Direction To Deposit 20% Amount U/S. 148 NI Act Not Absolute Rule; Discretion Lies With Appellate Court: Gujarat High Court

The High Court was hearing a revision application challenging an order passed by the first appellate court directing the applicants to deposit 20% of the compensation amount awarded.

A Bench comprising Justice R. T. Vachhani, while hearing the matter, observed that, “the direction to deposit minimum 20% amount is admittedly not an absolute rule, but is subject to discretion which is to be exercised by the first appellate court, keeping in mind the very provision of Section 148 of the N.I. Act.”

Advocate Vicky B. Mehta appeared for the petitioners, while H. K. Patel, Additional Public Prosecutor, represented the respondents.

Background

The petitioners had filed an appeal before the appellate court challenging their conviction and sentence under Section 138 of the Negotiable Instruments Act. Along with that, they filed an application seeking suspension of the sentence under Section 389(3) of the Code of Criminal Procedure. The appellate court had allowed the suspension of the sentence but subsequently directed the appellants to deposit 20% of the compensation amount as per Section 148 of the NI Act.

Aggrieved by the order, the petitioners approached the Gujarat High Court, contending that once the suspension of sentence had been granted, the subsequent order requiring them to deposit 20% of the compensation was not permissible.

The petitioners further argued that the appellate court had misconstrued Section 148 as mandatory, ignoring that the term “may” reflects discretion.

Court’s Observations

The Gujarat High Court, while deciding the matter, examined the scheme of Section 148 of the NI Act and referred to the judgments of the Supreme Court in Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Ltd. and Muskan Enterprises v. State of Punjab.

The Bench noted that the Supreme Court, in Jamboo Bhandari, had clarified that while the appellate court would ordinarily be justified in directing the deposit of 20% of the fine or compensation, exceptions could be made where imposing such a condition would be unjust or would deprive the appellant of the right to appeal. However, the Apex Court had clarified, such exceptions must be supported by recorded reasons.

The High Court further noted that in Muskan Enterprises, the Supreme Court had harmonised the apparent inconsistency between the terms “may” and “shall” in Section 148(1). Reproducing the relevant part of the Apex Court’s interpretation, the High Court observed that while “may” indicates discretion on whether to order a deposit, “shall” applies to the quantum, mandating that once such a deposit is ordered, it must be a minimum of 20% of the compensation.

The Court elaborated that the legislative intent behind Section 148 was to ensure that complainants in cheque dishonour cases receive some relief during the pendency of appeals, but the exercise of discretion should remain sensitive to the facts and fairness of the case.

The Court further clarified that the appellate court’s jurisdiction to order a deposit under Section 148 continues as long as the appeal is pending and may be invoked even after suspension of sentence if warranted by circumstances.

Conclusion

The Gujarat High Court concluded that the first appellate court had not exceeded its jurisdiction in directing the appellants to deposit 20% of the compensation amount, since the discretion to impose such a condition lies within the ambit of Section 148 of the NI Act.

Finding no illegality in the order, the Court accordingly dismissed the revision application.

Cause Title: Mahadev Enterprise & Another v. State of Gujarat & Another (Neutral Citation: 2025:GUJHC:58000)

Appearances

Petitioner: Vicky B. Mehta, Advocate.
Respondents: H. K. Patel, APP; Nrup H. Panchal and Parichay N. Ashar, Advocates.

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