S. 148 NI Act | Condition Imposing 20% Deposit Of Compensation Must Not Be Unjust Or Deprive Right To Appeal: Allahabad High Court

The Allahabad High Court has reiterated that while passing an order imposing the condition of depositing 20% of the compensation amount under Section 148 of the Negotiable Instruments Act, the court has to consider that such a condition won't be unjust or would deprive the individual's right of appeal. 

In doing so the court said that the imposition of the condition is not mandatory and the court has the discretion to reduce or exempt it in appropriate cases. 

Section 148(1) provides that notwithstanding anything contained in the CrPC when an appeal is to be filed against conviction for cheque dishonour under Section 138 NI Act, the Appellate Court may order the appellant to deposit a minimum of 20% of the compensation awarded in proceedings under Section 138.

Referring to decisions of the Supreme Court in Jamboo Bhandari vs M.P. State Industrial Development Corporation Ltd. and others (2023) and Muskan Enterprises and Another Vs. State of Punjab and Another (2024), Justice Arun Kumar Singh Deshwal said: 

“Though, it is correct in view of the law laid down by the Apex Court...that while passing order u/s 148 of the Act, 1881, direction for awarding compensation should not be excessive or unjust and it is not mandatory to impose condition of deposit, 20% of compensation and court has discretion to reduce or exempt in appropriate cases. Therefore, while passing order u/s 148 of the Act, 1881, court has to consider that condition of deposit of 20% will not be unjust but also, the fact whether the imposing condition would amount to deprivation of the right of the appeal of the appellant. Therefore, for passing final order u/s 148 of the Act, 1881, court can gather the required facts regarding financial condition of the appellant". 

Opposite party no.2 filed a complaint against the applicant under Section 138 of the NI Act. Applicant was convicted and filed an appeal against the conviction. At the time of granting interim protection, the Trial Court directed the applicant to deposit 20% of the compensation awarded to the opposite party.

Applicant challenged that order under Section 482 of CrPC where the order was set aside and case was remanded back to the appellate court to pass fresh order subject to deposit of 10% of the fine. Depositing 10% of the fine, as directed by the High Court, the applicant filed an application seeking waiver for depositing 20% of the compensation as the amount was huge and unjust for stay the conviction order.

The application filed by the petitioner was rejected and the applicant was directed to file his ITR and source of income for the last 5 years for consideration as an exception to the 20% deposit rule. Applicant challenged this order on relying on the judgment of the Apex Court in Muskan Enterprises and Another Vs. State of Punjab and Another, where filing sources of income was irrelevant and the Trial Court ought to have decided whether the 20% deposit was unjust or not.

Justice Deshwal observed that though 10% of the compensation had been deposited by the applicant, for determine the application of exception, the Trial Court has asked his to file his source of income, ITR for the last 5 years. It held that the order of the Trial Court was right in view of the decisions of the Apex Court.  

Accordingly, upholding the order of the Trial Court, the Court held that while passing final order under Section 148 of the NI Act, the Court must consider whether the condition of 20% deposit is unjust or not.

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

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