While upholding an order whereby an accused was ordered to pay 20% of the cheque amount as interim compensation in a case pertaining to the Negotiable Instruments Act (NI Act), the Allahabad High Court has held that merely because the accused has taken a defence that the cheques were misused does not automatically exclude the complainant from seeking interim compensation under Section 143A.

The High Court was considering an application filed under Section 528 BNSS for quashing an order passed by the Court of Sessions Judge as well as the order passed by the Special Court, 138 N.I. Act, Gautam Buddh Nagar arising out of a case registered under Section 138 of N.I. Act, 1881.

The Single Bench of Justice Jai Krishna Upadhyay held, “At the stage of consideration of an application under Section 143A N.I. Act, the Court is not required to conduct a detailed appreciation of evidence as if deciding the final complaint on merits. The defence sought to be raised by the accused regarding the alleged misuse of cheques is essentially a matter of trial and can only be adjudicated upon after evidence is led by the parties. Merely because the accused has taken a defence that the cheques were misused does not automatically exclude the complainant from seeking interim compensation.”

Advocate Shubham Kumar Yadav represented the Applicant, while Government Advocate represented the Opposite Party.

Factual Background

The complainant filed a complaint under Section 138 of the Negotiable Instruments Act alleging that the accused-applicant, engaged in the real estate business, had a liability of Rs 10 lakh towards the complainant. To discharge this liability, three cheques were issued (amounting to Rs. 3,00,000, Rs. 6,00,000, and Rs. 1,00,000), which were dishonoured upon presentation with the remarks "Funds Insufficient" and "Account Inoperative". Following this, an application under Section 143-A of the Negotiable Instruments Act was filed by the complainant seeking interim relief as per the said provision of law. The Trial Court directed the accused to pay 20% of the cheque amount (Rs. 2,00,000) as interim compensation within two months, which was subsequently upheld by the Revisional Court.

Reasoning

Referring to Section 143-A, which deals with the power to direct interim compensation, the Bench reiterated that while the power under Section 143-A is discretionary, the Court is only required to consider the 'prima facie' merits of the complaint and the defence raised.

The Bench also highlighted how legal jurists explain the term 'prima facie' not as a final standard of absolute proof, but as a threshold ensuring that a claim has enough legal merit to proceed to trial and shift the burden of proof. Applying the 'prima facie' standard to the facts, the Bench held that the Trial Court had rightly observed that the cheques in question admittedly belonged to the accused. The signatures on the cheques were not disputed, and the accused had already been summoned. The notice under Section 251 of the Cr.P.C. remained pending for a considerable time. Considering the fact that the bank statements of the accused-applicant showed that his account was already inoperative and out of money, the Bench held that this fact made his defence that the said cheques were misused, highly improbable.

“Further, the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act continue to operate unless rebutted during the trial”, it stated while further adding, “The complaint discloses the nature of the liability and the issuance of the cheques thus, the 'prima facie' ingredients necessary for the exercise of power under Section 143-A N.I. Act stood satisfied.”

The Bench further found that the Trial Court properly considered the pendency of the complaint, the nature of the allegations, and the admitted signatures on the cheques. “In the considered opinion of this Court, the impugned orders neither suffer from perversity nor from any jurisdictional infirmity”, the Bench held while dismissing the application.

Cause Title: Rahul Yadav v. State of U.P. and Another (Neutral Citation: 2026:AHC:124646)

Appearance

Applicant: Shubham Kumar Yadav, Shubhendu Mishra

Opposite Party: Government Advocate

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Allahabad High CourtJustice Jai Krishna Upadhyay

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.