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Deposit of 20% Fine Under Section 148 N.I. Act Is Not an Absolute Rule; Courts Must Consider Exceptional Circumstances: Delhi High Court

31 October 2024 8:50 AM

By: sayum


On October 21, 2024, the Delhi High Court delivered a significant ruling on the applicability of Section 148 of the Negotiable Instruments Act, 1881 (N.I. Act). Justice Neena Bansal Krishna set aside an order requiring the petitioner to deposit 20% of the fine imposed for a conviction under Section 138 of the N.I. Act. The Court emphasized that the deposit requirement under Section 148 is not absolute and that courts may waive this deposit if exceptional circumstances exist.

The petitioner, Rajesh Khanna, had been convicted under Section 138 of the N.I. Act for dishonor of cheques. He subsequently filed four appeals before the Additional Sessions Judge, seeking suspension of his sentence. While granting the suspension under Section 389 of the Code of Criminal Procedure, 1973 (Cr.P.C.), the Additional Sessions Judge also directed the petitioner to deposit 20% of the fine amount within 60 days, as per Section 148 of the N.I. Act.

Aggrieved by this order, Khanna filed petitions under Section 482 Cr.P.C. in the Delhi High Court, arguing that he was not given an opportunity to present his case regarding exemption from the deposit. He contended that his resignation from the directorship of the company before the issuance of the cheques, his unemployment since 2018, and the liquidation of the company justified a waiver of the deposit requirement.

The core issue was whether the deposit of 20% of the fine amount under Section 148 of the N.I. Act is an absolute requirement or if it can be waived in exceptional circumstances. The petitioner argued that the lower court had directed the deposit without hearing his claims of financial hardship and his lack of involvement in the issuance of the cheques.

Relevant Statutory Provisions:

Section 148 of the N.I. Act: Allows courts to direct appellants to deposit up to 20% of the fine or compensation amount as a condition for admitting appeals against convictions under Section 138.

Section 482 Cr.P.C.: Grants inherent powers to the High Court to prevent abuse of process or secure the ends of justice.

The petitioner relied on the Supreme Court rulings in Surender Singh Deswal v. Virender Gandhi and Jamboo Bhandari v. M.P. SIDC Ltd., which established that while Section 148 provides for a 20% deposit, courts must assess whether the imposition of such a condition would be unjust or deprive the appellant of their right to appeal due to financial incapacity or other exceptional circumstances.

Justice Neena Bansal Krishna observed that the deposit of 20% of the fine under Section 148 of the N.I. Act is not an absolute mandate and courts have the discretion to consider waiving this requirement in special cases. The Court referred to the Supreme Court’s judgment in Surender Singh Deswal, which emphasized that the word "may" in Section 148 is generally construed as "shall," but exceptions can be made when special reasons are recorded.

The Court found that the Additional Sessions Judge had directed the deposit without hearing the petitioner’s arguments regarding his resignation from the company before the cheques were issued, his financial incapacity due to unemployment, and the company’s liquidation. The High Court held that these factors constituted exceptional circumstances that warranted reconsideration.

"It is an erroneous presumption that the deposit of 20% of the fine amount is an absolute rule which does not accommodate any exception. Courts must assess whether the imposition of such a condition would deprive the appellant of the right to appeal," the Court noted.

In light of the petitioner’s exceptional circumstances, the Delhi High Court set aside the order requiring the 20% deposit and remanded the matter to the Additional Sessions Judge. The lower court was directed to reconsider the deposit requirement after giving the petitioner an opportunity to present his case. The petitions were accordingly allowed.

Date of Decision: October 21, 2024

Rajesh Khanna v. M/s Olam Agro India Ltd.

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