Non-signatory company director need not make 20% pre-deposit under NI Act Section 148, Calcutta HC rules

The petitioner, an erstwhile director of M/s. D.S. Metals Pvt. Ltd., was arrayed as accused no. 3 in a prosecution under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”).

The complaint indicated that accused no. 2 had not denied his signature on the cheque and was consequently the signatory/drawer of the cheque; the petitioner was not the signatory.

The complaint primarily contained allegations against the company and the other director, with no specific allegation against the petitioner.

The petitioner alone preferred Criminal Appeal No. 94 of 2024 against his conviction.

The learned Chief Judge, City Sessions Court, Calcutta, admitted the appeal subject to deposit of 20% of the fine amount under Section 148 of the NI Act and rejected the petitioner’s request for waiver of the deposit.

Whether the requirement or discretion under Section 148 of the NI Act to direct deposit of a minimum of 20% of the fine or compensation applies to an appellant who was not the drawer or signatory of the cheque?

Whether the appellate court erred in directing the petitioner, an allegedly non-signatory director and accused no. 3, to deposit 20% of the fine amount as a condition for admission of his appeal?

Section 148(1) of the NI Act provides that, notwithstanding the Code of Criminal Procedure, in an appeal “by the drawer” against conviction under Section 138, the appellate court may direct the appellant to deposit a sum of not less than 20% of the fine or compensation awarded by the trial court.

The provision confers discretion on the appellate court, as indicated by the word “may,” although the appellate court below relied on Surinder Singh Deswal v. Virender Gandhi, AIR 2019 SC 2956, for the principle that deposit of the prescribed amount is ordinarily the rule and departure requires special reasons.

The petitioner also relied on Dilip S. Dahanukar v. Kotak Mahindra Co. Ltd., (2007) 6 SCC 528, and Shri Gurudatta Sugars Marketing P. Ltd. v. Prithviraj Sayajirao Deshmukh, 2024 SCC OnLine SC 1800.

The High Court applied the textual limitation in Section 148 to an appeal by the drawer and held that the provision was not applicable to the petitioner, who was not the cheque’s signatory or drawer.

The High Court examined the complaint and found that accused no. 2, rather than the petitioner, had admitted or failed to deny his signature on the cheque and was therefore the drawer on behalf of the company.

The petitioner, accused no. 3, was merely a director, had not signed the cheque, and was not the person directly implicated by the material allegations in the complaint.

Since Section 148 specifically refers to an appeal “by the drawer,” the statutory precondition for directing a 20% deposit was absent in the petitioner’s case.

The appellate court consequently erred in treating the provision as applicable irrespective of whether the appellant was the drawer.

The High Court therefore exercised its revisional jurisdiction and held that the petitioner was entitled to relief from the deposit condition.

The criminal revision was allowed, and Order No. 2 dated 8 July 2024 in Criminal Appeal No. 94 of 2024 was quashed and set aside.

The trial court was directed to proceed in accordance with law; connected applications were disposed of, with no order as to costs.