The Madurai Bench of the Madras High Court has held that the requirement to deposit 20% of the compensation amount under Section 148 of the Negotiable Instruments (NI) Act is not an absolute rule. The Court clarified that this percentage can be reduced or even exempted in exceptional cases, provided the appellate court assigns specific reasons for doing so. Consequently, the High Court set aside an order of the Principal Sessions Judge, Kanyakumari, and remanded the matter to consider the petitioner’s claim for exemption.
Background of the Case
The petitioner, Shajin, faced trial for an offence under Section 138 of the Negotiable Instruments Act before the Judicial Magistrate No.II, Kuzhithurai, in STC No.142 of 2018. On December 2, 2025, the trial court convicted the petitioner, sentencing him to six months of simple imprisonment and directing him to pay a compensation amount of $₹ 3,00,000$, with a default sentence of one month.
Aggrieved by the conviction, the petitioner filed an appeal (C.A.No.35 of 2026) before the Principal Sessions Judge, Kanyakumari District at Nagercoil, along with an application for suspension of sentence (Crl.M.P.No.852 of 2026). On April 16, 2026, the lower appellate court granted the suspension of sentence but imposed a condition that the petitioner must deposit 20% of the compensation amount, totaling $₹ 60,000$. The petitioner challenged this specific condition before the High Court.
Arguments of the Parties
The learned counsel for the petitioner argued that the lower appellate court had “mechanically imposed” the condition of a 20% deposit without considering the specific facts of the case. It was contended that the petitioner had already filed an insolvency petition before the concerned court. The petitioner alleged that the respondent/complainant, despite being aware of the insolvency proceedings, misused the cheque. These points were raised as primary grounds in the appeal, but the petitioner claimed they were not considered when the deposit condition was mandated.
No appearance was recorded on behalf of the respondent.
Court’s Analysis
Justice S. Srimathy, presiding over the Madurai Bench, examined the scope of Section 148 of the Negotiable Instruments Act. The Court relied on the Supreme Court’s ruling in Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. and others [2023 (3) MWN (Cr.) DCC 104 (SC)], which established that:
“deposit of 20% of the compensation amount is not an absolute rule and it can be reduced or even exempted in exceptional cases by assigning reasons.”
The High Court also noted the Kerala High Court’s decision in Baiju v. State of Kerala [2023 (3) MWN (Cr.) DCC 140 (Ker.)], which similarly held that reasons must be assigned when directing the deposit of a fine or compensation amount.
The Court observed that there is an “element of application of mind” required while directing such a deposit. Justice Srimathy noted that if an accused makes out a ground for reduction or exemption, the appellate court must consider it before imposing the deposit as a condition for suspending a sentence or granting bail.
Decision
The High Court found that the petitioner had raised a prima facie ground for exemption before the lower appellate court, which was not addressed in a reasoned order. The Court stated:
“The lower appellate court ought to have applied its mind on this ground that was raised by the petitioner and passed a reasoned order. The same has not been done in this case.”
The High Court disposed of the Criminal Original Petition by remanding the matter back to the Principal Sessions Judge, Kanyakumari District at Nagercoil. The lower appellate court has been directed to deal with the issue regarding the sought exemption and pass appropriate orders on its own merits within four weeks from the receipt of the order copy.
Case Details:
- Case Title: Shajin Vs. Gopaladhas
- Case No.: CRL OP(MD).No.9164 of 2026
- Bench: Justice S. Srimathy
- Date: 07.05.2026
