Refining the Discretion on Compensation Deposits in Cheque-Bounce Appeals: The A.P. High Court’s New Guideline

This commentary examines the recent judgment in “Smt. Mekala Sudha Prameela Kantha @ Jangam Sudha Prameela Kantha v. The State,” delivered by the Andhra Pradesh High Court on January 6, 2025. The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881 (cheque-bounce offense). In the course of her appeal, she challenged an order directing her to deposit 20% of the cheque amount within 60 days as a precondition for suspending sentence, following established practice under Section 148 of the Negotiable Instruments Act.

The key legal question addressed by the Court concerned when, and under what circumstances, an appellate court can exercise discretion to depart from the general rule of directing deposit of a certain percentage of the cheque amount as a condition for suspending the sentence. The High Court ultimately modified the lower court’s condition, thereby clarifying how courts may consider “exceptional cases” that justify a reduced deposit amount.

Parties involved in this matter include:

• Petitioner/Appellant/Accused: Smt. Mekala Sudha Prameela Kantha @ Jangam Sudha Prameela Kantha
• Respondent No.1: The State (represented by the Public Prosecutor, Andhra Pradesh High Court)
• Respondent No.2: Smt. Thanneru Latha, the Original Complainant

The High Court took cognizance of the petitioner’s arguments that she was unable to deposit 20% of the compensation amount due to her limited financial circumstances and health issues. The Court referred to recent Supreme Court decisions that grant discretion to the appellate courts under Section 148 of the Negotiable Instruments Act, 1881, highlighting that a deposit of 20% is the norm; however, in “exceptional” or “appropriate” circumstances, lower deposits—or no deposit at all—may be permitted.

Concluding that the lower appellate court had applied the 20% deposit condition in a overly rigid manner, the High Court modified the deposit requirement from 20% to 10%. The Petitioner was then directed to make the 10% deposit within eight weeks from receiving a copy of the High Court order. Should she fail to do so, the lower appellate court retained the authority to proceed against her as per law.

The Judgment extensively referenced “Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. & Ors.” and “Muskan Enterprises vs. State of Punjab,” which are pivotal rulings from the Hon’ble Supreme Court. These cases affirmed that:

• A statutory discretion exists under Section 148 of the Negotiable Instruments Act to require deposits of up to 20% of the cheque amount during appeals against a conviction under Section 138, N.I. Act.
• Nonetheless, the appellate court’s discretion should take into account “exceptional” or “appropriate” circumstances. Hence, the mandatory deposit of 20% is not an absolute rule but a general guideline that must be balanced against equity and specific case facts.

The Court additionally referred to a recent Supreme Court interpretation that “may” in Section 148(1) of the Negotiable Instruments Act is not to be read solely as “shall,” but rather that appellate courts have authentic leeway when assessing deposit conditions.

The High Court’s reasoning flows from Section 389 of the Code of Criminal Procedure (CrPC) and Section 148 of the Negotiable Instruments Act. Typically, when the appellate court suspends a convict’s sentence pending appeal, it can impose reasonable conditions, including part-payment of the cheque amount, to guard against frivolous appeals. However, the bench emphasized:

• Exceptional Circumstances: If an accused/appellant demonstrates special hardship—such as severe financial constraints or personal health issues—the appellate court must give due consideration.
• Fair Balance Between Rights: The deposit condition ensures that the complainant’s interest is protected, but it should not unduly burden an appellant who can provide legitimate reasons for a reduced deposit.
• Consistency with Supreme Court Directives: Prior rulings encourage courts to view the 20% condition as a prudent guideline. Yet, it should not be applied mechanically without examining circumstances that might justify a lower deposit or potentially no deposit at all.

Here, the High Court noted that the appellate judge had overlooked the possibility of an exception and simply insisted on a blanket 20% deposit. The High Court thus applied these Supreme Court precedents, concluding that a reduced 10% deposit was more equitable under the petitioner’s circumstances.

This ruling reinforces appellate courts’ discretion when suspending sentences in cheque-bounce cases. It highlights that, while ordinarily 20% of the compensation amount is considered a suitable deposit, judges must inquire whether an accused has a well-founded reason to seek a lesser deposit. Consequently, future appellants may invoke this precedent to reduce the deposit burden by showing special circumstances. Courts, in turn, have been instructed to rigorously analyze each application and not to simply impose a standard requirement without exercising judicial discretion.

• Section 138 of the Negotiable Instruments Act (N.I. Act): This section makes cheque bouncing a criminal offense if certain conditions are met—chiefly that a cheque was issued for legally enforceable debt, dishonored upon presentation, and the payee was not duly paid after formal demand.

• Compensation Deposit in Appeals: Under Section 148 of the N.I. Act, an appellate court can require the convicted person to deposit a designated portion of the cheque amount as a condition for suspending the sentence. This mechanism ensures the complainant’s rights are protected while the appeal is pending.

• “Exceptional” or “Appropriate” Cases: These are situations where an appellant can show compelling reasons—financial, medical, or otherwise—to justify reducing or eliminating the typical deposit requirement.

• Section 389(1) CrPC: This provision deals with suspending the execution of a sentence pending an appeal. The court, while suspending the sentence, can impose conditions, including payment or part-payment of fines/compensation.

The A.P. High Court’s decision in “Smt. Mekala Sudha Prameela Kantha @ Jangam Sudha Prameela Kantha v. The State” underscores an important refinement: though courts generally impose a 20% deposit of the cheque amount when suspending a sentence under Section 148 of the N.I. Act, they must consider whether the facts of a case merit an exception. This new ruling provides meaningful guidance to lower courts and will encourage thorough, context-based analyses of a petitioner’s circumstances before insisting on the conventional deposit rate.

Overall, this enlarged judicial discretion aims to facilitate fair administration of justice: protecting the complainant’s lawful rights while ensuring that financially distressed or specially burdened appellants are not exposed to undue hardship. The precedent ensures that “may” cannot be read as an absolute “shall,” preserving the balancing act that underlies criminal jurisprudence.