S.138 NI Act | Court Must Decide Appeal In 90 Days If Convict Can't Get Bail Due To Non-Payment Of Compensation: P&H High Court

In a significant observation, the Punjab & Haryana High Court has held that if an appellate court is convinced that a convict under Section 138 of the Negotiable Instruments Act, 1881, is genuinely unable to deposit the 20% compensation amount under Section 148 and, as a result, cannot secure bail, then the appeal must be decided within a maximum period of 90 days.

Section 148 of the NI Act, allows an appellate court, in an appeal against a conviction for cheque dishonour under Section 138, to order the appellant (drawer of the cheque) to deposit a minimum of 20% of the fine or compensation awarded by the trial court. 

A division bench comprising Justice Sanjay Vashisth while hearing a reference, said, "whenever the deposits are expensive than the liberty, and the Appellate Courts are convinced that the convicts are not in a position to deposit and likely to forego their liberty even when the first appeal is yet to be decided, the Appellate Courts must make efforts to prioritize hearing appeals filed against the convictions under Section 148 NI Act and decide those preferably within sixty days of filing, and not later than ninety days, which clearly aligns with the legislators' intentions."

However, the time of sixty days should be extended to the extent to which the decision of the appeal is delayed because of the complainant, the Court clarified.

The bench said, "in the absence of any appeal, Section 148 NI Act does not authorize the complainant to seek directions for such a deposit by filing any application, revision, or appeal for enhancement of the sentence of imprisonment, compensation, or fine, and the applicable remedy for the complainant would be Section 395 BNSS, 2023, which corresponds to Section 357 CrPC, 1973."

It added that, during the pendency of such an appeal, the Appellate Court is also competent to direct a deposit upon the filing of an application by the complainant.

"The absence of the words “application to be filed by the complainant” in Section 148(1) NI Act is insignificant because the general rules of drafting do not contemplate scribing those details that are a natural consequence and corollary of the rights provided in the statutes," said the Court.

Referring to Section 148 It elucidated that the words, “(2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant.” used in Section 148(2) are significant, because sixty days extendable by another thirty days, are granted to a convict to deposit only if the appeal is pending, because of the words, “in an appeal by the drawer against conviction” used in Section 148.

Suppose before the expiry of the “sixty” extended to ninety days (sixty + thirty), the appeal itself is decided, then the Appellate Court shall also lose its jurisdiction to order such deposit, it said.

The Court added that, However, if the appeal is not decided within 60 days, with a possible extension of 30 days, then the convict must comply with the directions, if any, to deposit the compensation amount.

The bench said, statutory intention under Section 148 NIA is that when the complaint has been allowed, which means, the stand taken by the complainant regarding the dishonor of a cheque, has been substantiated in the trial, and such a convict challenges that judgment by filing an appeal, then during the pendency of appeal, i.e. if the appeal is not decided within 60 days, extendable by 30 days, then the convict might be compelled to deposit the amount as was directed, by taking recourse to Section 395 BNSS, 2023.

Direction To Appellant To Deposit 20% Of Compensation Amount Fails Proportionality Test

Considering that "the deposit of a minimum 20% amount is not an absolute rule", the Court said, "The legislative sanction given to an Appellate Court to direct an Appellant who has challenged the conviction, sentence, and compensation amount, by filing an appeal, to deposit at least 20% of the compensation amount under Section 148 of the Negotiable Instruments Act, 1881, miserably fails on the proportionality test."

The provision of Section 148 is based on proclivities and thus arbitrary; on the contrary, as per the literal and practical meaning, it does not authorize the Appellate Court to suspend the sentence by mandatorily imposing a condition of deposit, it added.

The Court that that, "purpose Section 148 intended to achieve was to ensure that at least 20% of the compensation amount is handed over to the holder of the cheque whose debt or other liability amount was withheld due to the dishonor of the cheque. However, due to ambiguous drafting because of the absence of clear procedures for quick recovery, e.g., freezing bank accounts to the extent of the deposit, attachment of property, etc., has led to the recovery of the deposits by imposition of conditions while suspending the sentence in a bailable offence. "

It elaborated that as per Section 148 of the NI Act, the only individual who can be compelled to deposit is the person who issued the cheque in his personal liability. For corporate entities, signing and issuing a cheque is a ministerial act; the signatory is often an employee working for the company, with a limited liability partnership, association, body, or firm, and none of these can be forced to deposit due to vicarious liability, not personal liability.

 The Court concluded that,  Section 148 "miserably fails to strike a fair, rationale, and a reasonable balance between the obligations of elected representatives towards the society's poorest segments, who at the time of emergency situations when they are in urgent need of money, the financial institutions rarely give any loan or immediate loan and these poor people, who have a weaker community support, turn to the money lenders, who in turn, mostly keep blank signed undated cheques as security for unsecured debts."

Also Read: Sec 138 NI Act| Right To Bail Can't Be Denied By Appellate Court Solely Due to Non-Payment of 20% Of Compensation: Punjab & Haryana High Court