This case centered around cheque dishonor and the accused were found guilty under Section 138 of the NI Act by the trial court. The matter went in appeal before the Sessions Court and relief was granted to the accused under Section 389 CrPC. The sessions court citing Section 148 of the NI Act suspended the sentence of the accused under Section 389 CrPC, on imposition of the condition that the appellants deposit 20% of the compensation sum. The Madhya Pradesh High Court affirmed the decision of the Sessions Court. The High Court was of the view that the imposition of the condition to deposit minimum 20% of the fine/compensation amount is a necessary condition imposed to grant relief for suspension of sentence under Section 389 of the Criminal Procedure Code.

The Supreme Court opined that “What is held by this Court is that a purposive interpretation should be made of Section 148 of the N.I. Act. Hence, normally, Appellate Court will be justified in imposing the condition of deposit as provided in Section 148. However, in a case where the Appellate Court is satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal of the appellant, exception can be made for the reasons specifically recorded.”

The Supreme Court held that the Trial court and High Court have proceeded on an erroneous premise that the deposit of minimum 20% of the amount of fine or compensation is an absolute rule and no exception applies to it. Thus Supreme Court allowing the appeal directed the High Court to consider the case afresh.