The High Court of Judicature at Allahabad has dismissed an application challenging the orders of lower courts that directed an accused to deposit 20% of the cheque amount as interim compensation under Section 143-A of the Negotiable Instruments (N.I.) Act, 1881. Justice Jai Krishna Upadhyay ruled that because the ownership of the cheques and the signatures on them were undisputed, the trial court had appropriately exercised its discretionary power. The Court clarified that at the preliminary stage of deciding interim compensation, a detailed trial-like evaluation of factual defenses is neither required nor permissible.
Background of the Case
The matter arose from a complaint filed on July 30, 2024, under Section 138 of the N.I. Act by the complainant, Rohit Singh, against the accused, Rahul Yadav, who is engaged in the real estate business. According to the complaint, Yadav owed a liability of Rs. 10,00,000/- to the complainant. To discharge this liability, Yadav issued three cheques amounting to Rs. 3,00,000/-, Rs. 6,00,000/-, and Rs. 1,00,000/-.
Upon presentation, the cheques were dishonored with bank remarks stating “Funds Insufficient” and “Account Inoperative.” Consequently, the complainant moved an application under Section 143-A of the N.I. Act seeking interim compensation.
On November 20, 2025, the Special Court, 138 N.I. Act, Gautam Buddh Nagar, allowed the application, directing Yadav to pay 20% of the total cheque amount (equivalent to Rs. 2,00,000/-) to the complainant within two months. This order was subsequently challenged by Yadav through a criminal revision before the Sessions Judge, Gautam Buddh Nagar, which was dismissed on May 14, 2026. Yadav then approached the High Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), seeking to quash both orders.
Arguments of the Parties
The learned counsel representing the applicant, Rahul Yadav, argued that the transaction in question was based on unverified and disputed cash payments made over a prolonged period. They contended that there was no independent documentary proof, receipts, banking records, or income tax disclosures to establish a legally enforceable debt. Furthermore, the defense argued that the trial and revisional courts failed to appreciate that Section 143-A is discretionary and directory, rather than mandatory, citing the Supreme Court precedent in Rakesh Ranjan Shrivastava vs. The State of Jharkhand & Anr. (2024) 4 SCC 419. They asserted that the cheques had been misused after being taken from Yadav’s vehicle.
Conversely, the learned Additional Government Advocate (AGA-I) for the State argued that the lower courts’ orders were well-reasoned and legally sound. The State highlighted that because Yadav admitted the ownership of the cheques and his signatures, statutory presumptions under Sections 118 and 139 of the N.I. Act applied against him. The State further pointed out that the provision was specifically enacted to secure the credibility of cheque transactions and prevent dilatory tactics by accused parties.
The Court’s Analysis and Precedents
In analyzing the scope of Section 143-A of the N.I. Act, the High Court referred to the guidelines established by the Supreme Court in the Rakesh Ranjan Shrivastava case. The Apex Court had summarized that the power under Section 143-A is discretionary, and courts must record brief reasons while evaluating the prima facie merits of both the complaint and the defense.
Delving into the concept of a “prima facie” standard, Justice Upadhyay noted that the Latin term translates to “at first sight” or “based on a ‘first impression.'” Referring to Webster’s Third International Dictionary, the Court observed that a prima facie case means “a case established by ‘prima facie evidence’ sufficient in law to raise a presumption of fact unless rebutted.”
The High Court cited several key rulings to delineate the limits of this legal threshold:
- Balvir Singh v. State of Uttarakhand (AIR 2023 SC 5551): The Supreme Court clarified that “‘prima facie’ only requires an initial, reliable impression rather than proof beyond a reasonable doubt.”
- Sunil Bharti Mittal v. CBI (2015) 4 SCC 609 and Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra (2021) 19 SCC 401: The Apex Court observed that while a judge must ensure the facts disclose a genuine offense, they must avoid “weighing the deeper merits, appreciating factual defences, or conducting a ‘mini-trial’ at the preliminary stage.”
Applying these principles, the High Court observed that the trial court’s order met the prima facie requirements because the cheques belonged to the accused, his signatures were undisputed, and he had already been summoned under Section 251 of the Cr.P.C.
Furthermore, the Court pointed out that bank statements showed Yadav’s account was already inoperative and lacked funds, which rendered his defense—that the cheques were stolen from his vehicle and misused—highly improbable at this stage.
Justice Upadhyay remarked: “At the stage of consideration of an application under Section 143A N.I. Act, the Court is not required to conduct a detailed appreciation of evidence as if deciding the final complaint on merits.”
The Court added that “The defence sought to be raised by the accused regarding the alleged misuse of cheques is essentially a matter of trial and can only be adjudicated upon after evidence is led by the parties.”
Addressing the issue of the debt’s validity, the Court held that “The contention of the applicant that the complainant has not established a legally enforceable debt cannot be conclusively examined at this preliminary stage.” The Court also rejected the argument that the trial court erred in awarding the maximum statutory limit of 20% without adequate reasons, finding that the trial court had adequately weighed the nature of the allegations, the duration of the pendency, and the undisputed facts.
Decision of the Court
The High Court concluded that “the impugned orders neither suffer from perversity nor from any jurisdictional infirmity.” Finding no ground to warrant judicial interference, the Court dismissed the application as devoid of merit.
Before concluding, Justice Upadhyay expressed appreciation for Research Associate Ms. Anjali Singh for her diligent research and assistance in drafting the order.
Case Details
Case Title: Rahul Yadav vs. State of U.P. and Another
Case No.: APPLICATION U/S 528 BNSS No. 22924 of 2026
Bench: Justice Jai Krishna Upadhyay
Date: June 2, 2026
