Kerala High Court Affirms Appellate Court's Statutory Discretion For Fines Under Section 148 Of NI Act

Kerala High Court Affirms Appellate Court's Statutory Discretion For Fines Under Section 148 Of NI Act

The Kerala High Court has ruled that the Appellate Court possesses statutory discretion to either mandate a deposit or waive the deposit of the fine or compensation amount under Section 148 of the Negotiable Instruments Act (NI Act). The Court emphasized that, as the Appellate Court exercises statutory discretion, it is legally obligated to provide reasons for either imposing a deposit or waiving the deposit of the fine or compensation amount.

During the appeal proceedings concerning a conviction for cheque dishonour under Section 138, the Appellate Court is empowered by Section 148 to instruct the appellant to deposit at least 20% of the compensation or fine amount as determined by the Trial Court.

In the present case, the appellants has challenged the directive of the Appellate Court (Sessions Court) mandating them to deposit a portion of the compensation sum under Section 148. They contested this directive, asserting that the Appellate Court (Sessions Court) had instructed compensation payment without providing any rationale.

Upon scrutinizing Section 148 of the Negotiable Instruments Act and considering the rulings of the Supreme Court in Surinder Singh Deswal @ Col. S.S. Deswal and Others v. Virender Gandhi and Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd., the Division Bench, comprising Justice A K Jayasankaran Nambiar and Justice Kauser Edappagath, established the following guidelines:

The Appellate Court, in exercising its discretion to either order the deposit or waive the deposit of the fine or compensation amount, is mandated to provide reasons indicating the exercise of its legal discretion in alignment with the objective of the statutory provision.

If the Appellate Court mandates the deposit of the fine or compensation amount, it should not be less than 20% of the amount awarded by the Trial Court.

Where the Appellate Court directs the deposit of an amount exceeding 20% of the fine or compensation, it must provide additional reasons justifying the requirement for such amounts exceeding the minimum of 20% as ordered by the Trial Court.

Analysing the Supreme Court decision in Surinder (Supra), the court emphasized that although the amended Section 148 of the N.I. Act used the term "may" in the context of exercising discretion, it was typically interpreted as "shall" or "must." It further stated that in most cases, the appellate court was obligated to issue a directive to deposit a prescribed percentage of the fine or compensation awarded by the trial court.

In the case of Jamboo (supra), the Supreme Court clarified that while it's generally acceptable for the Appellate Court to require the deposit of a fine or compensation amount under Section 148 of the NI Act, there are circumstances where imposing a 20% deposit condition might be unjust or could impede the appellant's right to appeal. The Court emphasized that exceptions could be made with specific reasons recorded by the Appellate Court. Essentially, the Court pointed out that its previous decision didn't establish a rigid rule mandating a 20% deposit without any room for exceptions.

In light of the aforementioned decisions by the Apex Court, it was emphasized that the Appellate Court is mandated to provide reasons when exercising its discretion regarding the imposition or waiver of the deposit of a fine or compensation amount as directed by the Trial Court.

The Court, therefore, nullified the rulings issued by the Sessions Court due to their lack of reasoning behind the directive to deposit the fine or compensation amount. Additionally, it instructed the Sessions Court to issue new orders, taking into account the petitions for the suspension of sentence filed by the petitioners.