20% Pre-Deposit Under Section 148 NI Act Not Mandatory

Section 138 of the Negotiable Instruments Act (NI Act)
Anuj Ahuja vs. Sumitra Mittal & Anr.

Facts

• The petitioner, Anuj Ahuja, was convicted under Section 138 of the Negotiable Instruments Act (NI Act) for dishonouring two cheques of ₹25,00,000 and ₹28,00,000.

• He appealed under Section 148 NI Act, and the Additional Sessions Judge (ASJ) admitted his appeals but conditioned the suspension of sentence on depositing 20% of the compensation awarded.

• Ahuja sought a waiver of this deposit, arguing that it was imposed mechanically and amounting to a bar on his right to appeal, and that the ASJ had erroneously assessed his financial capacity by attributing a saree business to him which actually belonged to the respondent.

Legal Issue

• Whether the requirement to deposit 20% of compensation under Section 148 NI Act is mandatory or discretionary, and whether imposing it in this case violated the appellant's right to appeal.

Judgment – Key Holdings

• The Delhi High Court, through Justice Saurabh Banerjee, held that the 20% deposit requirement is not mandatory. It must be imposed only at the discretion of the appellate court and based on sound judicial reasoning, not mechanically.
  

• Factors that the appellate court must duly consider include:

  • Nature of transaction

  • Relationship between parties

  • Quantum of amount involved

  • The appellant’s financial capacity

  • Potential prejudice from deposit requirement effectively depriving the right to appeal
    

• The High Court found that the ASJ had not applied the requisite judicial discretion or spelled out reasons for imposing the deposit, and had simply presumed the petitioner’s capacity based on flawed assumptions.
  

• Consequently, the High Court set aside the ASJ’s orders and remanded the waiver applications for fresh consideration, with instructions to assess them based on proper criteria.
  

3 Key Takeaways

1. Section 148 NI Act – Deposit is Discretionary
   The appellate court must not impose a deposit as a fixed condition; it must consider the specific facts and grant relief in appropriate cases.

2. Right to Appeal Must Be Protected
   Conditioning the suspension of a sentence with a deposit could impair the right to appeal if imposed unfairly or without consideration of circumstances.

3. Judicial Discretion Requires Real Application of Mind
   Courts must articulate reasons when imposing deposit conditions—nothing should be done mechanically or based on wrongful inferences.
   

Learning Points

Aspect Insight Principle of Law The 20% deposit under Section 148 is not automatic, but subject to discretionary judicial evaluation. Judicial Approach Courts must assess financial capacity, nature of dispute, relationship, and potential prejudice before mandating deposit. Outcome in This Case Orders imposing deposit were set aside; applications remanded for re-evaluation applying proper discretionary standards.