Delhi High Court Clarifies Scope of Section 143A of Negotiable Instruments Act: Interim Compensation in Dishonoured Cheque Cases


In the matter of ‘Prakash Vasant Ajgaonkar and Ors. Vs. The State NCT of Delhi and Anr.’, the issue revolves around the application of Section 143A of the Negotiable Instruments Act, 1881 (NI Act) regarding the payment of interim compensation in cases of dishonoured cheques. The Metropolitan Magistrate had directed the accused, including the petitioners, to make interim payments based on this provision. However, the High Court, upon scrutiny, found this direction to be erroneous.


Facts of the case:

The respondent filed complaints under Section 138 of the NI Act, alleging dishonour of cheques issued by the company. The petitioners, identified as directors and signatories of the company, were accused in these complaints. The respondent further invoked Section 143A of the NI Act, seeking interim compensation.

The Metropolitan Magistrate, in orders dated 24.07.2021 and 11.03.2022, directed the petitioners to make interim payments (12% / 10% of the cheque amount) within 60 days. However, the High Court, in its decision, analyzed the legal nuances and determined the correctness of these orders.


The decision of the Delhi High Court:

The High Court referenced the Supreme Court’s ruling in Rakesh Ranjan Shrivastava Vs. State of Jharkhand & Anr. (2024), which clarified that the application of Section 143A of the NI Act is discretionary, not mandatory. The Court emphasized that the exercise of this discretion should adhere to established parameters.


In the present case, the Trial Court erred in treating Section 143A as mandatory, contrary to the Supreme Court’s directive. Additionally, the High Court highlighted that Section 143A specifically targets the “drawer of the cheque” for interim compensation. The petitioners, although accused under Section 141 of the NI Act, were not the actual drawers of the cheques.


The Delhi High Court referenced past judgments, such as Anil Hada Vs. Indian Acrylic Ltd. and N. Harihara Krishna Vs. J. Thomans, which affirmed that the offender under Section 138 of the NI Act is the drawer of the cheque. Consequently, the liability for interim compensation under Section 143A falls solely on the drawer, not on other individuals connected with the company.


Moreover, the High Court cited Lyka Labs Ltd. & Anr. Vs. State of Maharashtra & Anr. (2023), which correctly interpreted that the power to direct interim compensation cannot be extended beyond the scope of Section 143A to include Section 141 of the NI Act.


In light of these considerations, the High Court allowed the petitions, setting aside the impugned orders of the Trial Court.



The Delhi High Court’s decision clarified the discretionary nature of Section 143A of the NI Act and affirmed that interim compensation is applicable only to the drawer of the dishonoured cheque, not to other accused parties under Section 141 of the NI Act.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. The content may not reflect the most current legal developments and is not guaranteed to be accurate, complete, or up-to-date. Readers should consult a qualified legal professional before taking any action based on the information provided. The authors and publishers disclaim any liability for any loss or damage incurred as a result of reliance on this article. This article does not create an attorney-client relationship.

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