Appellate Court Must Give Reasons for Ordering Deposit under NI Act: Kerala High Court

Appellate Court Must Give Reasons for Ordering Deposit under NI Act: Kerala High Court

The Kerala High Court has ruled that the appellate Court must pass a reasoned order, demonstrating careful consideration, before requiring the deposit of a minimum 20 per cent compensation/fine amount under Section 148 of the Negotiable Instruments Act as a condition for suspending sentence.

Upon appeal against a conviction for dishonouring a cheque under Section 138 of the Negotiable Instruments Act, the appellate Court possesses the authority, as per Section 148, to suspend the sentence pending the appeal's resolution. This power can be exercised by imposing a condition requiring the appellant to pay a minimum of 20 per cent of the compensation/fine amount ordered by the trial Court.

Justice P.V. Kunhikrishnan, referencing the Supreme Court's decision in Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. (2023), said that the deposit of a minimum 20 per cent compensation/fine amount does not constitute an absolute and mandatory rule when considering the suspension of sentence.

The Court observed that the appellate Court has the responsibility to independently determine whether such a condition for payment is necessary and to issue a reasoned order outlining its rationale.

The Court was of the view that when an accused applies for suspension of sentence under Section 389 of the CrPC, as exemplified in the Jamboo Bhandari case, they typically seek the relief without any attached conditions. This necessitates the appellate Court's initial assessment of whether a deposit is warranted. In instances where a blanket order is requested by the appellants, the Court must evaluate whether the case falls within the scope of a permissible exception.

The petitioner was convicted and sentenced by the Judicial First-Class Magistrate Court – II under Section 138 of the Negotiable Instruments Act for dishonouring a cheque. He was sentenced to simple imprisonment until the Court's rising and ordered to pay compensation/fine of ₹3.25 lakh. In the event of default, he faced an additional one-month imprisonment. Aggrieved by this, the petitioner approached the High Court, challenging the Sessions Court's order that suspended his sentence but mandated a 20 per cent deposit of the compensation/fine amount within 60 days.

Citing the Apex Court's ruling in Jamboo Bhandari (supra), the petitioner's counsel argued that a reasoned order was mandatory if the appellate Court intended to impose a condition requiring the deposit of an amount under Section 148 of the NI Act. He further alleged that the Sessions Court's order failed to meet this requirement, lacking sufficient justification for the imposed condition.

Drawing upon the Supreme Court's decision in Jamboo Bhandari (supra), the petitioner's advocate argued that a reasoned order was a legal obligation for any appellate Court contemplating the imposition of a deposit requirement under Section 148 of the NI Act. They further contended that the Sessions Court's order was deficient in this regard, failing to provide adequate justification for the imposed condition.

In its analysis of Section 148 of the Negotiable Instruments Act, the Court identified a two-fold process. The appellate Court must first decide on the imposition of a fine or compensation amount for the appellant. Subsequently, it must order the deposit of a minimum of 20 per cent of the imposed fine or compensation.

The Court underscored the need for the appellate Court to deliberate and decide on the imposition of a payment condition for compensation/fine under Section 148 of the Negotiable Instruments Act. It explicitly rejected the practice of blanket orders requiring a 20 per cent deposit without reasoned justification during sentence suspension considerations. Furthermore, the Court acknowledged the appellate Court's authority to demand a deposit exceeding the minimum of 20 per cent, reiterating the essential role of reasoned orders in such circumstances.

The Court thus decided to set aside the order of the Sessions Court and directed it to be reconsidered.