How Accused Can Challenge 20% Deposit Order in Cheque Bounce Appeal Under Section 138 NI Act

How accused can challenge 20% deposit condition

Many accused persons face a common problem in cheque bounce cases. They are convicted by the trial court, file an appeal and get a conditional suspension of sentence. The appellate or revisional court asks them to deposit 20% of cheque amount plus fine or compensation as a condition. But what happens when an accused cannot afford this condition? How can you challenge this order?

20% deposit is a normal rule but not an absolute rule. Every rule has exceptions. If the accused places evidence of exceptional circumstances, the appellate or revisional court can waive or stay the deposit condition. This article provides a draft argument for challenging deposit order in cheque bounce appeals.

Core rule in Section 138 NI Act: Legal notice must demand cheque amount

Before learning how to challenge a 20% deposit order, understand one basic rule.

A complaint filed under Section 138 NI Act fails if the statutory requirements are not strictly complied with.

One of the most commonly violated requirements is the legal notice sent by complainant.

The cheque amount must be clearly demanded in the legal notice. Mentioning interest, legal charges or expenses separately would not be an issue. However, the cheque amount must be correctly demanded.

If the legal notice does not mention the cheque amount, demands a wrong amount or is ambiguous in demanding the cheque amount, the legal notice becomes defective. In Jamshed Sardar v. Hyderabad Deccan Bank Ltd.,(2017) 6 SCC 312,the Supreme Court observed:

"The ingredient of demanding payment of the cheque amount would be negatived if the notice sent by complainant/recipient does not demand the payment of the cheque amount."

Section 143A NI Act vs Section 148 NI Act

Before discussing arguments for challenging deposit condition, know the difference between these two sections.

Section 143A NI Act is about "interim compensation" ordered by the trial court at the time of trial.

Section 148 NI Act empowers the appellate or revisional court to ask for deposit of 20% while suspending sentence in appeal.

Section 143A NI Act: Interim compensation during trial

Section 143A allows the court which is hearing a Section 138 NI Act case, to order interim compensation to the complainant. However, there are conditions:

• It is within the discretion of the court. The court may order it, but it is not bound to order it.
• The interim compensation cannot be more than 20% of the cheque amount.
• Remember that the provision says "may order interim compensation up to 20% of the cheque amount". This means, the court is not bound to order interim compensation of 20% in every case.

It is based on the facts of each case. For example, the accused can show that he has no liability, supports a family, is financially unstable, has disputed transaction, received a defective notice, there is no legally enforceable debt, or complainant evidence is weak. If the accused can show any of these grounds to convince the court that interim compensation is not justified in his case, the court may refuse to order interim compensation.

In the case mentioned in this article, the trial court did not order interim compensation under Section 143A NI Act.

Section 148 NI Act: Deposit after conviction in appeal

Section 148 NI Act empowers appellate court to ask for deposit of 20% or fine or compensation awarded by trial court.

In practice, appellate courts began treating this rule mechanically. The usual practice became that "every accused must deposit 20%". As a result, accused persons who lost job or money faced a problem. They could not afford 20% deposit and as a result couldn't file appeals.

To protect the rights of accused persons, the Supreme Court explained that Section 148 cannot be applied mechanically in every case. Following is the law explained by the Supreme Court.

Supreme Court Rule: "Deposit of 20% is not mandatory in every case"

In Jamboo Bhandari v. M. P. State Industrial Development Corporation Ltd., (2023) 10 SCC 446, the Apex Court clarified the law under Section 148 NI Act:

"The imposition of condition of deposit of 20% of the fine or compensation awarded by the trial court by the appellate court is a rule of normal application. At the same time, it is not impossible to specify any exception to the rule. If the appellate court is satisfied that the imposition of such a condition will cause injustice or will deprive the appellant of his right of appeal, it may, in exceptional cases, exercise its discretion not to impose such condition. However, if the appellate court exercises such discretion it must record specific reasons for making such exception" (emphasis added).

Therefore, if the accused can show exceptional circumstances, the appellate or revisional court can waive the deposit condition.

Note that the Supreme Court said "normal rule but not impossible to specify exception". The phrase "normal rule" means it will apply in most cases. But if the accused shows exceptional circumstances, the appellate court may not insist on 20% deposit.

What are exceptional circumstances?

Exceptional circumstances are different in every case. But following points will help you decide if you can ask for waiver or stay of deposit condition.

• Financial inability to deposit the amount demanded along with supporting documents.
• Accused has serious medical condition and can produce medical documents as proof.
• The findings of conviction are weak or not proved beyond reasonable doubt.
• Complainant witness had no knowledge about transaction.
• POA holder admitted in cross-examination that he has no knowledge.
• The trial court did not examine if there was legally enforceable debt.
• Legal notice was defective or demanded wrong amount.
• No finding on essential ingredients of Section 138 NI Act.
• Deposit condition will render the appeal meaningless.

The accused should explain the reasons for inability to pay. Don't just say "I cannot pay 20%. He should place medical documents, income details, bank statement, details of financial hardship suffered, loss of job, proof of liability, and other relevant documents before court.

Power of Attorney holder without knowledge

One important thing to note about cheque bounce complaints: In many cases, the complainant is a private limited company. Such companies usually file complaints through directors, authorised representatives or Power of Attorney holders.

There is nothing legally wrong with filing a Section 138 complaint through Power of Attorney holder. He can file the complaint and can also give evidence in court.

However, what if the POA holder has no knowledge of the transaction? What if he comes to court, looks at company records, sees the company received a cheque from accused, saw the cheque was dishonoured, and files a complaint on such information without actually knowing how the alleged liability arose?

Courts have consistently held that a Power of Attorney holder (POA holder) cannot be a witness on matters outside his knowledge.

In Dilip Satpute v. State of Maharashtra, (1998) 1 CRMR 683, it was held that "A power-of-attorney holder can depose only as regards facts which came to his knowledge. He cannot take the place of complainant where matters are exclusively within the knowledge of complainant himself or director/trustee". (emphasis added).

Simply put, if a POA holder does not know how the transaction occurred, when it occurred, from where the accused took cash/docs/goods, for which debt the cheque was issued, he cannot be a witness to these facts. He will not be able to prove these facts by simply reading the documents. Only the complainant, director or original witnesses can testify to these facts.

Now remember one thing. If the POA holder has no knowledge about transaction, the entire evidence of complainant collapses like a house of cards. Yes, the conviction becomes highly questionable. How? Follow this.

No director appeared, why?

This matter becomes serious when the complainant is a private limited company. If the complainant company files the complaint, who proves the transaction in court? A company can't walk into a court to prove a transaction. It does so through human beings.

If the director of the company who actually negotiated with accused doesn't appear as witness, but instead the POA holder appears and says "I don't know…..", is it not clear the complaint evidence is weak?

POA holder admitted he has no knowledge. Important questions he couldn't answer

Below are important points which POA holder admitted he does not know when cross-examined:

• Who negotiated with accused?
• When did the alleged liability arise?
• What goods were supplied or services were rendered?
• From where did the accused take cash/docs/goods against the cheque?
• Whether there was any written agreement
• Whether he saw any account received by complainant
• Whether cheque was issued for existing debt or not

If the POA holder admits these facts during cross examination, it seriously weakens the complainant case. This point can be used by accused to argue that the complainant evidence is weak. Order of 20% deposit must therefore be waived.

Remember that showing complainant evidence is weak helps in two ways:

• Directly weakens complainant evidence
• Helps you to seek waiver of deposit saying that appeal raises serious questions

Legally enforceable debt not examined

Let's take another important point. Court convicted accused but did not ask complainant how did the cheque get issued. Why? Well, because in cheque bounce cases, the cheque was issued for a "legally enforceable debt or liability".

There is good defence in every crime. If the accused tells the court there is a dispute about the transaction, it becomes the duty of trial court to probe whether a legally enforceable debt existed. It does not automatically mean that because a cheque was dishonoured, debt must have existed.

In Asha Rani v. K.R. Chandra Mouli,(2015) 15 SCC 172, the Supreme Court observed:

"If the accused person raises a probable defence……………………………………..thereafter, it is for the trial court to inquire into and examine whether the transaction and the debt claimed has been proved…" (emphasis added)

In other words, once accused raises a defence and shows the transaction is disputed, it becomes the duty of trial court to form its own opinion about whether debt exists.

Now apply this principle to your case. Was there any inquiry or finding about legally enforceable debt by trial court? One simple way to find out is to carefully read the judgment of trial court. If nowhere in the trial court judgment it is mentioned that cheque was issued for legally enforceable debt or liability, the defect can be attacked in appeal.

Section 393 BNSS requires that a criminal judgment must clearly mention points for determination, decision thereon and reasons for the decision. If this rule was violated by trial court, use it to argue that the trial court judgment is bad in law.

When can High Court interfere against deposit order?

These are the 3 points where High Court can come to the rescue of accused:

• POA holder admitted he had no knowledge about transaction
• Trial court never examined if legally enforceable debt existed
• The conviction is based on weak findings and complainant evidence

If the appellate court orders 20% deposit mechanically without considering the facts of the case, financial condition of the accused, and weakness in complainant evidence, the High Court can interfere.

The accused can file revision petition or appropriate application before the High Court praying for:

• Stay of the order demanding deposit of 20%
• Waiver of deposit condition
• Reduction in the amount of deposit
• Extend time to deposit the amount
• Suspension of sentence without deposit
• Ask appellate court to reconsider the deposit order.

Point to note: Accused must place financial hardship on record along with legal arguments based on the defects in case. The High Court is more likely to stay deposit condition if there is legal merit in the arguments.

Drafting Points for accused person to challenge 20% deposit condition

While drafting an application to challenge 20% deposit order, keep these points in mind:

• Accused must clearly plead that his appeal raises serious questions which can be considered in appeal.
• Financial condition of accused is not good. He cannot afford 20% deposit.
• POA holder who filed complaint had no knowledge about transaction.
• No director or other competent witness proved transaction.
• Legally enforceable debt was not proved
• Trial court failed to record findings on any of the ingredients of Section 138 NI Act.
• Statutory notice was defective and does not comply with law.
• Deposit condition will defeat the purpose of providing right to appeal to accused.

Accused can attach documents wherever possible. Medical records, income proof, bank statements, employment termination letters, financial liabilities, copies of cross-examination of witnesses, and portions from trial court judgment will be useful.

Why Jamboo Bhandari judgment is helpful for accused persons?

Simple. Jamboo Bhandari tells appellate courts that they cannot impose 20% deposit condition mechanically in every case. If the facts of your case fit into any of the categories mentioned in this article, apply these arguments.

Combination of Jamboo Bhandari facts with POA holder-no knowledge defence, absence of legally enforceable debt finding and financial inability will work very well if drafted properly.

The High Court can protect the rights of accused by staying the deposit order and giving them an opportunity to file appeal.

Conclusion

Don't let the mechanical orders defeat your right to appeal in cheque bounce cases. Understand the law, combine the facts favorable to accused and draft clearly.

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