The Punjab and Haryana High Court has reaffirmed that judicial discretion under Section 143-A of the Negotiable Instruments Act is not a mechanical exercise. An order granting interim compensation must reflect a deliberate, fact-specific application of mind - failure to do so renders the order legally unsustainable.
Background & Facts
The Dispute
The respondent, Gurmail Singh Khinda, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 alleging dishonour of a cheque for Rs.40,00,000 issued by the petitioner, Prabh Kiran Singh. The petitioner appeared before the trial court and pleaded not guilty. During the pendency of proceedings, the complainant moved an application under Section 143-A of the NIA seeking interim compensation of up to 20% of the cheque amount, i.e., Rs.8,00,000.
Procedural History
- 2024: Complaint filed under Section 138 NIA
- 2025: Complainant applied for interim compensation under Section 143-A NIA
- 28.10.2025: Judicial Magistrate First Class, Chandigarh, awarded Rs.4,00,000 (10% of cheque amount) as interim compensation
- 05.03.2026: Petitioner challenged the order before the High Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023
Relief Sought
The petitioner sought setting aside of the interim compensation order on grounds that the trial court failed to consider: (i) absence of any documentary evidence supporting the alleged debt; (ii) petitioner’s consistent appearance in court; (iii) no evidence of dilatory tactics; and (iv) serious dispute over the underlying liability.
The Legal Issue
The central question was whether Section 143-A of the Negotiable Instruments Act permits a trial court to grant interim compensation without recording specific reasoning based on the factual matrix, particularly when the accused disputes the underlying liability and has not engaged in procedural delay.
Arguments Presented
For the Petitioner
Learned counsel contended that Section 143-A confers discretionary power, not a mandatory obligation, and the word "may" requires judicial restraint. The trial court mechanically reproduced the statutory provision without addressing the petitioner’s objections regarding the absence of a promissory note, loan agreement, or any documentary proof of the transaction. It was further argued that the petitioner had regularly appeared before the court and had not attempted to protract proceedings, making the grant of compensation unjustified.
For the Respondent
The respondent’s counsel submitted that Section 143-A was inserted to strengthen the credibility of cheques and provide timely relief to payees. It was argued that once the accused pleads not guilty, the court is empowered to grant interim compensation if a prima facie case is made out. The trial court had noted a prima facie case and awarded only 10% of the cheque amount - well within the statutory cap of 20% - and therefore, its discretion did not warrant interference.
The Court's Analysis
The Court emphasized that while Section 143-A grants discretionary power to award interim compensation, such discretion is not unfettered. The word "may" mandates that the court must exercise its power with due consideration of the facts and circumstances of the case. The impugned order, though referencing the statutory provision and stating that a prima facie case existed, failed to engage with the petitioner’s substantive objections.
"An order imposing interim monetary liability, though interlocutory in nature, must disclose application of mind and cogent reasoning."
The Court observed that the trial court did not analyze the absence of documentary evidence, did not assess the petitioner’s conduct during proceedings, and did not evaluate whether the accused was attempting to protract the trial. The order was devoid of any factual analysis, rendering it non-speaking and arbitrary. The High Court held that a prima facie case alone cannot justify interim compensation without contextual justification. The absence of reasoning transforms discretionary power into arbitrary action, violating the principles of natural justice and Article 14 of the Constitution.
The Verdict
The petitioner succeeded. The High Court set aside the interim compensation order dated 28.10.2025 and remanded the matter to the trial court for fresh consideration. The Court held that Section 143-A requires a reasoned, speaking order grounded in the factual matrix, and mere recitation of statutory language is insufficient.
What This Means For Similar Cases
Reasoned Orders Are Non-Negotiable
- Practitioners must now insist that trial courts articulate specific reasons for granting interim compensation under Section 143-A
- Failure to address objections regarding underlying liability, documentary evidence, or conduct of the accused renders the order liable to be set aside
- A prima facie case alone is not a substitute for judicial reasoning
Discretion Must Be Context-Sensitive
- Courts must evaluate whether the accused has appeared regularly, delayed proceedings, or contested the transaction’s validity
- Absence of loan agreements or promissory notes must be weighed before awarding compensation
- The 20% cap is not a default; the percentage awarded must be proportionate to the strength of the prima facie case and the accused’s conduct
Interlocutory Orders Are Not Exempt from Scrutiny
- Even though interim compensation is temporary, it imposes a financial burden and affects the accused’s rights
- High Courts will intervene where trial courts act mechanically, regardless of the order’s interlocutory nature
- Petitioners under Section 528 BNSS may now successfully challenge such orders on grounds of non-speaking reasoning
