Rakesh Ranjan Shrivastava vs. State of Jharkhand & Anr.
Supreme Court of India, Criminal Appeal No. 741 of 2024, Judgment dated 15 March 2024
Citation: [2024] 3 S.C.R. 438; 2024 INSC 205; (2024) 4 SCC 419
Bench: Justice Abhay S. Oka and Justice Ujjal Bhuyan
Facts
The dispute arose from a business relationship between Rakesh Ranjan Shrivastava (appellant) and the complainant (respondent), involving profit-sharing agreements and partnership ventures.
The respondent was appointed as Executive Director in one of the appellant's firms, with a salary of ₹1,00,000 per month. Further, both parties and a third individual, Rahul Kumar, formed a partnership.
Due to non-payment of dues, the respondent initiated a civil suit for recovery of ₹4,38,80,000. A settlement was attempted, with the appellant agreeing to pay ₹4,25,00,000 via two cheques (₹2,20,00,000 and ₹2,05,00,000).
The first cheque was dishonoured, prompting the respondent to file a complaint under Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act).
During trial, the respondent sought interim compensation under Section 143A(1) of the N.I. Act, requesting 20% of the cheque amount. The trial court granted ₹10,00,000 as interim compensation, a decision upheld by the Sessions Court and High Court. The appellant challenged this before the Supreme Court.
Issues
Whether the power to grant interim compensation under Section 143A(1) of the N.I. Act is mandatory or discretionary.
What parameters should guide the courts in exercising this power.
Supreme Court’s Observations and Ruling
The Court clarified that Section 143A(1) of the N.I. Act is directory, not mandatory. This means courts have discretion, not an obligation, to order interim compensation in cheque dishonour cases.
The Court laid down guiding parameters for exercising this discretion:
Courts must prima facie evaluate the merits of the complaint and the defence.
Interim compensation should be ordered only if the complainant establishes a prima facie case.
If the accused presents a plausible defence, courts may deny interim compensation.
The quantum of compensation must be determined after considering the nature of the transaction, relationship between parties, and other relevant factors.
The Supreme Court noted that the trial court had not provided reasons for granting interim compensation. It directed the trial court to reconsider the application for interim compensation, ensuring a reasoned order is passed.
The amount already deposited by the appellant was to remain with the trial court until a fresh decision was made.
Significance
The decision clarifies the discretionary nature of interim compensation under Section 143A(1) of the N.I. Act, ensuring that such orders are not automatic but based on judicial assessment of each case's facts.
It protects accused persons from arbitrary orders and ensures that courts must provide reasons for granting or denying interim compensation, promoting fairness and transparency in cheque dishonour proceedings.
Key Citation
[2024] 3 S.C.R. 438; 2024 INSC 205; (2024) 4 SCC 419
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