Section 143A: Interim Compensation in Cheque Bounce Cases

Section 143A of the Negotiable Instruments Act 1881 allows the court trying a cheque dishonour complaint to direct the drawer to pay the complainant interim compensation of up to twenty per cent of the cheque amount while the trial is still running. The power arises when the drawer pleads not guilty in a summary trial or a summons case, or on framing of charge in any other case, and the money must be paid within sixty days, extendable by thirty on sufficient cause. It is discretionary rather than automatic: the drawer must be heard, the order must carry reasons, and if the drawer is ultimately acquitted the complainant repays the amount with interest.

That last feature is what distinguishes Section 143A from every other pre-judgment payment in Indian criminal procedure — it is provisional in both directions. As an Advocate practising at the Delhi High Court and Senior Partner at Unified Chambers And Associates, the two mistakes I see most often are a complainant treating twenty per cent as an entitlement that follows the not-guilty plea, and a drawer treating an order as unenforceable because no default sentence attaches to it. Neither survives the text. This note sets out the section sub-section by sub-section, the stage at which the power arises, how the quantum is arrived at, what happens on non-payment and on acquittal, and where the line falls between Section 143A and the appellate deposit under Section 148.

What does Section 143A actually provide?

The section was inserted by the Negotiable Instruments (Amendment) Act 2018 and brought into force with effect from 1 September 2018. It has six sub-sections, and each does a distinct job.

Sub-section (1) opens with a non obstante clause — notwithstanding anything in the Code of Criminal Procedure 1973, the court trying an offence under Section 138 may order the drawer of the cheque to pay interim compensation to the complainant. It then specifies the two entry points: clause (a), in a summary trial or a summons case, where the drawer pleads not guilty to the accusation made in the complaint; and clause (b), in any other case, upon framing of charge.

Sub-section (2) caps the amount: the interim compensation shall not exceed twenty per cent of the amount of the cheque.

Sub-section (3) fixes the payment window at sixty days from the date of the order, or such further period not exceeding thirty days as the court may direct on sufficient cause shown by the drawer.

Sub-section (4) deals with acquittal, requiring the complainant to repay with interest at the Reserve Bank of India bank rate. Sub-section (5) supplies the recovery machinery, treating the amount as if it were a fine under Section 421 of the Code of Criminal Procedure 1973. Sub-section (6) avoids double counting, reducing any fine under Section 138 or compensation under Section 357 of the Code by what has already been paid or recovered. Each is taken up in turn below.

Two textual points are worth fixing at the outset. The money is *paid to the complainant*, not deposited in court — a deliberate difference from Section 148. And the direction runs against "the drawer of the cheque", a phrase that does real work when the cheque is a company's.

At what stage can interim compensation be ordered?

The stage is not at large. Section 143A(1) ties the power to an identified procedural event, and an application filed before that event has not yet matured.

Under clause (a), the event is the drawer's plea of not guilty, recorded when the substance of the accusation is stated to him under Section 251 of the Code of Criminal Procedure 1973, now Section 274 of the Bharatiya Nagarik Suraksha Sanhita 2023. The successor provision carries a proviso the 1973 Code did not have: where the Magistrate considers the accusation groundless, he shall record his reasons in writing and release the accused, and that release has the effect of a discharge. Where that course is taken no plea of not guilty is recorded at all, and clause (a) never opens — so a drawer with a documented answer to the complaint has a reason to put it before the court at that stage rather than after.

An offence under Section 138 carries imprisonment which may extend to two years, or a fine which may extend to twice the amount of the cheque, or both. Because a warrant case is one relating to an offence punishable with death, imprisonment for life, or imprisonment for a term *exceeding* two years, a Section 138 complaint is a summons case — and Section 143 of the Negotiable Instruments Act directs that such offences be tried by a Judicial Magistrate of the first class or a Metropolitan Magistrate applying the summary-trial provisions of the Code so far as may be. Clause (a) is therefore the ordinary route.

Under clause (b), the event is the framing of charge. This is the residual limb, relevant where the trial is not a summary trial or a summons case and a charge is in fact framed — for instance where the Section 138 offence is tried alongside offences attracting the warrant-case procedure. It should not be invoked in a standalone summons-case complaint simply because the plea stage has been overtaken.

Section 143(3) separately requires the trial to be conducted as expeditiously as possible, with an endeavour to conclude it within six months of the complaint. Interim compensation exists because that endeavour is, in practice, rarely met.

Is an order under Section 143A automatic once the drawer pleads not guilty?

No, and this is the single most litigated aspect of the provision.

Section 143A(1) says the court "may order". It is settled that the word is directory and not mandatory, so the power is discretionary and is not to be exercised as a matter of course on the mere fact of a not-guilty plea. A mechanical order — particularly one granting the statutory maximum with no discussion — is vulnerable precisely because it discloses no exercise of discretion at all.

What the exercise requires, on the settled position, is this:

• **A hearing.** The drawer must have an opportunity to respond before an order directing payment is made. An order passed without notice is open to challenge on that ground alone.
• **A prima facie assessment.** The court forms a preliminary view of the strength of the complaint and of the defence disclosed, without conducting a mini-trial. The presumption under Section 139 of the Negotiable Instruments Act is part of that picture, but it is a presumption at trial and not a finding of liability; the interaction is worked through in the note on the <a href="/blog/section-139-presumption-rebuttal-cheque-case" style="color: inherit; text-decoration: underline; text-underline-offset: 2px;">Section 139 presumption and its rebuttal</a>.
• **Reasons.** The order must record why compensation is directed and why in the amount directed. Reasons are what make it reviewable.

Factors that legitimately bear on the discretion include the nature of the transaction, whether the defence appears prima facie plausible or designed to delay, the drawer's conduct in the proceedings, and his financial capacity. Where the drawer is in acute distress, or raises a substantial and particularised dispute about the existence of the debt, a court may decline to order interim compensation at all. Where he has admitted issuance and signature, offered no coherent defence and repeatedly sought adjournments, the record supports an order closer to the ceiling.

How is the quantum decided, and is twenty per cent the norm?

Twenty per cent is a ceiling, not a benchmark. Section 143A(2) says the interim compensation "shall not exceed" twenty per cent of the amount of the cheque, and nothing in the section suggests a presumptive figure below it.

The base is the amount of the cheque, not the amount claimed in the complaint. Where a complaint aggregates the cheque amount with interest, notice costs and incidental claims, the calculation under Section 143A(2) is confined to the instrument. Where several cheques are the subject of a single complaint, the natural reading is that the ceiling attaches to their aggregate; where separate complaints are filed on separate cheques, each carries its own ceiling — so a drawer facing a batch of complaints on one facility should raise the cumulative exposure early, because it can be substantial even where each individual order looks modest.

How long does the drawer have to pay, and what happens if he does not?

Sixty days from the date of the order, extendable by up to thirty days where the drawer shows sufficient cause. The extension is not automatic; it requires an application, a reason, and a judicial direction. The outer limit is therefore ninety days.

On non-payment, Section 143A(5) provides the consequence the section itself contemplates: the amount may be recovered as if it were a fine under Section 421 of the Code of Criminal Procedure 1973, now Section 461 of the Bharatiya Nagarik Suraksha Sanhita 2023. The Negotiable Instruments Act still refers to the Code by its 1973 section numbers, and Section 8 of the General Clauses Act 1897 directs that a reference to a repealed enactment be construed as a reference to the corresponding provision of the re-enacting statute.

That machinery gives two modes, usable together: a warrant for levy by attachment and sale of the defaulter's movable property, and a warrant to the Collector of the district authorising realisation as arrears of land revenue from his movable or immovable property, or both.

Two limits follow. No sentence in default attaches to interim compensation, so non-payment cannot of itself result in imprisonment — the recovery is civil in mechanism even though directed in a criminal proceeding. And whether any *other* coercive consequence may follow — closing the drawer's defence, terminating the trial, refusing to hear the accused — is contested and should not be assumed by either side. Section 143A(5) states the remedy the legislature provided.

What happens to the money if the drawer is acquitted?

It comes back, with interest. Section 143A(4) is mandatory in its terms — where the drawer is acquitted, the court shall direct the complainant to repay, within sixty days of that order and a further thirty on sufficient cause shown by the complainant.

The rate is specified rather than left to discretion: the bank rate published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year. That is the Bank Rate as such, not the repo rate and not a commercial lending rate, and it is fixed by reference to the start of the financial year rather than the date of payment.

For a complainant this carries a planning consequence that is frequently overlooked. Interim compensation is not realised revenue; it is a conditional receipt carrying a contingent liability to repay with interest, and an institution that books it as recovered is misstating its position. Lenders running dishonour portfolios at volume should treat these receipts as provisional internally — a point that sits alongside the documentation expectations set out for banks, NBFCs and ARCs.

Does interim compensation reduce the final fine or compensation?

Yes. Section 143A(6) provides that the fine imposed under Section 138, or the compensation awarded under Section 357 of the Code of Criminal Procedure 1973 — now Section 395 of the Bharatiya Nagarik Suraksha Sanhita 2023 — shall be reduced by the amount paid or recovered as interim compensation.

The set-off runs against the amount ordered on conviction, not against the underlying civil debt as such. That distinction matters where a complainant is also pursuing recovery through another route, because what the criminal court awards and what a civil or tribunal forum decrees are separate quantifications; the wider architecture is set out in the guide to debt recovery in India.

Compounding deserves a line here too. Section 147 makes every offence punishable under the Act compoundable, and most Section 138 matters end in settlement rather than judgment. Where interim compensation has been paid, it should be expressly accounted for in the compounding terms — recorded as paid, adjusted against the settlement figure, and dealt with in the discharge clause. A settlement silent on it invites a second dispute about the same money.

Does Section 143A apply to a cheque dishonoured before September 2018?

Sections 143A and 148 were both inserted by the Negotiable Instruments (Amendment) Act 2018 and came into force on 1 September 2018.

It is settled that Section 143A operates prospectively and is not available where the offence under Section 138 was complete before that date. The offence completes on the drawer's failure to pay within fifteen days of receipt of the statutory demand notice, so the relevant date is the expiry of that fifteen-day period — not the date of the complaint, the plea, or the application. The reasoning turns on character: the section creates a new obligation to part with money while the accused stands presumed innocent, and a provision of that kind is not read as reaching back over completed conduct.

Section 148 has been treated differently, being applied to appeals against conviction even where the underlying complaint was filed before 1 September 2018, on the footing that it attaches a condition to an appellate remedy after a court has already convicted. The distinction is between a payment demanded of a person presumed innocent and a deposit demanded of a person found guilty. The notice and limitation sequence that fixes the date of completion is set out in the note on Section 138 cheque bounce cases.

How does Section 143A differ from Section 148?

The two are routinely conflated. They operate at different stages, on different bases, and in opposite directions on quantum.

One further difference concerns how the discretion is read. In Section 143A the word "may" leaves a genuine choice, exercisable on reasons. In Section 148 the same word is read against the background of a completed conviction, so an appellate court declining to direct any deposit is expected to record why the case is an exception. The default is not the same at the two stages.

Who is "the drawer" when the cheque was issued by a company?

Section 143A(1) empowers the court to order "the drawer of the cheque" to pay. Where the cheque is drawn on a company's account, the company is the drawer. Directors and signatories arraigned under Section 141 of the Negotiable Instruments Act are accused by reason of vicarious liability; they are not, on the face of the instrument, the drawer. Whether a direction under Section 143A can therefore run against a Section 141 accused personally has to be argued on the statutory language rather than assumed in either direction, and it is a live point in most company-cheque complaints. The vicarious-liability framework, including what must be pleaded against an individual director, is dealt with in the note on director liability for a company cheque.

A related complication arises where the drawer company is in insolvency. A Section 138 proceeding against a corporate debtor is caught by the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code 2016, while the natural persons vicariously liable under Section 141 remain prosecutable — so the trial against the company, and any interim-compensation application within it, is suspended while the process against the individuals continues. The boundaries of that freeze are set out in the note on the Section 14 moratorium.

How is an order under Section 143A challenged?

An order granting or refusing interim compensation is ordinarily challenged before the sessions court in revision under Section 397 of the Code of Criminal Procedure 1973 — now Section 438 of the Bharatiya Nagarik Suraksha Sanhita 2023 — or before the High Court under Section 482 of the Code, now Section 528 of the Sanhita. Whether such an order is an "interlocutory order" within Section 397(2), and correspondingly Section 438(2), and therefore outside the revisional jurisdiction, has been argued both ways and should be checked against the current position of the court seized of the matter rather than presumed.

The quality of the order decides the outcome more often than the choice of route. An order that identifies the material, engages with the defence and explains the figure is difficult to disturb. One that recites the plea and awards twenty per cent is not.

A working sequence, and what to put on the record

For a complainant seeking interim compensation:

1. Wait for the plea — file after the drawer pleads not guilty under clause (a), or after charge is framed where clause (b) applies.

2. Anchor the quantum to the amount of the cheque and state the arithmetic, rather than asking for "twenty per cent" in the abstract.

3. Annex the dishonour memo, the demand notice with proof of despatch and service, and any admission of liability in correspondence.

4. Address the discretion expressly — conduct of the proceedings, adjournments sought, material on the drawer's means — and account for any receipt internally as provisional.

For a drawer resisting an application:

1. Insist on a hearing before any order is made, and take the point in writing if one is passed without it.

2. Put the defence on record with documents at that stage — the dispute about consideration, the alleged misuse of a security cheque, the discharge relied on — rather than reserving it for trial.

3. Place financial material on record if capacity is the objection; hardship asserted without particulars carries little weight.

4. If an order is made, diarise the sixty days from its date and apply for the thirty-day extension before it expires, with a stated reason.

5. Where several complaints arise out of one facility, raise the cumulative exposure rather than treating each order in isolation.

What Section 143A does not decide

It does not decide the debt. An order under Section 143A is not a finding that the cheque was issued in discharge of a legally enforceable liability, and it is not a judgment on the Section 139 presumption. It does not convert the complaint into a recovery proceeding, and it does not preclude an acquittal — the architecture of sub-section (4) assumes that acquittal remains a live outcome after payment.

Nor does it displace the civil position. Payment is not an admission, and an acquittal under Section 138 does not extinguish the underlying claim, which may remain pursuable in another forum subject to limitation. What the section does is redistribute the cost of delay: while the trial runs, part of the disputed amount sits with the complainant rather than the drawer, on terms that reverse if the drawer wins.

For definitions of the terms used above, see the legal glossary; for the forums in which these matters are heard, see the note on courts and tribunals. Dishonoured instruments alongside other enforcement routes are covered under debt recovery.

This article is general information on the law as it stands and is not legal advice; whether interim compensation should be ordered, resisted or quantified in a particular matter depends on the pleadings, the record and the facts of the case. Queries may be directed through the contact page.