Gujarat High Court Moderates Bail Conditions in Cheque Bounce Appeals: 80% Deposit Held Excessive

Background of the Dispute

The Gujarat High Court in Sharad Kishanchand Bihani Vs Harishbhai Ramkishan Narang dealt with a group of connected criminal appeals arising out of cheque dishonour convictions under Section 138 of the Negotiable Instruments Act, 1881.

All matters shared a common grievance: while granting suspension of sentence and bail, the Appellate Court at Surat, by orders dated 18.3.2026, directed the accused to deposit extremely high amounts as a pre-condition for bail.

Across seven appeals, the Appellate Court had:

  • In four cases, directed:

    • 80% of the compensation to be paid to the complainant, and
    • 20% of the amount to be deposited with the Government,
    • within a fixed period of 30 days, failing which the accused would suffer further simple imprisonment.

  • In the remaining three cases, ordered payment of the entire compensation amount to the complainant within 30 days, also backed by default imprisonment clauses.

These conditions were imposed simultaneously on the very same date for all appeals arising out of financial dealings between the parties.

The accused approached the High Court contending that the conditions were unduly harsh, contrary to the legal framework under Section 148 of the Negotiable Instruments Act, 1881 (NI Act), and had the effect of virtually blocking their right to pursue the statutory appeal.

Summary of the Sentences and Conditions Imposed

The High Court reproduced a tabular summary, as referred to by learned counsel, detailing:

  • Criminal Appeal Registration Numbers,
  • Original Complaint Case Numbers,
  • Cheque numbers,
  • Cheque amounts,
  • Dates of cheques,
  • Sentences awarded, and
  • Deposit amounts calculated as “20% of fine” by the Appellate Court.

The pattern across the cases was broadly as follows:

  • Each conviction carried:

    • Simple imprisonment for 1 year, and
    • A fine equivalent to twice the cheque amount (for example, fine of Rs. 30,00,000/- on a cheque of Rs. 15,00,000/-), or
    • In some cases, a specific fine/compensation figure such as Rs. 9,90,000/-.

  • The Appellate Court imposed a condition of depositing very high percentages of the fine/compensation amounts, structured as:

    • Either 80% to complainant and 20% to Government, or
    • Full compensation directly to the complainant,
    • In addition to a default clause of three months’ simple imprisonment for non-payment.

The deposit figures, calculated as “20% of fine” in the chart, were in the range of Rs. 1,98,000/- to Rs. 6,00,000/- per case, but the actual conditions referred to by the High Court and counsel involved payment of 80% compensation plus 20% to the Government in several of the matters.

The central question was whether the Appellate Court had correctly exercised its discretion under Section 148 of the NI Act while suspending sentence and granting bail pending appeal.

The challenge was premised on:

  • The language of Section 148(1) which uses the word “may” and not “shall”, indicating discretionary power;
  • The requirement that such discretion be exercised judiciously, after considering:
    • The nature of transactions,
    • The overall factual matrix, and
    • The financial capacity of the accused;
  • The principle that onerous deposit conditions should not practically extinguish the statutory right of appeal.

Counsel for the accused relied heavily on:

  • Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited & Ors. (2023) 10 SCC 446,
  • Surinder Singh Deswal @ Colonel S.S. Deswal & Ors. v. Virender Gandhi (2019) 11 SCC 341, and
  • Rakesh Ranjan Shrivastava v. State of Jharkhand & Anr. (2024) 4 SCC 419,

to argue that although deposit under Section 148 is ordinarily the rule, appellate courts must carve out exceptions where the deposit condition becomes unjust, oppressive, or destructive of the right to appeal.

Supreme Court’s Interpretation of Section 148 NI Act

Position in Surinder Singh Deswal

In Surinder Singh Deswal (2019) 11 SC 341, the Supreme Court examined the amended Section 148 of the NI Act. It held: