‘Interim compensation can’t be granted in routine manner’
Excelsior Correspondent
JAMMU, Apr 22: The High Court of Jammu & Kashmir and Ladakh has come down heavily on the “mechanical and routine” grant of interim compensation in cheque bounce cases, making it clear that such orders, if passed without application of mind, cannot stand the scrutiny of law.
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Setting aside an order of the Special Mobile Magistrate, Pulwama, which had directed payment of 10 percent of the cheque amount as interim compensation, the bench of Justice Wasim Sadiq Nargal held that such directions cannot be issued in a cursory or mechanical manner and must be backed by cogent reasoning and judicial application of mind.
“A plain reading of the impugned order revealed a complete absence of reasoning, with the trial court merely reiterating the statutory provision without undertaking any prima facie evaluation of the case. The order is conspicuously silent on any independent judicial assessment”, the High Court noted, terming the approach legally unsustainable.
The High Court emphasized that the use of the word “may” in Section 143-A clearly indicates that the grant of interim compensation is discretionary not mandatory and must be exercised judiciously on a case-to-case basis. It ruled that such discretion cannot be reduced to a routine exercise triggered merely upon denial of guilt by the accused.
The judgment further highlighted that before directing interim compensation, the trial court is duty-bound to undertake a prima facie evaluation of both the complainant’s case and the defence raised by the accused. In the present case, the petitioner had categorically denied issuing the cheques and even questioned the authenticity of the signatures, yet the trial court failed to consider this crucial defence.
Taking note of this lapse, the High Court observed that ignoring such a fundamental defence reflects non-application of mind and defeats the very purpose of judicial discretion envisaged under the law. The High Court also raised concerns over the arbitrary fixation of the quantum of interim compensation.
While the law permits compensation up to 20 percent of the cheque amount, the High Court made it clear that selecting any specific percentage such as 10 percent in the present case must be supported by clear and reasoned justification. In the absence of such reasoning, the order becomes legally untenable.
Reinforcing its stand, the High Court relied on the Supreme Court judgment in Rakesh Ranjan Shrivastava Versus State of Jharkhand, which lays down that courts must record brief reasons, evaluate the merits of the case, and consider factors such as the nature of the transaction and the plausibility of the defence before granting interim compensation.
The High Court also reiterated its earlier ruling that discretionary powers must always be exercised on well-recognized principles and cannot be left unguided or unreasoned, especially when the statute allows a wide range from 1 percent to 20 percent for determining compensation.
Consequently, the impugned order dated March 16, 2026, was quashed, with directions to the trial court to pass a fresh order strictly in accordance with law and after due consideration of all relevant factors. The High Court made it clear that if interim compensation is to be granted, it must be supported by a reasoned order reflecting proper application of mind.
Importantly, the High Court clarified that its observations are confined to the disposal of the petition and should not be construed as an opinion on the merits of the underlying cheque dishonour case.
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