The court's failure to evaluate the merits prima facie in interim compensation applications violates procedural requirements under the NI Act.

ORDER

The petitioner is the accused in S.T.No.932/2021 on the file of the Judicial First Class Magistrate Court, Erattupetta (for short “Trial Court”), which has been filed by the 1^st respondent alleging the commission of the offence publishable under Section 138 of the Negotiable Instruments Act (for short “NI Act”). During the pendency of the complaint, the 1^st respondent filed C.M.P.No.423/2024 before the Trial Court under Section 143A of the NI Act for a direction to the petitioner to pay interim compensation. Although the petitioner filed her objections to the said application, by the impugned Annexure A4 order, the learned Magistrate had allowed the application, directing the petitioner to deposit Rs.30,000/- as interim compensation within 60 days from the date of the order. Annexure A4 order is ex facie erroneous and unsustainable in law. The learned Magistrate has not considered the law in its proper perspective. Hence, the impugned order may be set aside.

2. I have heard the learned counsel for the petitioner and the learned Public Prosecutor. All though service of notice is completed on the 1^st respondent, there is no appearance.

3. The learned counsel for the petitioner submits that, Annexure A4 order is ex facie untenable, especially in view of the law down by the Hon'ble Supreme Court in Rakesh Ranjan Shrivastava vs. State of Jharkhand ( 2024 (2) KHC 481 ) wherein it is categorically held that the Trial Court should prima facie evaluate the merits of the application and objection and give reasons for ordering interim compensation. In the impugned order, the Trial Court has not found that there is a prima facie case in favour of the complainant or stated any reason for ordering interim compensation. Moreover, this Court has already stayed the impugned order. Therefore, this Court may set aside Annexure A4 order and direct the Trial Court to consider and dispose of the complaint expeditiously.

4. The 1^st respondent had filed the application under Section 143A of the NI Act for interim compensation. Although the petitioner objected to the said application, the Trial Court has allowed the application by the impugned order.

5. In the above context, it is apposite to refer the law laid down in Rakesh Ranjan Shrivastava's case (supra), which reads as follows:-

“16. When the court deals with an application under Section 143A of the N.I. Act, 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 under sub-section (1) of . The presumption under Section 139 of the N.I. Act, by itself, is no ground to direct the payment of interim compensation. The reason is that the presumption is rebuttable. The question of applying the presumption will arise at the trial. Only if the complainant makes out a prima facie case, a direction can be issued to pay interim compensation. At this stage, the fact that the accused is in financial distress can also be a consideration. Even if the Court concludes that a case is made out for grant of interim compensation, the Court will have to apply its mind to the quantum of interim compensation to be granted. Even at this stage, the Court will have to consider various factors such as the nature of the transaction, the relationship, if any, between the accused and the complainant and the paying capacity of the accused. If the defence of the accused is found to be prima facie a plausible defence, the Court may exercise discretion in refusing to grant interim compensation. We may note that the factors required to be considered, which we have set out above, are not exhaustive. There could be several other factors in the facts of a given case, such as, the pendency of a civil suit