Cheque Dishonor | Conviction Alone Not Sufficient For Appellate Court To Seek 20% Deposit, Must Consider Attending Circumstances: Delhi HC

The Delhi High Court has observed that a conviction under Section 138 of the Negotiable Instruments Act for dishonour of cheque cannot itself qualify as a reason for an Appellate Court to direct the accused to deposit 20% of fine or compensation under Section 148 NI Act. It stated that the Appellate Court has to consider various circumstances such as the nature of transaction, relationship between parties involved, quantum of amount and financial capacity of parties.The Court further noted that the Appellate Court also needs to consider whether the condition of deposit would hamper the right of appeal of such an appellant since the deposit would be made at an initial stage, without the Appellate Court proceeding to hear the appeal on merits. Justice Saurabh Banerjee was considering the petitioner's plea to quash two orders passed by the Additional Sessions Judge (ASJ), wherein the petitioner's applications seeking waiver of deposit of 20% of the compensation amount to suspend two orders of sentence passed by Magistrate under Section 138 of NI Act was dismissed. The petitioner was convicted by the Magistrate under Section 138 NI Act for dishonor of cheques. The petitioner then filed appeals under Section 148 NI Act before the ASJ challenging the orders of convictions and sentences. The ASJ granted suspension of the sentences subject to the deposit of 20% of the compensation amount in both cases. The petitioner then filed two applications before the ASJ seeking waiver of deposit of 20% of the compensation amount. However, the ASJ dismissed the said applications. The petitioner thus filed the present petition challenging ASJ's orders. He contended that the ASJ erred in treating the condition of 20% deposit of the compensation amount under Section 148 of the NI Act as an absolute and mandatory requirement. He submitted the condition to deposit is discretionary in nature, which has to be exercised by the Appellate Court depending upon the specific circumstances of each case. The High Court remarked that an order directing deposit of 20% of the fine or compensation must reflect due application of mind and should not to be passed mechanically.The Court relied on Jamboo Bhandari vs MP State Industrial Development Corporation Ltd (2023 LiveLaw (SC) 776), where the Supreme Court observed that deposit of minimum 20% amount under Section 148 of NI Act as a condition to suspend sentence is not an absolute rule and that the appellate court has to consider whether it is an exceptional case which warrants grant of suspension of sentence without imposing the condition of deposit of 20% of the compensation amount. It further relied on a Kerala High Court judgment in Baiju v State of Kerala (2023 LiveLaw (Ker) 712), where it was observed that the appellate court has to pass a 'speaking order' by applying its mind for ordering deposit of minimum 20% compensation/fine under Section 148 of NI Act as a condition to suspend sentence. The Court thus observed that any order of deposit by the appellate Court is not mandatory and that it is open to exercise of discretion and relaxation in exceptional cases. Here, the Court noted that the ASJ passed the orders based on the premise that presumption in the NI Act and detailed judgment of conviction against the petitioner established a prima facie case in favour of the complainant. The ASJ recorded that as the petitioner has a saree business in Chandni Chowk, Delhi, it indicated that he has the financial capacity to deposit 20% of the compensation amount.Pursuing the ASJ's order, the Court opined that the reasoning of the ASJ was not sufficient to direct the petitioner to deposit the amount. The Court observed that neither the presumptions in the NI Act nor the appellant being pronounced as 'guilty' could be held sufficient for calling upon any such 'guilty' person to deposit the 20% of compensation amount. It stated that since the appeal by the petitioner is pending, he cannot be directed to deposit the amount as it would amount to pre-judging his case. “I say so, since neither the presumptions of/ in the NI Act nor the appellant being pronounced as “guilty”, per se, can be held sufficient for calling upon any such “guilty” like the appellant thereto/ petitioner herein to deposit the 20% of compensation amount as awarded by the learned MM at the very threshold of the appeal itself. Similarly, since vide a detailed judgment passed by the learned MM, has convicted the appellant (like the petitioner herein) and is pronounced as “guilty” cannot qualify to be a reason, necessarily not a sufficient one, since the appeal thereagainst is already pending adjudication/ disposal before the very same learned ASJ and doing so will tantamount to pre-judging the case of the appellant.”The Court also noted that the ASJ wrongly recorded that the petitioner was in saree business. With these observations, the Court quashed the ASJ's orders. Case title: Anuj Ahuja vs. Sumitra MittalCitation: 2025 LiveLaw...

Cheque Dishonor | Conviction Alone Not Sufficient For Appellate Court To Seek 20% Deposit, Must Consider Attending Circumstances: Delhi HC

Sanjana Dadmi

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