Mandatory 20% Deposit Under Section 148 NI Act Relaxed Only in Rare, Exceptional Circumstances

The respondent filed a complaint under Section 138 of the Negotiable Instruments (N.I.) Act alleging that a cheque for Rs. 10 lakhs issued by the petitioner was dishonoured due to a signature mismatch

The Trial Court (Additional C.J.M. Barpeta) convicted the petitioner on 22.04.2025, sentencing her to six months imprisonment and ordering compensation of Rs. 15 lakhs

The petitioner appealed to the Sessions Court. On 20.05.2025, the Appellate Court admitted the appeal and 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 conditional stay before the High Court, contending that the demand notice was sent to the wrong address and that the cheques were stolen

1. Whether the Appellate Court is mandatorily required to order a minimum deposit of 20% of the fine/compensation under Section 148 of the N.I. Act, or if it can waive such a condition in exceptional circumstances

2. Whether the petitioner’s case presents "exceptional circumstances" justifying a waiver of the 20% deposit requirement

The court applied Section 148 of the N.I. Act (as amended in 2018), which empowers Appellate Courts to order a minimum deposit of 20% of the fine or compensation

Following S.S. Deshwal v. Virender Gandhi, the court noted that "may" in Section 148 is generally construed as a "rule" or "shall," making the deposit a mandatory requirement unless special reasons are assigned

The court further integrated the "exceptional circumstances" window established in Jamboo Bhandari v. M.P. State Industrial Development Corp. Ltd.

The court specifically relied on the illustrative criteria from Muskan Enterprises v. State of Punjab, which identifies perversity, failure to follow mandatory procedures, or outrageous compensation as grounds for waiver

The High Court examined the Trial Court’s findings to determine if the petitioner met the "exceptional circumstances" threshold. Regarding the demand notice, the court observed that the Trial Court had correctly evaluated evidence showing the petitioner's official and residential addresses were identical and that the notice was sent via registered post to that correct address

The court noted the petitioner failed to initiate any legal proceedings regarding the allegedly "stolen" cheques, which weakened the claim of perversity in the conviction

Applying the Muskan Enterprises test, the court found no evidence that the Trial Court's judgment was an ipse dixit (unsupported assertion) or that it suffered from a failure to appreciate evidence. Since the signature was admitted, the statutory presumption was properly invoked

Consequently, the petitioner failed to demonstrate any rare or fit circumstance to bypass the 20% deposit rule

The court answered that while Section 148 allows for discretion, the 20% deposit remains the norm. The petitioner was directed to pay the 20% amount immediately, as the statutory 90-day period (60 days + 30-day extension) had already elapsed, failing which the Appellate Court is at liberty to take coercive measures