FACTS-The gist of the dispute was that the complainant/respondent No. 2 had registered a complaint under Section 138 N.I. Act against the Appellant/Accused after a cheque amounting to Rs. 2,20,00,000/- was dishonoured by the bank. During the pendency of the proceedings, the complainant moved an application under Section 143A (1) of N.I. Act seeking direction against the accused to pay 20% of the cheque amount as compensation. The trial court allowed the application and directed the Accused to pay Rs. 10,00,000/- to the respondent no.2/complainant as interim compensation. The decision of the trial court was upheld by the High Court. Aggrieved by the High Court's decision, the appellant/accused preferred a criminal appeal before the Supreme Court.

OBSERVATION-The Supreme Court observed that mere filing of the cheque dishonour complaint under the Negotiable Instruments Act would not grant a right to a complainant to seek interim compensation under Section 143A (1) of the N.I. Act, as the power of the court to grant interim compensation, isn't mandatory but discretionary and needs to be decided after prima facie evaluating the merits of the case. The Court laid down the following parameters for exercising the discretion under Section 143A as are:

i. The Court will have to prima facie evaluate the merits of the case made out by the complainant and the merits of the defence pleaded by the accused in the reply to the application. The financial distress of the accused can also be a consideration.

ii. A direction to pay interim compensation can be issued, only if the complainant makes out a prima facie case.

iii. If the defence of the accused is found to be prima facie plausible, the Court may exercise discretion in refusing to grant interim compensation.

iv. If the Court concludes that a case is made out to grant interim compensation, it will also have to apply its mind to the quantum of interim compensation to be granted. While doing so, the Court will have to consider several factors such as the nature of the transaction, the relationship, if any, between the accused and the complainant, etc.

v. There could be several other relevant factors in the peculiar facts of a given case, which cannot be exhaustively stated. The parameters stated above are not exhaustive.

Thus, after finding that the trial court assigned no reasons thereof while directing the accused to pay interim compensation to the complainant, the Supreme Court directed the Trial Court to consider the application for the grant of interim compensation afresh and also directed that the amount of Rs. 10,00,000/- deposited by the appellant will continue to remain deposited with the Trial Court. Accordingly, the appeal was allowed, and the impugned order was set aside.