Interim Compensation under Section 143-A of the Negotiable Instruments Act

Source: Gauhati High Court 

Why in News? 

Justice Pranjal Das of the Gauhati High Court in the case of Sri Madhu Ram Deka v. The State of Assam & Anr. (2026) set aside a trial court order directing payment of 20% of the cheque amount as interim compensation under Section 143-A of the Negotiable Instruments Act, 1881 observing that disputed questions requiring proper adjudication through evidence necessitate caution in granting interim relief. 

What was the Background of Sri Madhu Ram Deka v. The State of Assam & Anr.(2026) Case? 

• The case arose from a criminal revision petition challenging a trial court's order granting interim compensation under Section 143-A of the Negotiable Instruments Act, 1881.  
• The original complaint was filed under Section 138 of the NI Act relating to dishonour of a cheque for Rs. 20,00,000. 
• The cheque was dishonoured on the ground of "drawer's signature differs". 
• The trial court had directed the accused to pay 20% of the cheque amount as interim compensation to the complainant. 
• The petitioner/accused denied issuance of the cheque and disputed the signature on it. 
• The accused asserted that he did not maintain the account in question from which the cheque was allegedly issued. 
• The accused had lodged a complaint alleging forgery of his signature, leading to registration of a case under Sections 420/468/471 of the Indian Penal Code. 
• The petitioner's submissions were supported by the testimony of the branch manager. 
• The respondent/complainant projected financial difficulties to support the claim for interim compensation. 

What were the Court's Observations? 

• The Court observed that "The court has to be satisfied about a prima facie case before granting interim compensation. The court to make such prima facie determination has to see the merits of the case put forth by the complainant and the merits of the defence put forth by the accused." 
• The bench noted that "if the defence of the accused is prima facie found to be plausible, the court may exercise discretion in refusing interim compensation." 
• The Court emphasized that there are disputed questions which will necessitate proper adjudication through evidence. 
• The Court held that only after proper adjudication through evidence would it be possible to answer the question as to whether the accused petitioner incurred criminal liability under Section 138 of the NI Act. 
• The Court concluded that "in such a situation... it may not be prudent to grant interim compensation at this stage, invoking the powers under section 143-A of NI Act. This is despite the projected financial difficulties of the respondent no. 2/complainant. 
• The Court accordingly set aside the trial court's order directing payment of interim compensation. 

What is Section 143-A of the Negotiable Instruments Act? 

Section 143-A - Power to Direct Interim Compensation: 

• When Court May Order: Court trying an offence under Section 138 can order the drawer to pay interim compensation to the complainant. 
• Timing of Order:  
  • In summary trial/summons case: When drawer pleads not guilty. 
  • In other cases: Upon framing of charges. 
• Compensation Limit: Interim compensation shall not exceed 20% of the cheque amount. 
• Payment Timeline:  
  • Must be paid within 60 days of the order. 
  • Court may extend by an additional 30 days on sufficient cause. 
• If Drawer is Acquitted:  
  • Complainant must repay the interim compensation amount. 
  • With interest at bank rate (as per RBI). 
  • Within 60 days (extendable by 30 days on sufficient cause). 
• Recovery Method: Interim compensation can be recovered as if it were a fine under Section 421 of CrPC. 
• Adjustment:  
  • Final fine under Section 138 OR. 
  • Compensation under Section 357 CrPC. 
  • Shall be reduced by the interim compensation amount already paid/recovered.