SECTION 148 of Negotiable Instruments ACT- waiver of
pre-deposit IN APPEAL
The
Supreme Court in a matter reported as INSC 1046 ( Criminal Appeal No. 5491/2024
arising out of SLP (Crl) 8072/2024 and captioned as Muskan Enterprises & Anr Vs The
State of Punjab & Anr have comprehensively dealt with the
provisions of the section 148 of Negotiable Instruments Act (In short “NI Act”)
and mandate of the section, besides, permissibility of pre-deposit waiver in
appeal filed by the convicted accused, and situation, if could be considered
for such purposes.
Before
proceeding further, the Section 148 of Negotiable Instruments Act may be
perused for ready reference:
“148.
Power of Appellate Court to order payment pending appeal against conviction.—
(1) Notwithstanding anything
contained in 8 the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal
by the drawer against conviction under Section 138, the Appellate Court may
order the appellant to deposit such sum which shall be a minimum of twenty
per cent of the fine or compensation awarded by the trial Court:
Provided that the amount payable under this
sub-section shall be in addition to any interim compensation paid by the
appellant under Section 143-A.
(2)
The amount referred to in sub-section (1) shall be deposited within
sixty days from the date of the order, or within such further period not
exceeding thirty days as may be directed by the Court on sufficient cause being
shown by the appellant.
(3)
The Appellate Court may direct the release of the amount deposited by
the appellant to the complainant at any time during the pendency of the appeal:
Provided that if the appellant is acquitted,
the Court shall direct the complainant to repay to the appellant the amount so
released, with interest at the bank rate as published by the Reserve Bank of
India, prevalent at the beginning of the relevant financial year, within sixty
days from the date of the order, or within such further period not exceeding
thirty days as may be directed by the Court on sufficient cause being shown by
the complainant.”
LEGAL PERSPECTIVE
What
is significant is that the legislature has used both the verbs ‘may’ and shall’
in sub-section (1) of Section 148, Negotiable Instruments Act, but, in
different contexts. As we read and understand the sub-section, what we find is
that the verb ‘may’, implies discretion; and, if intended to have its natural
meaning, it would refer to the discretion left to the Appellate Court to
determine as to whether such court should order any deposit to be made by the
appellant or not pending hearing of the appeal against the conviction and
sentence recorded by the trial court. What Jamboo Bhandari v. Madhya
Pradesh State Industrial Development Corporation Ltd. and Ors (2023) 10SC 446.
lays down is that deposit may not be ordered if the Appellate Court finds a
case to be exceptional not calling for a deposit and the reasons for not
ordering a deposit are recorded in the order. On the contrary, the verb ‘shall’
used in the same sentence and distanced from the verb ‘may’ by 8 (eight) words,
typically implies an obligation or duty that is referrable to the quantum of
deposit, that is, the deposit, in any case, must not be less than 20% of the
fine or compensation awarded by the trial court. What follows is that once the
Appellate Court is satisfied that a deposit is indeed called for, in an appropriate
case, such court’s power is in no way fettered to call upon the appellant to
deposit more than 20% of the awarded compensation, but in no case can it be
less than 20%. Interestingly, while the proviso to 11 sub-section (1) and
sub-section (2) of Section 148 use ‘shall’ in the relevant context, sub-section
(3) again reverts to ‘may’ and its proviso to ‘shall’. User of the verbs ‘may’
and ‘shall’ in different contexts in the same section is clearly suggestive of
the legislative intent to mean what it said.
The
Supreme Court, while veering around the fact that appellate court implicitly
have discretion in waiving “mandatory pre deposit” since, there may arise
a case before the Appellate Court, when such court may prima facie form
an opinion, even in the course of perusing the impugned order and thus could
reasonably ascertain as to what would be the appropriate quantum of fine or
compensation for a pre-deposit. There may be a situation that, appellate court
may find order of conviction and sentencing of accused by trial Court,
completely erroneous and that in probability in due course, the order recording
conviction and sentencing could be set aside and thus, appellate court may
reasonably come to an opinion that ordering a pre-deposit could be unnecessarily
burdensome for the appellant. If such a firm opinion is formed on the basis of
bare perusal of impugned order and appeal paper book and it may further occur
that the order was passed and sentence recorded after bypassing the mandatory
procedural requirements of the N.I. Act, then, in such situation, saddling the appellant with
pre-deposit may inflict irretrievable injury to the appellant may be severely
prejudicial to the appellant and hence, it could not be fathomed that the
appellate court shall be vested with no discretion. Therefore, when the
conviction order and sentencing is found vitiated prima facie, or the
vital evidence , though, was palpable, but ignored and still further if the
trial court has completely mis-appreciated the evidence, the saddling of
necessity of pre-deposit may inflict incalculable injury to the appellant. Yet
another dimension could be that the compensation awarded by the trial court
could be far excessive and even outrageous, so as to shake judicial conscience,
and thus, in such a situation it cannot be comprehended that appellate court
shall have no discretion as regards waiving pre-deposit. As a court of appeal
the appellate court has to render complete justice and truncating of the power
of appellate court cannot be the object of the section relating to pre-deposit.
The situation as depicted above , according to the Supreme Court is only
illustrative and may be taken as indicative only. The use of the word “may” and
“shall” in the recitation of the words in section 148 also indicates that
discretion is vested in the appellate court as regards waiver of requirement of
pre-deposit and extent of pre-deposit. In the above backdrop and in case
situation as depicted above is noticed, it would amount to a travesty of
justice, if exercise of discretion, which is provided for by the legislature
and in the situation calling for its invocation, is not permitted to be
exercised by the Appellate Court. The judicial interpretation of ‘may’ being
read as ‘shall’ in sub-section (1) of Section 148 cannot therefore be
comprehended. If the aggrieved appellant is forced to make a deposit of minimum
20% of the fine or compensation awarded by the trial court, even when probable
contrary opinion of the Appellate Court shall be contrary to the letter and
spirit of the section 148 of NI Act. It may turn out as t ironical, if the
conviction and sentence is found to be perverse even on the basis of cursory
perusal of order of conviction and sentencing, thus, if it is assumed that despite
overwhelming situation in favour of the appellate, the appellate court shall, still
be denuded with discretion of waiving pre-deposit, it cannot be so understood,
as even the bare perusal of section 148 of NI Act in entirety does not suggest
so. No doubt, in ordinary course, the discretion of the Appellate Court should
lean towards requiring a deposit, depending upon the facts and circumstance in
every individual case, but in a situation when the judgment of trial court and
order of sentencing is found to be perverse, the order of waiving of
pre-deposit and discretion in this regard has to be exercised. As a matter of fact, it is implicit from the
bare recitation of section 148 of NI Act that discretion is vested in the
appellate court, since, the legislature has
used ‘shall’ instead of ‘may’ in sub-section (1) and if the sub- section, read
as a whole, it reveals that ‘may’ has been used twice and ‘shall’ thrice, it
must be presumed that the legislature was well and truly aware of the words
used which form the skin of the language. It is the duty of the Court to cull
out the intention of legislature in Reading and understanding the words used by
the legislature not only in the literal sense, but also in effect. It is the
duty cast on the courts to avoid a situation leading to manifest absurdity. Therefore,
holistic reading of section 148 of the NI Act, itself implies that discretion
as regards pre-deposit or its waiver is available to the appellate court.
The
interpretation of statute depends on the bare text and the context – relegating
the one against other shall defeat the purpose. It is to be understood that the
text represents the texture and the context imparts and the interpretation shall
have to be contextual. No doubt, the legislative intent shall have to be
firstly seen with the prism of legislature and the way it is provided for, but,
the duty is cat on the Court to look into the enactment as a whole and in pith
and substance and each section, each clause, each phrase and each word has to
be understood in the context of what it means and how it is designed to fit
into the scheme of the entire enactment, hence, purposive interpretation is
squarely in the domain of courts. How, the words are to be interpreted and manner
of interpreting a statute could be discerned from the decision of Supreme Court
in Reserve Bank of India v. Peerless General Finance & Investment Co.
Ltd AIR 1987 SC1023. What Jamboo Bhandari (supra) lays down is
that deposit may not be ordered if the Appellate Court finds a case to be
exceptional not calling for a deposit and the reasons for not ordering a
deposit are recorded in the order.
FACTUAL MATRIX
In
Muskan Enterprises (Supra), Shorn of unnecessary details, conviction
for offence punishable under Section 138 of the Negotiable Instruments Act,
1881 had been recorded against the appellants by the Judicial Magistrate, 1st
Class, and resultantly, the proprietor of the first appellant was sentenced to
2 years’ rigorous imprisonment and in addition thereto, under Section 357(3),
Cr. PC. they were directed to pay compensation of Rs.74,00,000/- (double the
cheque amount) to the complainant who was given the liberty to recover the same
from the appellants.
In
appeal before the ld Sessions Court, the ld Sessions Court had suspended the
sentence of appellant till disposal of the appeal and was granted bail. The
appellant was directed to deposit 20% of the compensation amount awarded by the
trial magistrate within a period of sixty days in the court below, being of the
view that such a deposit (of 20%) was imperative. The complainant was given
liberty to withdraw the deposit subject to furnishing an undertaking that the
same would be returned, if the appellants succeeded in the appeal.
Imposition
of such condition by the Sessions Court for deposit of 20% of the compensation
awarded by the trial magistrate was questioned by the appellants before the
High Court in a petition filed under Section 482 of Cr. PC. It is relevant to
point out that at that time Surinder Singh Deswal @ Col. S. S. Deswal vs
Virender Gandhi 2019 (11) SCC 341 was governing the field on
interpretation of Section 148 of the N.I. Act. The said decision held the
condition for deposit in terms of Section 148, Negotiable Instruments Act as
mandatory. In the face of this, the petitioner had to withdraw the petition
from the High Court and accordingly, an order was passed to the effect that the
petition stands dismissed as withdrawn.
The
relevant paragraph of judgment rendered in Surinder Singh Deswal (Supra)
is as under :-
“Now so far as the
submission on behalf of the appellants that even considering the language used
in Section 148 of the NI Act as amended, the appellate court “may” order the
appellant to deposit such sum which shall be a minimum of 20% of the fine or
compensation awarded by the trial court and the word used is not “shall” and
therefore the discretion is vested with the first appellate court to direct the
appellant-accused to deposit such sum and the appellate court has construed it
as mandatory, which according to the learned Senior Advocate for the appellants
would be contrary to the provisions of Section 148 of the NI Act as amended is
concerned, considering the amended Section 148 of the NI Act as a whole to be
read with the Statement of Objects and Reasons of the amending Section 148 of
the NI Act, though it is true that in the amended Section 148 of the NI Act,
the word used is “may”, it is generally to be construed as a “rule” or “shall”
and not to direct to deposit by the appellate court is an exception for which
special reasons are to be assigned. Therefore, amended Section 148 of the NI
Act confers power upon the appellate court to pass an order pending appeal to
direct the appellant-accused to deposit the sum which shall not be less than
20% of the fine or compensation either on an application filed by the original
complainant or even on the application filed by the appellant-accused under
Section 389 CrPC to suspend the sentence. The aforesaid is required to be
construed considering the fact that as per the amended Section 148 of the NI
Act, a minimum of 20% of the fine or compensation awarded by the trial court is
directed to be deposited and that such amount is to be deposited within a
period of 60 days from the date of the order, or within such further period not
exceeding 30 days as may be directed by the appellate court for sufficient
cause shown by the appellant. Therefore, if amended Section 148 of the NI Act
is purposively interpreted in such a manner it would serve the Objects and
Reasons of not only amendment in Section 148 of the NI Act, but also Section
138 of the NI Act. The Negotiable Instruments Act has been amended from time to
time so as to provide, inter alia, speedy disposal of cases relating to the
offence of the dishonour of cheques. So as to see that due to delay tactics by
the unscrupulous drawers of the dishonoured cheques due to easy filing of the
appeals and obtaining stay in the proceedings, an injustice was caused to the
payee of a dishonoured cheque who has to spend considerable time and resources
in the court proceedings to realise the value of the cheque and having observed
that such delay has compromised the sanctity of the cheque transactions,
Parliament has thought it fit to amend Section 148 of the NI Act. Therefore, such
a purposive interpretation would be in furtherance of the Objects and Reasons
of the amendment in Section 148 of the NI Act and also Section 138 of the NI
Act.”
However,
subsequently, the decision of another judgment by coordinate bench of Supreme
Court, reported as Jamboo Bhandari (Supra) was pronounced
and upon consideration of the law laid down in Surinder Singh Deswal
(supra), the bench in Jamboo Bhandari (supra) proceeded to hold
as follows: -
“6. What is held
by this Court is that a purposive interpretation should be made of Section 148
of the NI Act. Hence, normally, Appellate Court will be justified in imposing
the condition of deposit as provided in Section 148. However, in a case 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 of the appellant, exception can be made for the reasons specifically
recorded.
7. Therefore, when
Appellate Court considers the prayer under Section 389 of the Cr. P.C. of an
accused who has been convicted for offence under Section 138 of the N.I. Act,
it is always open for the Appellate Court 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 fine/compensation amount. As
stated earlier, if the Appellate Court comes to the conclusion that it is an
exceptional case, the reasons for coming to the said conclusion must be
recorded.”
The
Second petition u/s 482 Cr.PC was therefore filed by the petitioner/appellant
before the High Court in view of Jamboo Bhandari (Supra), but the
high court did not entertain that being the subsequent petition. The appellant
was before the Supreme Court inter alia on the issue that in the case of the
appellant waiver of pre-deposit while entertaining appeal against the
conviction and sentence ought to have been granted, but not granted by the
Courts below.
That
it may be noted that the decisions in Surinder Singh Deswal (supra)
and Jamboo Bhandari (supra) have been rendered by coordinate
bench of Supreme Court with equal strength. The legal position is also clear
that if a cleavage of opinion is discernible as herein owing to Jamboo
Bhandari (supra), seeking to explain the law by reading a limited
discretion that an Appellate Court has been conferred with by sub-section (1)
of Section 148 of NI Act. The decision of the latter bench is to be considered
as law. Though, in case of conflict of opinion, larger bench ought to be
constituted for arriving at a conclusion.
The
supreme Court in Muskan Enterprises (Supra) has held that a
reference to a larger bench would have been appropriate in view of the
divergent views expressed in the said decisions, yet the later view expressed
in Jamboo Bhandari (supra); was followed by the Supreme Court
while assigning reasons:
“Law is well-settled that user of
the verbs ‘may’ and ‘shall’ in a statute is not a sure index for determining
whether such statute is mandatory or directory in character. The legislative
intent has to be gathered looking into other provisions of the enactment, which
can throw light to guide one towards a proper determination. Although the
legislature is often found to use ‘may’, ‘shall’ or ‘must’ interchangeably,
ordinarily ‘may’, having an element of discretion, is directory whereas ‘shall’
and ‘must’ are used in the sense of a mandatory provision. Also, while the
general impression is that ‘may’ and ‘shall’ are intended to have their natural
meaning, it is the duty of the court to gather the real intention of the
legislature by carefully analysing the entire statute, the section and the
phrase/expression under consideration. A provision appearing to be directory in
form could be mandatory in substance. The substance, rather than the form,
being relevant, ultimately it is a matter of construction of the statute in
question that is decisive”.
In
Muskan Enterprises (Supra) therefore, the impugned order of the High
Court was set aside and the matter was remitted to the Sessions Court to
re-examine the issue of ordering deposit and for passing necessary order.
Whether sufficient ground is made out by the appellants to persuade the
Sessions Court not to order any deposit is left entirely to its discretion and
satisfaction.
Kerala High Court
The
Kerala High Court in Baiju vs. State of Kerala 2023 SCC OnLine Ker 10204,
while dealing with Section 148 of the NI Act and similar circumstances involved
has also held as under:-
“7. In the above Section, it is
clearly stated that the appellate court may order the appellant to deposit such
sum which shall be a minimum of 20% of the fine or compensation awarded by the
trial court. There are two limbs in Section 148(1) of the Negotiable
Instruments Act. First, the appellate court has to decide, whether to order the
appellant to deposit the fine or compensation awarded by the trial court. The
second limb is that, once it is decided to order deposit of fine or
compensation, a minimum of twenty percent of the fine or compensation is to be
ordered to deposited. Therefore, the duty of the appellate court is firstly to
decide whether such a deposit is to be ordered. As observed by the Apex court
in Jamboo Bhandari's case (supra), when an accused applies under S. 389 of the
CrPC for suspension of sentence, he normally applies for grant of relief of
suspension of sentence without any condition. Therefore, when a blanket order
is sought by the appellants, the Court has to consider whether the case falls
within the exception or not. The appellate court while suspending a sentence
cannot pass a blanket order in all cases to deposit 20% of the fine or
compensation without assigning any reason. Moreover, once the court has decided
to order deposit as per Section 148(1) of the Negotiable Instruments Act, the
amount of deposit ordered by the Court can be varied from the minimum 20% of
the fine or compensation to a higher percent of the fine or compensation. That
also shows that a speaking order is necessary. Even if the court is imposing
20% of the fine or compensation as a condition for suspending the sentence, in
the light of the principle laid down by the Apex Court”.
Delhi
High Court
In
Anuj Ahuja Vs Sumitra Mittal CRL.M.C. 1327/2025 , the Delhi High
Court taking note of Jamboo Bhandari (Supra) has held as
under:
“19. In view of the aforesaid,
such an order asking an appellant (like the petitioner herein) to deposit 20%
of the fine or compensation awarded by the learned MM in a complaint under
Section 138 of the NI Act, passed by the appellate Court (like the learned ASJ
herein) while dealing with an appeal under Section 148 of the NI Act, has to
reflect due application of mind as it ought not to be passed mechanically.
Prima facie, therefore, in the considered opinion of this Court for exercising
the discretion and relaxation in exceptional cases, as and when the need so
arises, the appellate Court (like the learned ASJ herein) has to bear in mind
various surrounding circumstances like those relating to the nature of
transaction(s) involved; the relationship(s) inter-se the parties involved; the
quantum of amount involved; the financial capacity of the parties; is the
condition of deposit of 20% imposed upon the an appellant (like the petitioner
herein) going to hamper the right of appeal of such an appellant, particularly,
since the appellant (like the petitioner herein) is going to be called upon to
deposit 20% of the fine or compensation awarded by the learned MM at the very
initial stage itself, without the appellate Court (like the learned ASJ herein)
proceeding to hear the appeal on merits involved, amongst other factors”.
Allahabad High Court
In
Anil Mittal vs State of UP & Anr Neutral Citation No. -
2024:AHC:128997. It is held as under:
“7. From the plain
reading of Section 148 (1) of the N.I. Act, the deposit of 20
percent of the amount of fine/compensation as awarded by the trial court,
appears to be discretionary in nature However, such discretion ought to be
exercised by the Appellate Court in exceptional circumstances. Ordinary, no
appeal could be entertained without the said deposit and proviso to sub-section
(1) of Section 148 of the N.I. Act also provides that if any amount
under Section 143 (A) of the N.I. Act was deposited by the
accused/appellant, the amount which is required to be deposited under Sectio0n
148 (1) of the N.I. Act, is in addition to the same and shall not be
adjusted against the amount already paid during the trial”.
RETROSPECTIVE
APPLICATION OF SECTION 148
Yet
another dimension of appeal under section 148 of Negotiable Instruments Act is
that the provision of the appeal and mandatory pre-deposit shall be
retrospective in operation and thus it implies that the complaint relating to
pre-amendment i.e pre 2018 shall also entails that the amended section 148 of
Negotiable Instruments Act shall apply in case, the complaint was pending
before the amendment.
CONCLUSION
On
the basis of the aforesaid discussion, the prescription of section 148 of
Negotiable Instruments Act, as emerges is that while staying operation of
judgment of sentencing and/or conviction, the appellate court may call upon the
appellant to deposit 20% of the awarded amount by the Magistrate, by way of
fine and/or compensation as a norm, unless, the appellant is able to show
exceptional circumstances entitling him/her to claim waiver of pre-deposit inter
alia on the premises that the impugned order which is appealed against is
so perverse that the same is liable to be set aside and mandatory procedure as
per law is completely ignored by the trial court and/or such exceptional
grounds that may be available to the appellant. As elaborated above, the Section
148 of the Negotiable Instruments Act has been inserted in the statute book by
way of amendment in 2018 and the same is aimed to accord some interim payment
to the successful complainant. Moreover, even if the complainant in the course
of proceedings before the Magistrate is already granted 20% amount as interim
compensation, the same shall not be factored in the pre-deposit in the appellate
court and 20% in addition thereto, as a pre-deposit shall have to be paid. The
amount of pre-deposit so made can be withdrawn by the complainant subject to
furnishing security that in the event of appellant succeeding in appeal, the
amount of pre-deposit so received shall be liable to be returned to the
appellant with due interest thereon as may be ordered. The stipulations as
regards pre-deposit to the extent of 20% of the awarded amount by way of
compensation or fine imposed by the Magistrate is therefore deemed to be a
mandate of law. In fact, the Supreme
Court had ruled in favour of pre-deposit in appeal in a matter reported as Surinder
Singh Deswal (Supra), however, subsequently, in Jamboo
Bhandari (Supra), the Supreme Court has veered around the view that
pre-deposit in appeal u/s 138 of Negotiable Instruments Act is not
mandatory and in case prima facie, exceptional circumstances in favour
of the appellant/ convict existed and if the order in impugned order in appeal is perverse, then,
the requirement of pre-deposit may be waived by the appellate court. Therefore,
after Jamboo Bhandari (Supra) case, the clarity has emerged in
this regard and to reiterate that pre-deposit in appeal is the mandate of law,
unless, exceptional circumstances warranting its waiver is shown to have
existed, in that event, the appellate court can exercise discretion in
favour of the waiver of pre-deposit.
------
Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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