CASE ANALYSIS – Shivanand Bhoja Shetty And Anr vs State Of Maharashtra

Introduction

This case consideration is a substantial decision of the High Court of judicature at Bombay on the construction and interpretation of Section 148 of the Negotiable Instruments Act, 1881. The main question involved here is whether there should be mandatory pre-deposit of required amount of money to be deposited by a person as a condition to be granted suspension of sentence in an instance concerning cheque dishonour, especially when an appeal is moved. The decision enlightens when a waiver of this deposit may be requested and the relief the court may exercise in such an event creating significant information as regards to the interaction between lack of finances, corporate insolvency, and statutory compliance in a criminal appeal.

Facts Of the Case 

• The petitioners were found to be guilty under Section 138 of the Negotiable Instruments Act (N.I. Act) and handed over a simple sentence of imprisonment and a fine of Rs. 1,30,00,000/.
• On appeal the Sessions Court suspended their sentence provided they paid 20% of the fine (Rs. 26,00,000/-).
• On January 9, 2024, the Magistrate denied the petitioners request to be allowed to waive this 20% deposit. Later, they were given an extension of last chance until February 8, 2024, to deposit. 
• The petitioners approached the High Court with Criminal Writ Petition on the basis of poor financial position, insolvency of the company and being a senior citizen as being of “exceptional circumstances” to waive an offence under S.148 N.I. Act. They also mentioned an earlier payout of Rs. 30, 00, 000/- to the complainant.
• Respondent was against the waiver, since Petitioners did not have any bona fides and also because of their lack of financial ability citing that 20% was a statutory minimum.

Issues of The Case

• Whether the Petitioners had an “exceptional case” so as to cause waiving of the 20% amount of the pre-deposit fine as a criteria towards suspension of sentence under Section 148 of the Negotiable instruments Act, 1881?
• Does declaration of insolvency of the company (Accused No. 1) relieve its Directors (the Petitioners) of their personal liability to pay the amount of fine under Negotiable Instruments Act?
• Does the conduct of the Petitioners, while seeking an extension of time to deposit and during the same contesting the underlying order shows lack of bona fide?

Judgment: 

After a careful analysis of the arguments put across and the legal provisions invoked the court stated as follow in the judgment with respect to the claims made by the Petitioners:

• The Petitioners were found guilty of the offence under Section 138 of the Negotiable Instruments Act and were to serve the simple imprisonment till the rising of the Court and are liable to pay a fine of Rs. 1,30,00,000/-.
• The Sessions Court had suspended their sentence subject to the condition of receiving 20% of the amount of fine (Rs. 26,00,000/-) deposited by the Petitioners.
• The learned Magistrate declined the application made by the Petitioners to exempt them of depositing 20% amount.
• The argument of the Petitioners on the basis that the company was declared to be insolvent cannot be taken into consideration to grant waiver on payment of fine.
• Even with the assumption that any proceedings are commenced against the Petitioner company, the Directors still cannot be relieved of a proceeding against them.
• The Petitioners have failed to establish any exceptional circumstances in order to warrant a waiver in payment of fine under Section 148 of the N.I. Act.
• The Petitioners moved the High Court to challenge the said order after seeking time to deposit the amount, yet assured that they intended to comply, which means that they lacked bona fide.
• The writ petition, moved by the Petitioners, was not granted, since it was not bona fides, and did not carry any merits.
• The request by the Petitioners to have the order stayed by two weeks was denied.

Reasoning

• The High Court noted that the Trial Court itself had already taken a liberal stand when it had disposed of the case sentencing by merely ordering imprisonment till the time Court rose. The condition of the Sessions Court of 20 per cent of the amount of the fine, deposited, in order to suspend the sentence, was within the Section 148 of N.I. Act and 60 days was allowed to the Pititioner in order to deposit the amount.
• It was held that the waiver sought by the Petitioners was only aimed at reviewing the previous order passed on October 12, 2023, therefore, the application, was not maintainable and had no substance.
• Another important element in the argument was the stand of the court in the view that the insolvency of the company would not be a factor of granting waiver of payment of fine. It categorically added that the Directors are not in a position to shed off liability even when the company is put under insolvency proceedings. The Petitioners have finally failed to come out with any extraordinary circumstance to allow waiver in payment of fine u/s.148 of N.I.Act.
• The court was critical on the conduct of the Petitioners when it said that after the, having been given time in which to present the amount, having promised to do so and moved to the High Court challenging the same order. Such a move, coupled with the circumstances of their prior litigation matter, constituted a blatant display of a sentence having a “lack of bona fides” and carried a contradiction with their allegations that they had a financial incapability, and thus sufficed the petition to be issued as “devoid of merits”.

Conclusion

Finally, the High Court of Bombay granted writ petition filed by the Petitioners rejecting their criminal writ petition and therefore confirming the move by the Sessions Court to order 20% pre-deposit against suspension of the sentence in the cheque dishonour appeal. The decision is a confirmation of the principle that the fact that the company is insolvent does not necessarily imply that the directors of such company, in their personal capacity, are absolved of their personal liabilities in terms of the Negotiable Instruments Act. In addition, the fact that the court was not satisfied to prove that there was a genuine reason/ exceptional circumstances that could justify a waiver under the Section 148 N.I. act and that absence of good faith (bona fides) when bringing up legal matter shall be treated badly by the court is captured by the ruling. This ruling is a definite guideline on the absolute fulfillment of the pre-deposit requirements in matters of appeals against Section 138 of the N.I. Act.]

References

1.  Shivanand Bhoja Shetty And Anr. v. State of Maharashtra, 2024 Latest Caselaw 3727 Bom. (High Court of Bombay Feb. 7, 2024), https://www.latestlaws.com/judgements/bombay-high-court/2024/february/2024-latest-caselaw-3727-bom/.

2. Shivanand Bhoja Shetty And Anr. v. State of Maharashtra, Indian Kanoon (Bombay High Court Feb. 6, 2024), https://indiankanoon.org/doc/163925880/.

3. The Negotiable Instrments Act, 1881, https://www.indiacode.nic.in/bitstream/123456789/15327/1/negotiable_instruments_act%2C_1881.pdf.

Written by Aryan Jain; an intern under Legal Vidhiya

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