In Exceptional Cases Only: Appellate Courts May Waive the Mandatory 20% Deposit Under Section 148 NI Act.

The petitioner was convicted by the Additional C.J.M., Barpeta, under Section 138 of the Negotiable Instruments (N.I.) Act for the dishonor of a ₹10 lakh cheque and sentenced to six months imprisonment with a compensation of ₹15 lakhs

On 20.05.2025, the Appellate Court stayed the sentence subject to the petitioner depositing 20% of the compensation amount within 60 days, as per Section 148 of the N.I. Act

The petitioner challenged this condition before the High Court, contending that the statutory demand notice was sent to an incorrect address and the cheques were stolen

1. Whether the Appellate Court is mandatorily required to order a minimum 20% deposit of the fine/compensation for staying a sentence under Section 148 of the N.I. Act

2. Whether the petitioner established "exceptional circumstances" to waive the statutory requirement of a 20% deposit

The court primarily applied Section 148 of the N.I. Act, which empowers Appellate Courts to order a minimum deposit of 20% of the fine/compensation

It relied on S.S. Deswal v. Virender Gandhi, which established that "may" in Section 148 should generally be construed as "shall"

It further integrated the principles from Jamboo Bhandari v. M.P. State Industrial Development Corp. and Muskan Enterprises v. State of Punjab, which identified five illustrative "exceptional circumstances" (such as perversity, lack of procedural adherence, or outrageous compensation) where the deposit requirement may be waived to prevent a travesty of justice

The Court noted that the Trial Court found the demand notice was sent to the petitioner's correct official/residential address and that the petitioner had admitted her signature on the cheque, triggering statutory presumptions

Regarding the "stolen cheque" defense, the Court observed that the petitioner had failed to initiate any legal proceedings regarding the alleged theft

Applying the Muskan Enterprises criteria, the Court found that the conviction did not lack procedural adherence, was not an ipse dixit (unsupported assertion) of the judge, and the compensation was not disproportionate. Consequently, the petitioner failed to demonstrate any "exceptional case" that would justify departing from the standard "rule" of mandatory deposit

The High Court dismissed the petition and directed the petitioner to pay the 20% deposit immediately, noting that the statutory 90-day maximum period for deposit had already expired, and authorized the Appellate Court to take coercive measures if the petitioner failed to comply