to the facts of the case before
passing the drastic order of deposit. He submitted that the
existence of a prima facie case is essential for exercising the
power under Section 143A. Only after prima facie consideration
of the merits of the complainant's case and defence of the
accused, the Court must conclude whether a case is made out
for the grant of interim compensation. After the Court comes to
the conclusion that a case for grant of interim compensation
has been made out, the Court has to apply its mind to the
quantum of interim compensation. In every case, the Court
cannot grant 20 per cent of the cheque amount as interim
compensation.

6. The learned counsel appearing for the respondent

submitted that considering the very object of Section 138 of the
N.I. Act, sub-section (1) of Section 143A will have to be held as
mandatory. He submitted that there is a presumption under
Section 139 of the N.I. Act that unless a contrary is proved, the
holder of a cheque received the cheque for the discharge, in
whole or in part, of any debt or liability. He submitted that the
question of rebutting the said presumption would arise only
after the evidence is adduced. Therefore, the defence of the
accused at the stage of considering an application under sub-
section (1) of Section 143A is irrelevant. In every case, an order
of payment of interim compensation must follow. He submitted
that unless it is held that sub-section (1) of Section 143A is

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mandatory, the very object of the legislature of enacting this

provision will be frustrated.

CONSIDERATION OF SUBMISSIONS

The object of Section 143A

7. Section 143A was brought on the statute book by Act No.

20 of 2018 with effect from 1st September 2018. Section 143A
reads thus:
“143-A. Power to direct interim
compensation.—(1) Notwithstanding
anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974),
the Court trying an offence under
Section 138 may order the drawer of
the cheque to pay interim
compensation to the complainant—
(a) in a summary trial or a
summons case, where he pleads
not guilty to the accusation
made in the complaint; and

(b) in any other case, upon

framing of charge.
(2) The interim compensation under
sub-section (1) shall not exceed
twenty per cent of the cheque
amount.
(3) The interim compensation shall be
paid within sixty days from the date of
the order under sub-section (1), or within
such further period not exceeding thirty
days as may be directed by the Court on
sufficient cause being shown by the
drawer of the cheque.
(4) If the drawer of the cheque is
acquitted, the Court shall direct the

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complainant to repay to the drawer the

amount of interim compensation, with
interest at the bank rate as published by
the Reserve Bank of India, prevalent at
the beginning of the relevant financial
year, within sixty days from the date of
the order, or within such further period
not exceeding thirty days as may be
directed by the Court on sufficient cause
being shown by the complainant.
(5) The interim compensation payable
under this section may be recovered as if
it were a fine under Section 421 of
the Code of Criminal Procedure, 1973 (2
of 1974).
(6) The amount of fine imposed under
Section 138 or the amount of
compensation awarded under
Section 357 of the Code of Criminal
Procedure, 1973 (2 of 1974), shall be
reduced by the amount paid or recovered
as interim compensation under this
section.”
(emphasis added)

7.1. In the statement of objects and reasons, it was stated that

unscrupulous drawers of the cheques prolong the proceedings
of a complaint under Section 138 by filing appeals and
obtaining a stay. Therefore, injustice is caused to the payee of
a dishonoured cheque, who has to spend considerable time and
resources in Court proceedings to realise the value of the
cheque. It was further observed that such delays compromise
the sanctity of the cheque transactions. Therefore, it was
proposed to amend the N.I. Act to address the issue of undue
delay in the final resolution of the cheque dishonour cases. It

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was also stated that the proposed amendments would

strengthen the credibility of cheques and help trade and
commerce.

8. We may note here that by the same Act No.20 of 2018,

Section 148 was brought on the statute book, which provides
that in an appeal preferred by the drawer against conviction
under Section 138, the Appellate Court may order the appellant
to deposit such a sum which shall be a minimum 20 per cent
of the fine or compensation awarded by the Trial Court. The
proviso to sub-section (1) of Section 148 clarifies that the
amount payable under sub-section (1) of Section 148 is in
addition to interim compensation paid by the
appellant/accused under Section 143A. There are no separate
objects and reasons set out for the addition of Section 148.

MANDATORY OR DIRECTORY

9. There is no doubt that the word “may” ordinarily does not

mean “must”. Ordinarily, “may” will not be construed as
“shall”. But this is not an inflexible rule. The use of the word
“may” in certain legislations can be construed as “shall”, and
the word “shall” can be construed as “may”. It all depends on
the nature of the power conferred by the relevant provision of
the statute and the effect of the exercise of the power. The
legislative intent also plays a role in the interpretation of such
provisions. Even the context in which the word “may” has been
used is also relevant.

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10. The power under sub-section (1) of Section 143A is to

direct the payment of interim compensation in a summary trial
or a summons case upon the recording of the plea of the
accused that he was not guilty and, in other cases, upon
framing of charge. As the maximum punishment under Section
138 of the N.I. Act is of imprisonment up to 2 years, in view of
clause (w) read with clause (x) of Section 2 of the Code of
Criminal Procedure, 1973 (for short, ‘the Cr.PC’), the cases
under Section 138 of the N.I. Act are triable as summons cases.
However, sub-section (1) of Section 143 provides that
notwithstanding anything contained in the Cr.PC, the learned
Magistrate shall try the complaint by adopting a summary
procedure under Sections 262 to 265 of the Cr.PC. However,
when at the commencement of the trial or during the course of
a summary trial, it appears to the Court that a sentence of
imprisonment for a term exceeding one year may have to be
passed or for any other reason it is undesirable to try the case
summarily, the case shall be tried in the manner provided by
the CrPC. Therefore, the complaint under Section 138 becomes
a summons case in such a contingency. We may note here that
under Section 259 of the Cr.PC, subject to what is provided in
the said Section, the learned Magistrate has the discretion to
convert a summons case into a warrant case. Only in a warrant
case, there is a question of framing charge. Therefore, clause
(b) of sub-section (1) of Section 143A will apply only when the
case is being tried as a warrant case. In the case of a summary
or summons trial, the power under sub-section (1) of Section
143A can be exercised after the plea of the accused is recorded.

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11. Under sub-section (5) of Section 143A, it is provided that

the amount of interim compensation can be recovered as if it
were a fine under Section 421 of the Cr.PC. Therefore, by a
legal fiction, the interim compensation is treated as a fine for
the purposes of its recovery. Section 421 of the Cr.PC deals
with the recovery of the fine imposed by a criminal court while
passing the sentence. Thus, recourse can be taken to Section
421 of the Cr.PC. for recovery of interim compensation, which
reads thus:
“421. Warrant for levy of fine.—(1)
When an offender has been sentenced to
pay a fine, the Court passing the
sentence may take action for the
recovery of the fine in either or both of
the following ways, that is to say, it
may—
(a) issue a warrant for the levy of
the amount by attachment and
sale of any movable property
belonging to the offender;
(b) issue a warrant to the Collector
of the district, authorising him to
realise the amount as arrears of
land revenue from the movable or
immovable property, or both, of the
defaulter:
Provided that, if the sentence
directs that in default of payment of the
fine, the offender shall be imprisoned,
and if such offender has undergone the
whole of such imprisonment in default,
no Court shall issue such warrant
unless, for special reasons to be
recorded in writing, it considers it
necessary so to do, or unless it has made
an order for the payment of expenses or

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compensation out of the fine under

Section 357.
(2) The State Government may make
rules regulating the manner in which
warrants under clause (a) of sub-section
(1) are to be executed, and for the
summary determination of any claims
made by any person other than the
offender in respect of any property
attached in execution of such warrant.
(3) Where the Court issues a warrant to
the Collector under clause (b) of sub-
section (1), the Collector shall realise the
amount in accordance with the law
relating to recovery of arrears of land
revenue, as if such warrant were a
certificate issued under such law:
Provided that no such warrant shall be
executed by the arrest or detention in
prison of the offender.”

12. Non-payment of interim compensation by the accused

does not take away his right to defend the prosecution. The
interim compensation amount can be recovered from him
treating it as fine. The interim compensation amount can be
recovered by the Trial Court by issuing a warrant for
attachment and sale of the movable property of the accused.
There is also a power vested with the Court to issue a warrant
to the Collector of the District authorising him to realise the
interim compensation amount as arrears of land revenue from
the movable or immovable property, or both, belonging to the
accused. For recovery of the interim compensation, the
immovable or movable property of the accused can be sold by
the Collector. Thus, non-payment of interim compensation

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fixed under Section 143A has drastic consequences. To recover

the same, the accused may be deprived of his immovable and
movable property. If acquitted, he may get back the money
along with the interest as provided in sub-section (4) of Section
143A from the complainant. But, if his movable or immovable
property has been sold for recovery of interim compensation,
even if he is acquitted, he will not get back his property.
Though, the N.I. Act does not prescribe any mode of recovery of
the compensation amount from the complainant together with
interest as provided in sub-section (4) of Section 143A, as sub-
section (4) provides for refund of interim compensation by the
complainant to the accused and as sub-section (5) provides for
mode of recovery of the interim compensation, obviously for
recovery of interim compensation from the complainant, the
mode of recovery will be as provided in Section 421 of the CrPC.
It may be a long-drawn process involved for the recovery of the
amount from the complainant. If the complainant has no
assets, the recovery will be impossible.

13. At this stage, we may note sub-section (1) of Section 148.

Section 148 reads thus:-
“148. Power of Appellate Court to
order payment pending appeal
against conviction.—(1)
Notwithstanding anything contained
in the Code of Criminal Procedure,
1973 (2 of 1974), in an appeal by the
drawer against conviction under
section 138, the Appellate Court may
order the appellant to deposit such
sum which shall be a minimum of
twenty per cent of the fine or

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compensation awarded by the trial

Court:
Provided that the amount payable
under this sub-section shall be in
addition to any interim compensation
paid by the appellant under section
143A.
(2) The amount referred to in sub-
section (1) shall be deposited within
sixty days from the date of the order,
or within such further period not
exceeding thirty days as may be
directed by the Court on sufficient
cause being shown by the appellant.
(3) The Appellate Court may direct the
release of the amount deposited by the
appellant to the complainant at any
time during the pendency of the
appeal:
Provided that if the appellant is
acquitted, the Court shall direct the
complainant to repay to the appellant
the amount so released, with interest
at the bank rate as published by the
Reserve Bank of India, prevalent at the
beginning of the relevant financial
year, within sixty days from the date of
the order, or within such further
period not exceeding thirty days as
may be directed by the Court on
sufficient cause being shown by the
complainant.”

Sub-section (1) of Section 148 confers on the Appellate Court a

power to direct the appellant/accused to deposit 20 per cent of
the compensation amount. It operates at a different level as the
power thereunder can be exercised only after the
appellant/accused is convicted after a full trial.

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14. In the case of Section 143A, the power can be exercised

even before the accused is held guilty. Sub-section (1) of
Section 143A provides for passing a drastic order for payment
of interim compensation against the accused in a complaint
under Section 138, even before any adjudication is made on the
guilt of the accused. The power can be exercised at the
threshold even before the evidence is recorded. If the word
‘may’ is interpreted as ‘shall’, it will have drastic consequences
as in every complaint under Section 138, the accused will have
to pay interim compensation up to 20 per cent of the cheque
amount. Such an interpretation will be unjust and contrary to
the well-settled concept of fairness and justice. If such an
interpretation is made, the provision may expose itself to the
vice of manifest arbitrariness. The provision can be held to be
violative of Article 14 of the Constitution. In a sense, sub-
section (1) of Section 143A provides for penalising an accused
even before his guilt is established. Considering the drastic
consequences of exercising the power under Section 143A and
that also before the finding of the guilt is recorded in the trial,
the word “may” used in the provision cannot be construed as
“shall”. The provision will have to be held as a directory and not
mandatory. Hence, we have no manner of doubt that the word
“may” used in Section 143A, cannot be construed or interpreted
as “shall”. Therefore, the power under sub-section (1) of Section
143A is discretionary.

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15. Even sub-section (1) of Section 148 uses the word “may”.
In the case of Surinder Singh Deswal v. Virender Gandhi 1,
this Court, after considering the provisions of Section 148, held
that the word “may” used therein will have to be generally
construed as “rule” or “shall”. It was further observed that
when the Appellate Court decides not to direct the deposit by
the accused, it must record the reasons. After considering the
said decision in the case of Surinder Singh Deswal1, this
Court, in the case of Jamboo Bhandari v. Madhya Pradesh
State Industrial Development Corporation Limited & Ors.2,
in paragraph 6, held thus:
“6. What is held by this Court is that a
purposive interpretation should be made
of Section 148 NI Act. Hence, normally,
the appellate court will be justified in
imposing the condition of deposit as
provided in Section 148. However, in
a case where the appellate court is
satisfied that the condition of deposit
of 20% will be unjust or imposing such
a condition will amount to deprivation
of the right of appeal of the appellant,
exception can be made for the reasons
specifically recorded.”
(Emphasis added)

15.1. As held earlier, Section 143A can be invoked before the

conviction of the accused, and therefore, the word “may” used
therein can never be construed as “shall”. The tests applicable
for the exercise of jurisdiction under sub-section (1) of Section

1
(2019) 11 SCC 341
2
(2023) 10 SCC 446

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148 can never apply to the exercise of jurisdiction under sub-

section (1) of Section 143A of the N.I. Act.

FACTORS TO BE CONSIDERED WHILE EXERCISING

DISCRETION

16. When the court deals with an application under Section

143A of the N.I. Act, the Court will have to prima facie evaluate
the merits of the case made out by the complainant and the
merits of the defence pleaded by the accused in the reply to the
application under sub-section (1) of Section 143A. The
presumption under Section 139 of the N.I. Act, by itself, is no
ground to direct the payment of interim compensation. The
reason is that the presumption is rebuttable. The question of
applying the presumption will arise at the trial. Only if the
complainant makes out a prima facie case, a direction can be
issued to pay interim compensation. At this stage, the fact that
the accused is in financial distress can also be a consideration.
Even if the Court concludes that a case is made out for grant
of interim compensation, the Court will have to apply its mind
to the quantum of interim compensation to be granted. Even at
this stage, the Court will have to consider various factors such
as the nature of the transaction, the relationship, if any,
between the accused and the complainant and the paying
capacity of the accused. If the defence of the accused is found
to be prima facie a plausible defence, the Court may exercise
discretion in refusing to grant interim compensation. We may
note that the factors required to be considered, which we have
set out above, are not exhaustive. There could be several other
factors in the facts of a given case, such as, the pendency of a

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civil suit, etc. While deciding the prayer made under Section
143A, the Court must record brief reasons indicating
consideration of all the relevant factors.

17. In the present case, the Trial Court has mechanically

passed an order of deposit of Rs.10,00,000/- without
considering the issue of prima facie case and other relevant
factors. It is true that the sum of Rs.10,00,000/- represents
less than 5 per cent of the cheque amount, but the direction
has been issued to pay the amount without application of mind.
Even the High Court has not applied its mind. We, therefore,
propose to direct the Trial Court to consider the application for
grant of interim compensation afresh. In the meanwhile, the
amount of Rs. 10,00,000/- deposited by the appellant will
continue to remain deposited with the Trial Court.

18. Hence, impugned orders are set aside, and the application
made by the complainant in Complaint Petition No. 1103/2018
under Section 143A (1) of the N.I. Act is restored to the file of
Judicial Magistrate First Class, Bokaro. The learned Judge will
hear and decide the application for the grant of interim
compensation afresh in the light of what is held in this
judgment. The amount deposited by the appellant of Rs.
10,00,000/- shall be invested in a fixed deposit till the disposal
of the said application. At the time of disposing of the
application, the Trial Court will pass an appropriate order
regarding refund and/or withdrawal and/or investment of the
said amount.

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19. Subject to what is held earlier, the main conclusions can

be summarised as follows:
a. The exercise of power under sub-section (1) of Section 143A
is discretionary. The provision is directory and not
mandatory. The word “may” used in the provision cannot be
construed as “shall.”

b. While deciding the prayer made under Section 143A, the

Court must record brief reasons indicating consideration of
all relevant factors.

c. The broad parameters for exercising the discretion under

Section 143A are as follows:
i. The Court will have to prima facie evaluate the merits
of the case made out by the complainant and the
merits of the defence pleaded by the accused in the
reply to the application. The financial distress of the
accused can also be a consideration.

ii. A direction to pay interim compensation can be issued,

only if the complainant makes out a prima facie case.

iii. If the defence of the accused is found to be prima facie

plausible, the Court may exercise discretion in
refusing to grant interim compensation.

iv. If the Court concludes that a case is made out to grant

interim compensation, it will also have to apply its
mind to the quantum of interim compensation to be
granted. While doing so, the Court will have to

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consider several factors such as the nature of the

transaction, the relationship, if any, between the
accused and the complainant, etc.

v. There could be several other relevant factors in the

peculiar facts of a given case, which cannot be
exhaustively stated. The parameters stated above are
not exhaustive.

20. The Appeal is partly allowed on the above terms.

……………………..J.
(Abhay S. Oka)

……………………..J.
(Ujjal Bhuyan)

New Delhi;
March 15, 2024

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