20% pre-deposit condition must not deprive right to appeal in cheque bounce cases: Delhi HC on NI Act's Section 148, Read Judgment

"An order directing the deposit of compensation by the appellate Court is not absolute; it must be based on judicial discretion and applied in exceptional cases."- Delhi HC

Emphasizing the need for judicial discretion, the Delhi High Court examined whether the requirement of 20% deposit of the compensation amount as a precondition for suspending the sentence, was applied mechanically or based on sound legal principles. The dispute arose from a financial transaction where the petitioner, Anuj Ahuja, challenged the dismissal of his plea for waiver of this requirement. The Court’s examination focused on whether the lower court had properly exercised its discretion in light of statutory provisions and established judicial precedents.

The petitioner, Anuj Ahuja, filed petitions under Section 528 of the Bhartiya Nagrik Suraksha Sanhita, 2023, seeking to quash two orders dated 27.01.2025, passed by the ASJ, Rohini Courts, Delhi. The ASJ had dismissed his request to waive the 20% deposit of the compensation amount required to suspend his sentence.

The dispute arose from two financial transactions where the petitioner allegedly took a ₹53,00,000 loan from the respondents, Rajesh Mittal and Sumitra Mittal. The petitioner issued two post-dated cheques as security, which later bounced. The respondents filed cases under Section 138 of the Negotiable Instruments Act (NI ACT), and the MM convicted the petitioner on 01.07.2024.

The petitioner appealed, and on 07.08.2024, the ASJ admitted the appeals but required a 20% deposit of the compensation amount. The petitioner failed to comply and later sought a waiver, which was rejected on 27.01.2025, leading to the present petitions.

The petitioner, represented by Dr. Amit George, argued that the ASJ erred in treating the 20% deposit requirement as mandatory rather than discretionary. He contended that the appellate court must exercise its discretion based on the specific facts of each case.

The petitioner further alleged that the ASJ wrongly assessed his financial capacity by assuming he owned a saree business, which actually belonged to respondent Sumitra Mittal. This misjudgment, he claimed, led to an unjust financial burden, effectively depriving him of his right to appeal.

Relying on Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd., and other precedents, the petitioner argued that the requirement of deposit should not be absolute. He maintained that imposing such a financial burden without considering his ability to pay amounted to irreparable harm and injury.

Contentions of the Respondent:

The respondents, represented by Mr. F.K. Jha, defended the impugned orders, arguing that the deposit requirement under Section 148 of the NI Act serves as a safeguard for complainants in cheque dishonor cases. He contended that the petitioner had failed to prove any genuine financial incapacity, and mere claims of hardship were insufficient grounds for exemption.

Mr. Jha further asserted that the petitioner deliberately delayed compliance with court orders dated 07.08.2024 and 23.09.2024. He argued that the current petitions were a delaying tactic to evade financial liabilities rather than a genuine legal challenge.

The respondents pointed out that the petitioner never challenged the ASJ's earlier orders mandating the 20% deposit. By not contesting those orders, the petitioner had effectively accepted them, making the present petitions legally untenable.

Mr. Jha maintained that the Jamboo Bhandari precedent was inapplicable since the ASJ had exercised judicial discretion appropriately, and the pre-deposit condition was imposed per legal provisions.

The Court noted that Section 148 of the NI Act was introduced to ensure "speedy disposal" of cheque dishonor cases while also preventing "dilatory tactics exercised by a party who has already been pronounced as ‘guilty’" by the Trial Court. However, the provision also provides the appellant a means to proceed with the appeal, subject to depositing "a minimum of twenty per cent of the fine or compensation awarded by the trial Court."

The Court emphasized that the appellate Court’s discretion under Section 148 is evident from the wording, which states that the appellate Court "may order the appellant to deposit" the required amount. The Court clarified that "any order of deposit by the appellate Court is not compulsory and/or mandatory and should reflect the exercise of discretion and relaxation in exceptional cases." The Court stressed that such an order must not be passed mechanically and should consider "various surrounding circumstances" such as the financial capacity of the appellant and whether the deposit would "hamper the right of appeal."

Referring to Surinder Singh Deswal (2019) and Jamboo Bhandari, the Court observed that while the condition of deposit is generally justified, an exception can be made where the appellate Court is "satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal." The Court further cited the Kerala High Court’s ruling in Baiju v. State of Kerala, which held that an appellate Court "cannot pass a blanket order in all cases to deposit 20% of the fine or compensation without assigning any reason" and that a "speaking order is necessary."

Turning to the case at hand, the Court scrutinized the reasoning provided by the ASJ in the impugned orders. The ASJ had denied the appellant's request for waiver, citing that "prima facie case is clearly made out in favour of respondent/complainant" and that the appellant had the "financial capacity to deposit 20% of the compensation amount." The Court observed that these orders were largely premised on the statutory presumptions under the NI Act rather than a proper application of judicial discretion.

Given the above, the Court found it necessary to examine whether the ASJ had exercised discretion in accordance with the principles laid down in Surinder Singh Deswal and Jamboo Bhandari or had mechanically imposed the deposit requirement without adequately considering the appellant’s circumstances.

The impugned orders dated 27.01.2025, passed by the learned ASJ, were set aside, and the applications in appeals C.A. No.139/2024 (Anuj Ahuja vs. Sumitra Mittal) and C.A. No.138/2024 (Anuj Ahuja vs. Rajesh Mittal) were remanded for fresh consideration in accordance with the established position of law.

It was further clarified that the earlier orders dated 07.08.2024 and 23.09.2024 were not to be given effect by the learned ASJ until the disposal of the applications seeking a waiver of the deposit of 20% of the compensation amount for suspending the sentences dated 08.07.2024 in Ct. Cas. No.2196/2020 and Ct. Cas. No.2197/2020, passed by the learned MM. Consequently, the present petitions were allowed as per the stated terms.

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