143-A NI Act | Prima Facie Doubts Over Cheque Ownership, Grant of Interim Compensation Is Imprudent: Gauhati High Court

“Where Accused Denies Issuance and Signature on Cheque, and Bank Testimony Supports Defence, Grant of Interim Compensation Is Imprudent” – In a notable ruling Gauhati High Court held that interim compensation under Section 143-A of the Negotiable Instruments Act, 1881 cannot be mechanically granted where the accused has prima facie disputed the issuance, signature, and even ownership of the bank account related to the cheque in question. Justice Pranjal Das quashed the trial court’s direction for payment of 20% interim compensation, terming it legally unsustainable at this stage.

“If the defence of the accused is found to be prima facie plausible, the Court may exercise discretion in refusing to grant interim compensation,” the Court reiterated, drawing on the principles laid down in Rakesh Ranjan Shrivastava v. State of Jharkhand, (2024) 4 SCC 419. [Para 18]

“Power Under Section 143-A Is Discretionary and Requires Prima Facie Evaluation” – Court Criticizes Mechanical Application by Magistrate

The dispute arose from a complaint under Section 138 of the NI Act, where the complainant alleged that the accused, Madhu Ram Deka, issued a cheque of ₹20,00,000 on June 14, 2021, which was dishonoured due to “drawer’s signature differs”. Relying on Section 143-A, the trial court directed the accused to pay 20% of the cheque amount as interim compensation.

However, the accused categorically denied issuing the cheque, denied the signature on it, and asserted that he did not hold any account in the concerned bank (South Indian Bank, Dispur branch). He also filed an FIR under Sections 420, 468, and 471 IPC (Hatigaon P.S. Case No. 530/2021), alleging forgery and misuse of his name.

Crucially, the testimony of PW2, the Branch Manager of the South Indian Bank, Dispur Branch, supported the defence. The manager clearly stated that the account linked to the cheque number 045164 was held by a third party named Bhaswati Das, not by the petitioner.

The Court observed: “The contention of the accused/petitioner that he does not have an account in Dispur branch of South Indian Bank and that the cheque… was not issued by him nor signed by him – find some support from the testimony of the branch manager.” [Para 24]

Thus, the High Court concluded that the trial court had failed to properly apply the statutory parameters before exercising discretion under Section 143-A.

“Trial Court Must Apply Judicial Mind Before Granting Interim Compensation” – Revisional Interference Justified

Citing Rakesh Ranjan Shrivastava, the Court stressed that Section 143-A of the NI Act, inserted in 2018, is directory, not mandatory. The word "may" confers discretion, not obligation. The Court must briefly record reasons, evaluate the merits of both parties, and grant interim compensation only upon finding a prima facie case in favour of the complainant.

Quoting from the Supreme Court: “A direction to pay interim compensation can be issued, only if the complainant makes out a prima facie case… If the defence of the accused is found to be prima facie plausible, the court may exercise discretion in refusing to grant interim compensation.” [Para 17]

Here, the Gauhati High Court noted that the accused’s denial was not merely evasive but backed by credible bank testimony, a pending police complaint for forgery, and absence of any account linkage to him. These facts raised serious and disputed questions of fact requiring full trial.

“Only then, it would be possible to answer the question as to whether the accused incurred criminal liability under Section 138 of the NI Act.” [Para 25]

“Cheque Bounce Prosecution from 2021 – Trial Court Directed to Expedite Proceedings”

While quashing the interim compensation order dated September 26, 2023 (passed by the Additional CJM, Nalbari in NI Case No. 59/2021), the Court also expressed concern over the pendency of the criminal complaint since 2021. It directed the trial court to endeavour to conclude the trial “expeditiously”, taking into account the docket load and age of the case. [Para 27]

This judgment offers clear judicial guidance on the limits of Section 143-A, affirming that interim compensation in cheque bounce cases cannot be granted as a matter of course, especially when the foundational elements of the offence are prima facie contested.

The Court’s analysis reiterates that procedural fairness, prima facie judicial scrutiny, and discretion are integral to invoking Section 143-A, and mechanical application merely to aid the complainant’s financial position cannot override statutory safeguards for the accused.

Date of Decision: 22 January 2026