In a significant ruling, the Delhi High Court has held that the condition of depositing 20% of the compensation amount under Section 148 of the Negotiable Instruments Act (NI Act) cannot be imposed in a mechanical manner and must be backed by reasoned justification. Justice Saurabh Banerjee, while deciding two petitions filed by Anuj Ahuja against Sumitra Mittal and Rajesh Mittal, set aside the orders of the Additional Sessions Judge (ASJ), Rohini Courts, which had mandated the deposit as a prerequisite for hearing Ahuja’s appeal.
Background of the Case
The case arose from financial transactions between real estate businessman Anuj Ahuja and the respondents, Sumitra Mittal and her son Rajesh Mittal. The Mittals had extended a loan of Rs. 53 lakh to Ahuja, for which he issued two post-dated cheques amounting to Rs. 25 lakh and Rs. 28 lakh, respectively. Upon presentation, both cheques were dishonored due to insufficient funds, prompting the respondents to initiate proceedings under Section 138 of the NI Act.
The Metropolitan Magistrate, Rohini Courts, convicted Ahuja and sentenced him under Section 138 read with Section 141 of the NI Act on July 1, 2024. Challenging the conviction, Ahuja filed appeals before the ASJ, who, while admitting the appeals, directed him to deposit 20% of the compensation amount as per Section 148 of the NI Act. However, Ahuja sought a waiver of this condition, which was rejected by the ASJ in orders dated January 27, 2025. Consequently, Ahuja approached the Delhi High Court.
Legal Issues and Court’s Observations
The key legal issue before the High Court was whether the ASJ had the discretion to impose a 20% deposit as a blanket requirement or if such an order required specific justification. Ahuja’s counsel, Dr. Amit George, contended that the deposit condition under Section 148 was not an absolute mandate but subject to judicial discretion, especially when the accused demonstrated financial hardship. He argued that the ASJ failed to apply judicial mind and erroneously presumed Ahuja’s financial capacity.
The respondents’ counsel, Mr. F.K. Jha, countered that the deposit was a statutory safeguard ensuring that complainants receive compensation, and Ahuja had neither proved financial incapacity nor challenged the ASJ’s previous orders.
Justice Banerjee, while analyzing Section 148, observed that although the provision empowers appellate courts to direct a deposit, it does not impose a strict obligation. He relied on Supreme Court judgments, including Surinder Singh Deswal v. Virender Gandhi and Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd., which emphasized that courts must provide specific reasons if they choose to impose or waive such a condition.
Key Excerpts from the Judgment
Justice Banerjee noted:
“Any order directing an accused to deposit 20% of the compensation amount must reflect due application of mind and should not be passed mechanically. The exercise of discretion under Section 148 must take into account the financial capacity of the accused, the nature of transactions, and whether such a condition would unjustly deprive the accused of the right to appeal.”
The court further held:
“The appellate court must strike a balance between the rights of the complainant and the accused. Imposing an arbitrary financial burden without assessing the accused’s capacity defeats the purpose of fair adjudication.”
Verdict
The High Court quashed the ASJ’s orders and remanded the matter for reconsideration, directing the appellate court to assess Ahuja’s waiver application afresh in light of the established legal principles. Until then, the previous orders mandating the deposit were stayed.
