BOMBAY HIGH COURT REFUSES GRANT OF INTERIM COMPENSATION IN CHEQUE BOUNCING CASE AS ACCUSED HAD ESTABLIHSED BONA FIDES THROUGH PART PAYMENTS

A single-Judge Bench of the Bombay High Court comprising of Justice N. J. Jamadar passed a judgment dated 10.06.2024 in the matter of M/s. Bajaj Constructions vs. the State of Maharashtra & Ors., Writ Petition (ST) No. 22150 of 2023, and observed that the Ld. Metropolitan Magistrate’s Order rejecting award of Interim Compensation to the Complainant did not suffer from legal infirmity, as the Accused had already established bona fides by showing proof of part payment under the Contract.

FACTS:

i) That the Petition above mentioned was filed before the High Court of Bombay by one, M/s. Bajaj Constructions through its sole proprietor, Manish Bajaj (Petitioner-Accused) against the State of Maharashtra, M/s. Paint Art and one, Shakeel Khan (Respondents – Complainants), that challenged the Judgment and Order dated 19.08.2023 issued by the Ld. Additional Sessions Judge (ASJ) of Greater Bombay in Criminal Revision Application No. 400 of 2023. The Ld. ASJ allowed the Revision Petition filed by the Complainant and set aside an Order dated 10.04.2023 passed by the Ld. Metropolitan Magistrate (M.M.) of the 30^th Court in Kurla that rejected the Complainant’s Application (Exhibit-11) seeking direction to pay Interim Compensation under Section 143A of the Negotiable Instruments Act, 1881 (“NI Act, 1881”) (Power to direct interim compensation). The Ld. ASJ directed the Petitioner to deposit 20% of the amount of the cheques as Interim Compensation.

ii) The Complainant, M/s. Paint Art, was engaged in the business of internal and external painting, plumbing, and reconstruction work. The Petitioner-Accused No.2, Manish Bajaj, who operates M/s. Bajaj Construction, enlisted the Complainant to complete the Civil Work for Vandana Building for an agreed sum of Rs. 1,70,00,000/- (Rupees One Crore Seventy Lakh only). Despite the completion of the work in May 2019, the Petitioner-Accused defaulted on the payment.

iii) Thereafter, on 07.09.2021, the Petitioner acknowledged the debt through an Affidavit and issued four Cheques amounting to Rs. 1,70,00,000/-. The Cheques were dishonoured upon presentation, leading to a Complaint filed under Section 138 of the NI Act, 1881 (Dishonour of a cheque for insufficiency, etc., of funds in the account.).

iv) Upon receiving the Summons, the Petitioner-Accused appeared in Court and contested the payment claim, asserting partial repayment and misuse of the Cheques by the Complainant. The Ld. M.M., considered the Petitioner-Accused’s explanation and denied the Complainant’s Application for Interim Compensation.

v) Aggrieved, the Complainant filed an Appeal before the Ld. ASJ, in which the Ld. ASJ directed the Petitioner-Accused to deposit 20% of the Cheque amount as Interim Compensation. Aggrieved by this Order dated 19.08.2023, the Petitioner-Accused sought the Writ Jurisdiction of the Hon’ble High Court.

METROPOLITAN MAGISTRATE:

The Petitioner-Accused appeared before the Court on 07.12.2022, and the plea was recorded on the same day, showing no intent to delay the trial. Further, the Petitioner-Accused presented a plausible explanation in their reply, claiming that a substantial portion of the amount covered by the Cheques had already been paid in cash and through banking channels, that were supported with copies of payment vouchers and bank account extracts.

Furthermore, the Petitioner-Accused argued that the Complainant misused the Cheques and failed to acknowledge the part payments received, making the presentment of the Cheques without recognising these payments, as illegal. The Ld. M.M., considered the provided explanation and evidence and determined that there was a possibility of rebutting the presumption of a legally enforceable debt, thereby, leading to the rejection of the Complainant’s Application for Interim Compensation.

ADDITIONAL SESSION JUDGE:

a) The Ld. M.M. failed to exercise Jurisdiction under Section 143A of the NI Act, 1881, in a lawful manner. Further, there appeared to be no dispute regarding the existence of the Contract between the Complainant and the Accused.

b) The Ld. M.M. did not take into account the factors necessary for determining the Application for Interim Compensation. Given the undisputed Contract and Cheques, the Magistrate ought to have awarded Interim Compensation.

c) Considering these factors, Ld. ASJ held that Interim Compensation was warranted. Therefore, Ld. ASJ allowed the Revision Application and directed the Petitioner-Accused to deposit 20% of the amount covered by the Cheques as Interim Compensation under Section 143A of the NI Act, 1881.

BOMBAY HIGH COURT:

Aggrieved by the Order dated 19.08.2023 of Ld. ASJ the Petitioner-Accused filed a Writ Petition under Article 227 of the Constitution of India, 1950 (Power of superintendence over all Courts by the High Court) and Section 482 of the Code of Criminal Procedure, 1973, (Cr. P.C.) (Saving of inherent power of High Court).

ISSUE:

Whether the Ld. ASJ was justified in reversing the Ld. M.M.’s Order and directing the Petitioner-Accused to pay 20% of the Cheque amount as Interim Compensation under Section 143A of the NI Act, 1881.

OBSERVATION:

1) The High Court emphasized the necessity of a prima facie evaluation of the Complainant’s claim and the Petitioner-Accused’s defense to determine the appropriateness of granting interim compensation. If the Petitioner-Accused’s defense appears plausible, the Court may refuse Interim Compensation and ought to consider the appropriate quantum, with 20% being the upper limit, not to be awarded as a matter of course.

2) The Complainant cited the affidavit evidencing the Cheques and referenced the Supreme Court’s decision in Hiten P. Dalal vs. Bratindranath Banerjee (AIR 2001 Supreme Court 3897), to argue for a legally enforceable liability. The High Court found this argument insufficient, noting that the presumption under Sections 118 and 139 of the NI Act is rebuttable and more relevant at trial than for Interim Compensation.

3) The Petitioner-Accused claimed that substantial payments had been made in cash and through banking channels, supported by vouchers and bank account extracts. The High Court noted that the Metropolitan Magistrate found this plausible, indicating a possibility of rebutting the presumption of a legally enforceable debt.

4) The High Court criticised the Additional Sessions Judge for not addressing the quantum of Interim Compensation, emphasising that the Court must consider the appropriate amount even if Interim Compensation is warranted.

5) The High Court concluded that the Ld. Metropolitan Magistrate’s Order rejecting award of Interim Compensation did not suffer from legal infirmity, as the Accused had already established proof of payment. Hence, the High Court observed that Ld. MM’s Order ought to be restored, and the ASJ’s Order awarding Interim compensation ought to be quashed.

6) The High Court clarified that its observations were limited to the issue of Interim Compensation under Section 143A of the NI Act and that it would not influence the Trial Court’s determination of the Petitioner-Accused’s guilt or innocence.

CONCLUSION:

Based on these observations, the High Court allowed the Writ Petition, quashed the Additional Sessions Judge’s Order awarding Interim compensation, restored the Metropolitan Magistrate’s Order and thereby, rejected the Complainant’s Application for Interim Compensation.

 

Sakshi Raghuvanshi

Senior Legal Associate

The Indian Lawyer