Gujarat High Court Upholds Mandatory Deposit Condition in Cheque Bounce Case

Court Mandates 20% Compensation Deposit During Appeal, Reinforces Interpretation of "May" as "Shall"

The Gujarat High Court, presided over by Justice R. T. Vachhani, delivered a significant ruling on September 22, 2025, in the case of Mahadev Enterprise v. State of Gujarat, affirming the mandatory deposit condition under Section 148 of the Negotiable Instruments Act, 1881. The court ruled that the appellate court's directive for the appellant to deposit 20% of the compensation amount during the pendency of an appeal is valid and necessary, unless specific exceptional circumstances are demonstrated.

The judgment arose from a criminal revision application filed by Mahadev Enterprise, challenging the Rajkot Additional Sessions Judge's order that required the company to deposit 20% of the cheque amount as a condition for suspending the sentence. The appellant argued against the necessity of the deposit, citing the use of the word "may" in Section 148, which they interpreted as non-mandatory.

Justice Vachhani, however, emphasized that the term "may" in the context of Section 148 should be construed as "shall" in cases where no exceptional reasons are provided. This interpretation aligns with the precedent set by the Supreme Court in Muskan Enterprises v. The State of Punjab, where the court clarified that the legislative intent was to ensure some compensation is available to the complainant during lengthy appeal processes.

The judgment also highlighted that the discretion to impose the deposit condition lies with the appellate court, which should exercise this power based on the factual context of each case. The ruling is significant as it reinforces the protective measure for complainants in cheque bounce cases, ensuring they receive some relief while the appeal is pending.

The court dismissed the revision application, affirming the lower court's order and reinforcing the principle that appellate courts should ordinarily impose the deposit condition unless substantial reasons justify otherwise.

Bottom Line:

Negotiable Instruments Act, 1881, Section 148 - Deposit of 20% compensation amount during the pendency of appeal - The appellate court has discretion to impose such a condition, keeping in mind the surrounding circumstances and factual matrix of the case - The word "may" in Section 148(1) is to be interpreted as "shall" in certain cases, making the deposit mandatory unless exceptional circumstances are recorded. 

Statutory provision(s): Negotiable Instruments Act, 1881 - Section 148, Code of Criminal Procedure - Section 389(3), Bharatiya Nagarik Suraksha Sanhita, 2023 - Section 430

Mahadev Enterprise v. State of Gujarat, (Gujarat) : Law Finder Doc Id # 2788543