Delhi HC - section 143 A of the NI Act is not mandatory, it is a directory provision.

The Delhi High Court held that Section 143A of the Negotiable Instruments Act, 1881 (NI Act) is not ‘mandatory’; it is a directory provision. Justice Anu Malhotra made the observations while setting aside an order passed by the trial court, where the trial court u/s 143A(4) of the Negotiable Instruments Act granted interim compensation of Rs 26 Lakh for the dishonor of cheque. 

Section 143A gives the power to the Court to hear a cheque bounce case and order the drawer of the cheque to pay interim compensation.

The trial court made the observations based on the objects behind the introduction of the provision, and it seemed to have a ‘mandatory effect.’ The trial court also added that even if providing interim compensation is discretionary, the Court is still clothed with these powers after recording enough reasons. 

The accused persons moved to the HC against the order passed by the Trial court and argued that the order was against the law and the law vests the Metropolitan Magistrate with discretion; therefore, ordering interim compensation is not mandatory. He further argued that the trial court did not give any reason on the merits, only justified the award of interim compensation.

The HC cited judgments by the Top Court, Bombay HC, and Punjab & Haryana HC to say that it is clear that the provision of 143A is a ‘directory’ as far as its effect on the lower Court to grant interim compensation is concerned.

Justice Anu Malhotra, therefore, set aside the order and remanded the case to the trial court to dispose of the application u/s 143A of the Act. 

Author: Papiha Ghoshal