Supreme Court of India · NI Act Section 143A · Interim Compensation
Surinder Singh Deswal & Ors.
v. Virender Gandhi
Citation
(2019) 11 SCC 494
Court
Supreme Court of India
Year
2019
Core Holding
Section 143A NI Act interim compensation is discretionary — the Magistrate must apply mind, not mechanically order in every case. Non-compliance is grounds to refuse stay of sentence in appeal. Acquittal triggers refund with interest.
Background — Section 143A NI Act Amendment 2018
Section 143A was enacted as part of the NI Act Amendment Act, 2018 in response to the staggering pendency of Section 138 cases across India. The Amendment also introduced Section 148, which requires accused persons to deposit a minimum of 20% of the fine or compensation awarded by the trial court before an appellate court can suspend the sentence. Together, these provisions were designed to create financial disincentives for accused persons to prolong litigation without paying anything to the complainant.
Judgment & Ratio
The Supreme Court held that the use of the word "may" in Section 143A makes the power to grant interim compensation discretionary, not mandatory. The Magistrate must consider: (a) the nature of the transaction; (b) the financial capacity of the accused; (c) whether the defence appears to be bona fide or a delay tactic; and (d) any other relevant circumstances. A blanket policy of always granting 20% interim compensation, or never granting it, would both be an improper exercise of discretion. The judgment also confirmed that Section 143A applies to all pending cases at the time of its enactment — not just cases filed after 2018.
Strategic Significance for Section 138 Complainants
For banks, NBFCs, and businesses pursuing Section 138 complaints, Surinder Singh Deswal confirms that Section 143A is a genuinely useful interim recovery tool. A well-argued application for interim compensation at the charge-framing stage, supported by evidence that: (a) the accused is financially solvent; (b) the transaction is clear; and (c) the defence is frivolous, has a strong prospect of success. The 20% interim compensation on large cheque amounts can be significant — on a ₹1 crore cheque, this is ₹20 lakhs secured during trial itself.
Frequently Asked Questions
What is Section 143A NI Act and what did Surinder Singh Deswal decide?
Section 143A was inserted by the Negotiable Instruments (Amendment) Act, 2018 to address the severe pendency of cheque bounce cases. It empowers the Magistrate to direct the accused to pay interim compensation up to 20% of the cheque amount at the stage of framing of charge (or first hearing after the accused pleads not guilty). Surinder Singh Deswal v Virender Gandhi [(2019) 11 SCC 494] clarified that the power under Section 143A is discretionary — the Magistrate must apply their mind to the circumstances and is not obliged to mechanically direct payment in every case.
What are the consequences of not paying Section 143A interim compensation?
If the accused fails to pay the interim compensation ordered under Section 143A within 60 days (extendable by 30 days by court), the court may treat this non-compliance as a ground to refuse suspension of sentence during appeal under Section 148. More critically, Surinder Singh Deswal confirmed that non-payment of interim compensation, combined with an appeal against conviction, can result in the appellate court refusing bail or declining to stay sentence execution. The provision is designed to ensure that accused persons cannot use litigation as a delay tactic without any immediate consequence.
Is interim compensation under Section 143A refundable on acquittal?
Yes. Section 143A(4) provides that if the accused is acquitted, the court shall direct the complainant to repay the interim compensation with interest at the prevailing bank rate from the date of payment. This safeguard ensures that Section 143A is not used as a punitive measure against an ultimately innocent accused. The refund provision makes the interim compensation a security deposit rather than a final penalty.
Cheque Bounce & Section 143A
Advocate Subodh Bajpai · Unified Chambers and Associates