The Uttarakhand High Court set aside an appellate court order requiring a cheque bounce convict to deposit 20% of the statutory compensation within 60 days, holding that the condition under Section 148 of the Negotiable Instruments Act, 1881 is directory and not mandatory. The Court emphasized that financial hardship must be considered and directed a fresh application for waiver within 15 days, to be decided by a reasoned and speaking order.
Background & Facts
The Dispute
The applicant, Ramchander, challenged the order dated 07.07.2026 passed by the Appellate Court under Section 148 of the Negotiable Instruments Act, 1881, whereby he was directed to deposit 20 percent of the statutory amount of compensation, i.e. Rs. 3,98,000, within a period of 60 days. The order was passed in relation to his appeal against conviction and sentence under Section 138 NI Act, which had been stayed subject to the said deposit condition.
Key Facts
- The applicant was convicted by the Trial Court under Section 138 of the Negotiable Instruments Act, 1881.
- While preferring an appeal, the conviction and sentence were stayed by the Appellate Court on the condition that the applicant deposit 20 percent of the statutory amount of compensation within 60 days.
- The statutory amount of compensation was determined to be Rs. 19,90,000 (since 20% thereof equals Rs. 3,98,000).
- The applicant contended that he was facing acute financial hardship and was not in a position to deposit the required amount.
- He moved an application before the Appellate Court for suspension of conviction and sentence, citing his financial inability.
- The Appellate Court, without waiving the condition, directed the applicant to deposit the amount by suspending the order of conviction and sentence.
- The impugned order dated 07.07.2026 was a non-speaking order, as it did not deal with the issue of the applicant's financial status.
Procedural History
- 07.07.2026: Appellate Court passed the impugned order directing deposit of 20% of statutory amount (Rs. 3,98,000) within 60 days.
- Date of application for suspension by applicant: not specified in judgment.
- 17.09.2026: Judgment of the Uttarakhand High Court delivered, setting aside the impugned order and remanding the matter.
Relief Sought
The applicant sought to set aside the impugned order dated 07.07.2026, to be permitted to move a fresh application for waiver of the deposit condition under Section 148 NI Act within 15 days, and to obtain a reasoned and speaking order from the Appellate Court on such application.
The Legal Issue
The central question was whether the condition of depositing 20 percent of the statutory amount of compensation under Section 148 of the Negotiable Instruments Act, 1881 is mandatory or directory, and whether the Appellate Court is bound to consider the applicant's financial status before imposing such condition. Further, the Court had to determine the effect of a non-speaking order that fails to address the accused's financial hardship in the context of Section 148 NI Act.
Arguments Presented
For the Applicant
The applicant's counsel argued that the condition under Section 148 NI Act is directory and not mandatory, relying on the judgment of the Supreme Court in Jamboo Bhandari vs. M.P. State Industrial Development Corporation Limited and Others (2023 Live Law SC 776). It was contended that the Appellate Court erred in not considering the applicant's acute financial hardship and in passing a non-speaking order without recording reasons, thereby violating the principles of natural justice and the requirement for a reasoned order.
For the Respondent
The State's counsel contended that the deposit of 20 percent of the statutory amount is a mandatory precondition for suspension of conviction and sentence under Section 148 NI Act, and that the Appellate Court properly exercised its discretion in imposing the condition. It was argued that the applicant's financial hardship was not a ground to waive the statutory requirement and that the order, though brief, was sufficient as it complied with the statutory mandate.
The Court's Analysis
The Court began by noting that Section 148 of the Negotiable Instruments Act, 1881 provides for suspension of conviction and sentence upon deposit of twenty percent of the statutory amount of compensation. It observed that the language of the provision uses the word 'may', indicating that the condition is directory vs mandatory. The Court relied on the Supreme Court's decision in Jamboo Bhandari vs. M.P. State Industrial Development Corporation Limited and Others (2023 Live Law SC 776), which held that the condition under Section 148 is directory and that the court must consider the financial status of the accused before insisting on deposit.
The Court further emphasized that an order imposing such condition must be a reasoned and speaking order, disclosing the reasons for not waiving the deposit requirement, especially when the accused pleads financial inability. A non-speaking order that fails to address the accused's financial status is liable to be set aside. In the present case, the Appellate Court's order dated 07.07.2026 did not deal with the issue of the applicant's financial status, despite the applicant's specific plea of acute financial hardship.
"the condition as stipulated under section 148 of N.I. Act is directory and not mandatory"
Applying these principles, the Court found that the impugned order was unsustainable. It set aside the order and remanded the matter to the Appellate Court with a liberty to the applicant to move a fresh application for waiver of the deposit condition under Section 148 within a period of 15 days. The Court directed that, if such an application is moved, the Appellate Court shall decide the same by a reasoned and speaking order, in accordance with the mandate of the Supreme Court in Jamboo Bhandari.
The Court clarified that the directory nature of the condition does not absolve the accused from liability but allows the court to consider genuine cases of financial distress while ensuring that the object of the NI Act - compensation to the complainant - is not defeated.
The Verdict
The Uttarakhand High Court allowed the applicant's petition. It set aside the impugned order dated 07.07.2026 directing deposit of 20% of the statutory amount (Rs. 3,98,000) within 60 days. The matter was remanded to the Appellate Court with liberty to the applicant to move a fresh application for waiver of the deposit condition under Section 148 NI Act within 15 days. If such an application is moved, the Appellate Court is directed to decide it by a reasoned and speaking order. No costs were awarded.
What This Means For Similar Cases
Financial Hardship Must Be Considered Under Section 148 NI Act
Practitioners must now argue that the deposit condition under Section 148 NI Act is directory and that the accused's financial status is a relevant factor for waiver. Bail applications or suspension petitions should be supported by evidence of indigence, and courts are obliged to record reasons if they refuse to waive the deposit.
Non-Speaking Orders Violate Natural Justice
Any order imposing conditions under Section 148 without addressing the accused's plea of financial hardship and without providing reasons is liable to be set aside. Drafting orders must include a speaking component, especially when statutory conditions are challenged on grounds of inability to pay.
Directory Nature of Statutory Conditions
The judgment reinforces that conditions prefixed by 'may' in penal statutes are directory. Counsel should check the statutory language and seek waiver where appropriate, rather than treating such conditions as absolute barriers to relief.
