In a significant ruling, the High Court of Jammu & Kashmir and Ladakh has emphasized the importance of reasoned judicial discretion in awarding interim compensation under the Negotiable Instruments Act. Justice Sanjay Dhar, presiding over the case of Mujeeb Ul Ashraf Dar vs. Mushtaq Ahmad Wani (CRM(M) No.144/2024), quashed an order by a lower court that had granted maximum interim compensation without providing adequate justification.
Background of the Case
The case originated from a complaint filed by Mushtaq Ahmad Wani against Mujeeb Ul Ashraf Dar under the Negotiable Instruments Act for a dishonored cheque. On November 20, 2023, the Judicial Magistrate (1st Class) in Srinagar awarded an interim compensation of 20% of the cheque amount (Rs. 4 lakhs) to the complainant under Section 143-A of the Act. Dar, represented by advocate Aatir Kawoosa, challenged this order in the High Court, while Wani was represented by advocate F. A. Waida.
Legal Issues and Court’s Decision
The primary issue before the High Court was whether the Magistrate’s order awarding the maximum permissible interim compensation was legally sound. Justice Dhar, in his order dated July 15, 2024, identified several key points:
1. Discretionary Nature of Section 143-A: The court emphasized that the power to award interim compensation under this section is discretionary, not mandatory. Justice Dhar noted, “It is settled law that the power to award interim compensation in terms of Section 143-A of N I Act is discretionary in nature. This discretion has to be exercised on the basis of valid reasons in the absence of which the exercise of discretion becomes arbitrary.”
2. Necessity of Reasoned Orders: The High Court stressed the importance of providing clear reasons for awarding interim compensation. Justice Dhar observed, “The learned Magistrate was expected to justify in order with reasons the quantum of interim compensation as the same can vary from 1% to 20% of the cheque amount. The impugned order in the absence of such reason becomes unsustainable in law.”
3. Consideration of Relevant Factors: Citing the Supreme Court’s judgment in Rakesh Ranjan Shrivastava vs. State of Jharkhand (2024), Justice Dhar outlined the parameters for granting interim compensation. These include evaluating the merits of the complainant’s case, the accused’s defense, the nature of the transaction, and the relationship between the parties.
Court’s Observations
Justice Dhar made several noteworthy observations:
“A perusal of the impugned order would reveal that the learned Magistrate has awarded interim compensation to the extent of 20% of the cheque amount in favour of the respondent/complainant. However, it is not discernible from the contents of the order as to on what basis the learned Magistrate has proceeded to award the maximum amount of interim compensation under the provision of 143 A of N I Act.“
“From the above enunciation of law laid down by the Supreme Court, it is clear that while deciding the quantum of interim compensation, a Magistrate has to apply his/her mind and he/she has to consider several factors such as nature of transaction, the relationship if any between the accused and the complainant etc.“
Also Read
Conclusion
The High Court allowed the petition, quashing the Magistrate’s order and directing a fresh consideration of the application for interim compensation.
