S.148 NI Act | Appellate Court Has Discretion To Waive Or Order Deposit Of Minimum 20% Fine But It Must Give Reasons: Kerala High Court

Tellmy Jolly

29 March 2024 10:41 AM IST

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S.148 NI Act | Appellate Court Has Discretion To Waive Or Order Deposit Of Minimum 20% Fine But It Must Give Reasons: Kerala High Court

The Kerala High Court has held that the Appellate Court has the statutory discretion to either order a deposit or waive the deposit of the fine or compensation amount under Section 148 of the Negotiable Instruments Act. The Court clarified that since the Appellate Court would be exercising statutory discretion, it would be legally obliged to give reasons for either ordering a deposit or...

The Kerala High Court has held that the Appellate Court has the statutory discretion to either order a deposit or waive the deposit of the fine or compensation amount under Section 148 of the Negotiable Instruments Act. The Court clarified that since the Appellate Court would be exercising statutory discretion, it would be legally obliged to give reasons for either ordering a deposit or waiving the deposit of fine or compensation amount.

While hearing an appeal against conviction for cheque dishonour under Section 138, the Appellate Court may under Section 148 direct the appellant to deposit a minimum of 20% of the compensation or fine amount as awarded by the Trial Court.

The Division Bench comprising Justice A K Jayasankaran Nambiar and Justice Kauser Edappagath on analysing Section 148 NI Act and the Apex Court decisions in Surinder Singh Deswal @ Col. S.S. Deswal and Others v. Virender Gandhi (2019) and Jamboo Bhandari v. M.P.State Industrial Development Corporation Ltd. (2023) laid down the following points:

The Appellate Court while exercising its discretion to order deposit or waive the deposit of fine or compensation amount was legally obliged to furnish reasons indicating that it has exercised it legal discretion as per the objective of the statutory provision.
If Appellate Court directs that fine or compensation amount has to be deposited, then it cannot be less than an amount equivalent to 20 % of the fine or compensation amount awarded by the Trial Court.
If Appellate Court directs that fine or compensation amount of more than 20 % has to be deposited, then it has to give further reasons for ordering such amounts which are in excess of the minimum 20 % fine or compensation amount as ordered by the Trial Court.

In the facts of the case, the appellants in the High Court have challenged the order issued by the Appellate Court (Sessions Court) directing them to deposit a percentage of the compensation amount under Section 148. It was challenged stating that the Appellate Court (Sessions Court) had ordered payment of compensation without giving any reasons.

Analysing the Supreme Court decision in Surinder (supra), the Court stated that the 2018 amendment to Section 148 empowers the Appellate Court to order a deposit of 20 % fine or compensation amount. It stated that even though the term 'may' was used in Section 148, it would be construed as a 'rule' or 'shall' and the Appellate Court only in exceptional cases after recording special reasons could refrain from issuing a direction to deposit the fine or compensation amount as awarded by the Trial Court.

In Jamboo (supra), the Apex Court clarified that normally the Appellate Court would be justified in imposing the condition of depositing a fine/compensation amount under Section 148 NI Act. However, the Court stated that where the Appellate Court feels the condition of a deposit of 20% would be unjust or imposing such a condition would amount to a deprivation of the right of appeal of the appellant, it could make exceptions for specifically recorded reasons. “The Court, in other words, found that in its earlier decision, it had never envisaged the deposit of a minimum of 20% of the fine or compensation awarded by the trial court as an absolute rule which did not accommodate any exception”, stated the Court.

Considering the above Apex Court decisions, the Court stated that the Appellate Court was legally obliged to give reasons while exercising its discretion to order a deposit or waive the deposit of fine or compensation amount as ordered by the Trial Court.

The Court thus set aside the orders issued by the Sessions Court since it did not contain any reasons for ordering the deposit of fine or compensation amount. It also directed the Sessions Court to issue fresh orders while considering the petitions for suspension of sentence submitted by the petitioners.

Counsel for Petitioners: Advocates P Samsudin Panolan, Milan Rachel Mathew, Lira A.B., Nasrin Wahab, M.Shaju Purushothaman, K.S.Rajesh, Jacob George, Sebastian.K.C.