Safiya Malik

In a recent decision, the Allahabad High Court disposed of an application challenging an order that required submission of financial documents by an applicant to determine whether a case qualifies as an exceptional category under Section 148 of the Negotiable Instruments Act, 1881. The Single Bench of Justice Arun Kumar Singh Deshwal, observed that the lower court is permitted to assess the financial condition of the appellant while considering whether to impose or reduce the deposit amount required for stay of conviction. It was recorded that “there is no illegality in the impugned order dated 11.02.2025.

The order under challenge was issued in Criminal Appeal No.76 of 2024 filed under Section 148 of the Negotiable Instruments Act, 1881, before the ADJ-II/Special Judge (SC/ST) Act, District Court, Gautam Buddha Nagar. The order directed the applicant, Rajesh Kumar Gupta, to submit his source of income, including Income Tax Returns for the past five years, to evaluate if his case falls under the “exceptional category” for modification of deposit conditions.

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The facts giving rise to the dispute, as noted by the High Court, originated from a complaint filed by opposite party no.2 under Section 138 of the Negotiable Instruments Act, 1881, against the applicant. The applicant was convicted, and an appeal was subsequently filed. During the pendency of the appeal, the appellate court stayed the conviction order but imposed a condition requiring the applicant to deposit 20% of the compensation amount.

The applicant challenged the deposit condition before the High Court by filing Application u/s 482 No.36957 of 2024. The High Court, in its order dated 25.10.2024, set aside the appellate court’s earlier order dated 07.10.2024 and remanded the matter back to the appellate court with a direction that the applicant shall deposit 10% of the fine before the appellate court, after which the lower court was to pass a fresh order under Section 148 of the Act, 1881.

Following the High Court’s order dated 25.10.2024, the applicant deposited 10% of the compensation amount before the appellate court. He then filed an application before the sessions court arguing that the earlier condition requiring a 20% deposit was arbitrary and unjust, citing that the amount was substantial and posed a financial burden. The appellate court rejected this application through its order dated 11.02.2025 and directed the applicant to furnish financial details to assess whether the case falls within the exceptional category.

The applicant subsequently approached the High Court to quash the sessions court’s order. During the proceedings before the High Court, counsel for the applicant submitted that the sessions court misinterpreted the earlier order of the High Court dated 25.10.2024 and the judgment of the Supreme Court in Muskan Enterprises and Another Vs. State of Punjab and Another, 2024 SCC OnLine SC 4107. It was argued that the sessions court erroneously directed the applicant to provide financial documents, which were alleged to be irrelevant for determining whether the condition to deposit 20% compensation was unjust.

The applicant’s counsel stated that “order is absolutely erroneous.”

The Additional Government Advocate appearing for the State opposed the submissions, contending that the sessions court had not yet passed a final order under Section 148 of the Act, 1881, and that the direction to seek financial documents was only intended to assess the applicant’s financial position. The State submitted that there was no illegality in the sessions court’s approach.

The High Court, after hearing both parties, reviewed the records and noted that the applicant had complied with the earlier order dated 25.10.2024 by depositing 10% of the compensation before the appellate court. The Court recorded that the lower court was required to pass a fresh order under Section 148 of the Act, 1881.

The High Court, upon examining the sessions court’s order, stated, “From the perusal of the impugned order, it is clear that appellate court has observed that whether the case of the applicant falls in exceptional category or not, to determine this issue, it is necessary to consider the financial condition of the applicant and direct him to submit ITR for the last 5 years.”

Justice Deshwal referred to Supreme Court precedents in Jamboo Bhandari vs M.P. State Industrial Development Corporation Ltd. and others, (2023) 10 SCC 446, and Muskan Enterprises (supra) and recorded that “while passing order u/s 148 of the Act, 1881, direction for awarding compensation should not be excessive or unjust and it is not mandatory to impose condition of deposit, 20% of compensation and court has discretion to reduce or exempt in appropriate cases.”

The Court further noted, “court has to consider that condition of deposit of 20% will not be unjust but also, the fact whether the imposing condition would amount to deprivation of the right of the appeal of the appellant.”

The High Court accepted that the sessions court was entitled to gather information regarding the applicant’s financial status to properly adjudicate whether the case qualified as exceptional for reduction or exemption of the deposit under Section 148 of the Act, 1881. It was observed, “Therefore, for passing final order u/s 148 of the Act, 1881, court can gather the required facts regarding financial condition of the appellant.”

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Concluding the matter, the High Court disposed of the application while stating, “there is no illegality in the impugned order dated 11.02.2025.” It further recorded an expectation that the sessions court, while passing its final order under Section 148, will ensure that any condition imposed for deposit will not be excessive or unjust.

Advocates Representing the Parties

For the Petitioner: Naman Agarwal, Advocate and Nipun Singh, Advocate

For the Respondent:  G.A.

Case Title: Rajesh Kumar Gupta v. State of U.P. and Another

Neutral Citation No.: 2025: AHC:33778

Case No.: Application U/S 528 BNSS No. 7574 of 2025

Bench: Justice Arun Kumar Singh Deshwal

[Read/Download order]