The Allahabad High Court has reaffirmed that while imposing the condition of depositing 20% of the compensation amount under Section 148 of the Negotiable Instruments Act, 1881, courts must ensure that such a condition is fair and does not deprive individuals of their right to appeal.
The Court emphasized that the imposition of this condition is not mandatory. Courts have the discretion to reduce or exempt it in appropriate cases, considering the financial circumstances of the appellant.
Legal Framework Under Section 148 NI Act
Section 148(1) of the NI Act states that if an appeal is filed against a conviction for cheque dishonor under Section 138, the appellate court may direct the appellant to deposit at least 20% of the compensation awarded in the trial.
Citing the Supreme Court's rulings in Jamboo Bhandari vs. M.P. State Industrial Development Corporation Ltd. (2023) and Muskan Enterprises and Another vs. State of Punjab and Another (2024), Justice Arun Kumar Singh Deshwal observed:
"While passing orders under Section 148 of the NI Act, courts must ensure that the compensation awarded is neither excessive nor unjust. The deposit condition is not mandatory, and courts have the discretion to reduce or exempt it in exceptional cases. The court must evaluate whether imposing such a condition would deprive the appellant of the right to appeal. Assessing the appellant's financial condition is crucial before passing a final order under this section."
Case Background
The case involved a complaint under Section 138 NI Act filed against the applicant, Rajesh Kumar Gupta, by the opposite party. The applicant was convicted and subsequently filed an appeal. During the appeal proceedings, the trial court ordered the applicant to deposit 20% of the compensation amount as a condition for staying the conviction.
Challenging this order under Section 482 CrPC, the applicant argued that the deposit condition was excessive. The High Court intervened, setting aside the order and directing the appellate court to reconsider the deposit amount. The appellate court was instructed to impose a fresh condition, subject to the applicant depositing 10% of the fine amount.
Upon compliance with the 10% deposit, the applicant sought exemption from depositing the remaining 20%, arguing that the amount was excessive and unjust. The trial court rejected the application, directing the applicant to submit income tax returns (ITR) and financial details from the past five years for consideration.
The applicant challenged this decision, relying on Muskan Enterprises, where the Supreme Court ruled that assessing an appellant’s source of income is unnecessary while determining the justifiability of a 20% deposit.
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High Court’s Observations and Ruling
Justice Deshwal upheld the trial court’s decision, stating that while the applicant had deposited 10% of the compensation, the requirement to submit financial documents was necessary to assess whether the case warranted an exception. The Court observed:
"The trial court's direction to submit financial details aligns with the principle that the imposition of 20% deposit should be fair. The financial condition of the appellant must be evaluated before granting any exemption."
The High Court clarified that appellate courts must ensure that conditions imposed under Section 148 NI Act do not act as an unjust barrier to the right to appeal. The ruling reinforced that while discretion exists, it must be exercised judiciously.
Case Title: Rajesh Kumar Gupta v. State of U.P. and Another [APPLICATION U/S 528 BNSS No. - 7574 of 2025]
Counsel for Applicant: Naman Agarwal, Nipun Singh
