Cheque dishonour appeal: director's 20% deposit u/s148 when company can't be tried-order quashed, question referred

Whether an appellate court can direct deposit under s.148 NI Act against a convicted director/authorised signatory when the company, though the principal offender under s.138, could not be proceeded against due to a legal impediment was examined. Applying prior rulings on vicarious liability under s.141 and the limited discretion under s.148, the SC held the HC erred in mechanically insisting on a 20% deposit without considering whether the appellant could be treated as the "drawer" and whether exceptional circumstances existed; the deposit condition was quashed and suspension of sentence restored on bond. Noting conflicting approaches on construing "drawer," the SC referred the interpretative question to a larger Bench.

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ISSUES PRESENTED AND CONSIDERED

1) Whether, where a conviction is recorded under Section 138 read with Section 141 against a director/authorised signatory while the company cannot be proceeded against due to a "legal snag" (such as winding up/liquidation), the appellate court can require deposit of a minimum 20% under Section 148, or whether Section 148 deposit is confined only to the juristic "drawer/company".

2) Whether prior decisions holding that directors/authorised signatories are not "drawers" for Sections 143A/148 should be treated as laying down a blanket exemption from Section 148 deposit in all cases where only vicariously liable individuals are prosecuted/convicted due to the company's legal impediment.

3) Whether Section 148 is generally mandatory, and if so, the extent of the appellate court's discretion to exempt deposit in "exceptional circumstances".

ISSUE-WISE DETAILED ANALYSIS

Issue 1-2: Applicability of Section 148 deposit to a convicted director/authorised signatory when the company cannot be proceeded against due to a legal impediment; whether deposit is confined to the company alone

Legal framework (as discussed by the Court): The Court examined the interaction of Sections 138 and 141 (vicarious liability when the offender is a company) with Section 148 (appellate deposit in an appeal by the "drawer"), and the established position that proceedings may continue against persons covered by Section 141 where the company cannot be prosecuted due to a "legal snag". The Court also considered the legislative objective underlying the 2018 amendment introducing Sections 143A and 148, namely curbing delay tactics and ensuring meaningful interim monetary relief.

Interpretation and reasoning: The Court analysed earlier decisions that construed "drawer" strictly to mean only the entity whose account the cheque is drawn upon, and on that basis excluded directors/authorised signatories from deposit obligations under Sections 143A/148. The Court, however, found that such an approach rests on an "overly literal" construction that insufficiently engages with the quasi-criminal, compensatory and remedial character of cheque dishonour proceedings and the amendment's purpose of preventing appellate delay from frustrating monetary relief. The Court reasoned that, if deposit obligations were treated as never applicable to individuals prosecuted/convicted only because the company is beyond reach due to liquidation/winding up, the remedial scheme of Section 148 could become ineffective precisely in cases where the complainant's recovery is most jeopardised. It therefore expressed the view that a director cannot receive a blanket exemption from Section 148 merely because the company cannot be proceeded against, and that exemption must depend on the facts of each case rather than an automatic rule.

Conclusion (as finally determined): Although the Court stated it was unable to concur with the interpretation that yields a blanket exemption from Section 148 deposit for Section 141 "category of persons" where the company is not prosecutable, it held that as a co-equal bench it could not take a different binding view on its own. The Court therefore did not finally settle whether Section 148 deposit can be directed against such convicted individuals, and instead directed that the question be authoritatively decided by a Larger Bench.

Issue 3: Whether Section 148 is mandatory and the scope of discretion to exempt deposit

Legal framework (as discussed by the Court): The Court considered prior authority treating the Section 148 deposit requirement as generally mandatory (by reading "may" as "shall"), while also recognising later clarification that the appellate court retains a limited discretion to exempt deposit in "exceptional circumstances", with reasons to be recorded.

Interpretation and reasoning: The Court agreed with the position that Section 148 is generally mandatory in operation, but that a narrow, reasoned discretion exists to grant exemption in exceptional cases. This articulation formed part of the Court's basis for rejecting the proposition that an entire class of cases (involving Section 141 convictions when the company cannot be prosecuted) must automatically be treated as exceptional and exempted from deposit.

Conclusion (as finally determined): The Court conclusively reaffirmed that the appellate court has only a limited discretion to exempt Section 148 deposit in exceptional circumstances and that exemption is not automatic; however, the precise application of Section 148 to convicted directors/authorised signatories in the "legal snag" scenario was left for determination by the Larger Bench.

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