Trial courts must analyze conduct of accused before granting interim compensation in check dishonor cases: HC

The trial courts must examine whether an accused person is attempting to delay proceedings in check dishonor cases when considering the plea of ​​the complainant for grant of interim compensation as per the new provision added in the Negotiable Instruments Act, 1881, with effect from August 2018.

The bedrock of the NI (Amendment) Act, 2018, was to stall unscrupulous drawers of checks dragging proceedings with frivolous applications, absenting themselves, seeking continuous adjournments causing delay and grave prejudice to the case of the complainants as clearly stated in the ‘statements of objects and reasons’ of the 2018 Act, the High Court pointed out.

Such being the background for introducing provision for payment of interim compensation and legal consequences for not paying such interim compensation, the trial courts should grant interim compensation, which would vary from 1% to 20%, only after analyzing the conduct of the accused and recording. proper reasons, the High Court made it clear.

Justice M. Nagaprasanna passed the order on finding that a magistrate court in Bengaluru city had not assigned any reason for ordering payment of 10% (around ₹ 55 lakh) of the value of the dishonored check, which was ₹ 5.56 crore, in favor of the complainant.

V. Krishnamurthy, a distributor of ice cream for Coimbatore in Tamil Nadu, had questioned the trial court’s order of asking him to pay interim compensation to Diary Classic Ice Creams Pvt. Ltd., Bengaluru.

Proper application of mind and recording of reasons by the trial court is essential for grant of interim compensation as every application that is made need not result in grant of interim compensation, the High Court said.

The trial court has to decide whether there is a need to grant interim compensation at all in cases where the accused completely cooperate for trial, the High Court said.

Recording of reason is also important as non payment of interim compensation attracts serious legal consequence, including taking accused into custody, under Section 421 of the Code of Criminal Procedure, the High Court pointed out.

The High Court also pointed out that the trial courts also have to bear in mind the value of the dishonoured check while deciding quantum of interim compensation as sometimes times value runs into several crores.

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