Case Title: Rajesh Kumar Gupta v. State of U.P. and Another
Application U/s 528 BNSS No. – 7574 of 2025

Legal Context and Background:

This case involves an important interpretation of Section 148 of the Negotiable Instruments Act, 1881 (NI Act), which relates to the appellate court’s power to direct the appellant to deposit a certain portion of the compensation awarded by the trial court in check dishonor cases under Section 138 of the NI Act.

Section 148(1) of the NI Act, as amended by the Negotiable Instruments (Amendment) Act, 2018, provides that:

“Notwithstanding anything contained in the Code of Criminal Procedure, 1973, in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit a minimum of 20% of the fine or compensation awarded by the trial court. Such amount shall be in addition to any interim compensation paid under Section 143A.”

This provision was enacted to discourage frivolous appeals and to secure the interest of the complainant in cheque dishonour cases. However, courts have consistently held that the deposit of 20% compensation is not mandatory, and judicial discretion must be exercised to ensure fairness and justice in individual cases.

Facts of the Case:

• The complainant (Opposite Party No.2) initiated proceedings under Section 138 of the NI Act against the applicant, Rajesh Kumar Gupta, alleging cheque dishonour.
• The applicant was convicted by the Trial Court and sentenced accordingly.
• Aggrieved by the conviction, the applicant preferred an appeal before the appellate court, simultaneously seeking interim protection from the execution of the sentence.
• At the stage of granting interim protection, the Trial Court directed the applicant to deposit 20% of the compensation amount awarded to the complainant.
• The applicant challenged this condition by filing a petition under Section 482 of the CrPC before the High Court, contending that the deposit condition was onerous and unjust.
• The High Court, considering the challenge, set aside the earlier condition and remanded the matter back to the appellate court with the direction that the applicant shall deposit 10% of the fine amount as a precondition.

Subsequent Developments:

• The applicant complied with the High Court’s directive and deposited 10% of the fine.
• Thereafter, he filed an application seeking waiver of the remaining 20% compensation deposit under Section 148 of the NI Act, citing financial hardship and claiming that the amount was excessive and unjust.
• The Trial Court rejected the application, directing the applicant to furnish his Income Tax Returns (ITR) and proof of income for the last five years for evaluating whether he was entitled to exemption from the 20% deposit condition.

Contentions of the Applicant:

• The applicant challenged the Trial Court’s order again, stating that the direction to submit ITRs and income details was irrelevant, especially in light of the Supreme Court’s ruling in:
  • Muskan Enterprises and Another v. State of Punjab and Another (2024), and
  • Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. and Others (2023).
• It was argued that as per these judgments, the financial background of the appellant should not become a prerequisite, and the primary focus must be on whether the deposit condition itself is unjust or prejudicial to the appellant’s statutory right to appeal.

Observations of the High Court:

Justice Arun Kumar Singh Deshwal, while deciding the matter, reaffirmed the principle laid down by the Apex Court that:

“While passing an order under Section 148 of the NI Act, imposition of the 20% deposit condition is not mandatory. It is discretionary, and the court must ensure that the condition is not excessive, unjust, or disproportionate, so as to deprive the appellant of the right to appeal.”

The Court further observed that:

• The object of Section 148 is to balance the rights of the complainant and the appellant.
• In cases where the appellant raises the ground of financial hardship or disproportionate burden, the Court is empowered to examine the factual matrix, including financial capacity, to decide whether the condition should be reduced or waived.
• Therefore, the direction of the Trial Court asking the appellant to file ITRs and details of income over the last 5 years was found appropriate and justified.
• This requirement does not contradict the principles laid down in Muskan Enterprises or Jamboo Bhandari, but rather complements the court’s discretion by equipping it with material to assess whether enforcing the 20% deposit would be unjust.

Judgment:

The Allahabad High Court upheld the order of the trial court, stating that

“The direction to furnish income documents is in consonance with the need to assess the viability and fairness of imposing the statutory deposit requirement. The Trial Court has rightly exercised its discretion and acted within the framework laid down by the Supreme Court.”

Thus, the application filed by the applicant was dismissed, and the applicant was required to submit the financial documents as directed to enable the court to pass a final reasoned order under Section 148 of the NI Act.

Legal Significance:

This judgment is significant in reinforcing that:

1. Section 148 of the NI Act does not impose a mandatory 20% deposit condition on appellants seeking a stay on conviction in check dishonor cases.
2. The court has ample discretion to reduce, waive, or vary the condition depending on the facts and circumstances of each case.
3. While deciding such applications, the court may call for financial documents to ensure that judicial discretion is exercised transparently and judiciously, especially when financial incapacity is pleaded.

This decision provides further judicial clarity and safeguards the constitutional right to appeal while also securing the complainant’s interest in recovery.