Section 143A & 148 NI Act in 2026: Interim Compensation, 20% Appeal Deposit, Exceptions, Recovery & Refund

For the underlying Section 138 procedure, see our Cheque Bounce Case in India guide.

1. Why Sections 143A and 148 are often confused

Both provisions involve payment during ongoing litigation, but their legal context is different. Section 143A acts before guilt has been adjudicated. Section 148 acts after a trial court has already convicted the drawer. That distinction explains why the Supreme Court has treated the word ‘may’ differently in practical application.

2. Section 143A: interim compensation before conviction

Section 143A permits the court trying an offence under Section 138 to direct the drawer to pay interim compensation in specified situations, including where the accused pleads not guilty in a summary or summons trial. The amount cannot exceed 20% of the cheque amount.

The payment is ordinarily to be made within the statutory period specified in the provision, subject to permissible extension.

3. Rakesh Ranjan Shrivastava v. State of Jharkhand, 2024 INSC 205

The Supreme Court directly addressed whether Section 143A is mandatory. It held that the provision is directory/discretionary. A court cannot mechanically award 20% merely because the complainant asks for it.

The court should apply judicial mind to the prima facie merits, the defence and the circumstances. The presumption under Section 139 is relevant, but it does not convert Section 143A into an automatic pre-conviction levy.

Official judgment: Rakesh Ranjan Shrivastava v. State of Jharkhand, 2024 INSC 205.

4. What should the trial court consider under Section 143A?

The Supreme Court indicated that the discretion must be reasoned. Relevant considerations may include:

• the prima facie strength of the complainant’s case;
• the nature of the accused’s defence;
• whether the defence appears plausible on the material available;
• the transaction and cheque amount;
• other relevant circumstances bearing on fairness; and
• the fact that guilt has not yet been established.

The court should not conduct a full trial at this stage, but neither should it treat interim compensation as a routine formality.

5. Is 20% compulsory under Section 143A?

No. Twenty per cent is the statutory ceiling, not a mandatory figure. The court may award a lower amount or decline interim compensation altogether after applying the proper test.

6. What happens if the accused is acquitted?

Section 143A contains a restitution mechanism. If the drawer is acquitted, the complainant may be required to repay the interim compensation with interest according to the statute. This reinforces why the pre-conviction power must be exercised cautiously.

7. Recovery of Section 143A compensation

The Act provides a statutory recovery mechanism. Non-payment should not be approached as though it automatically proves the Section 138 offence; the trial on guilt remains separate. Counsel should examine the exact recovery order, time allowed, extension requests and the statutory mechanism invoked.

8. Section 148: payment pending appeal after conviction

Section 148 empowers the appellate court, in an appeal by the drawer against conviction under Section 138, to order deposit of a sum that must be at least 20% of the fine or compensation awarded by the trial court if such deposit is ordered. It is additional to any interim compensation paid under Section 143A.

This stage is fundamentally different because a conviction already exists.

9. The evolution from Surinder Singh Deswal to Jamboo Bhandari

Surinder Singh Deswal v. Virender Gandhi strongly favoured requiring the statutory deposit. Later, in Jamboo Bhandari v. M.P. State Industrial Development Corporation, the Supreme Court clarified that an appellate court can make an exception where a 20% deposit would be unjust or would effectively deprive the appellant of the right of appeal, provided specific reasons are recorded.

10. Muskan Enterprises v. State of Punjab, 2024 INSC 1046

In Muskan Enterprises & Anr. v. State of Punjab & Anr., decided on 19 December 2024, the Supreme Court expressly endorsed the later approach in Jamboo Bhandari. It explained that the word ‘may’ in Section 148 preserves a limited discretion whether to order a deposit at all. However, once the appellate court decides that a deposit should be made, the statutory amount cannot be less than 20%.

The Court stressed that departure from the normal deposit rule should be rare, fit and reasoned. Examples may include a conviction that appears facially perverse, serious procedural illegality, rejection of admissible evidence, reliance on inadmissible material or an award so excessive that compelling deposit would be unjust.

Official judgment: Muskan Enterprises v. State of Punjab, 2024 INSC 1046.

11. Is Section 148 deposit always exactly 20%?

No. If the appellate court orders deposit, 20% is the statutory minimum, not the maximum. The court may direct a higher deposit depending on the facts. What it generally cannot do is order a deposit lower than 20% while still purporting to act under Section 148(1).

12. When can an appellant seek exemption from Section 148?

An appellant seeking complete exemption should not merely plead financial inconvenience. The application should identify why the case is exceptional. Depending on facts, arguments may include:

• facially unsustainable conviction;
• serious denial of fair trial;
• mandatory notice/limitation defect overlooked by the trial court;
• admissible defence evidence wrongly excluded;
• clear mismatch between cheque amount and legally enforceable liability;
• grossly disproportionate compensation; or
• circumstances showing that deposit would effectively extinguish the statutory right of appeal.

The court must record reasons if it treats the case as exceptional.

13. Suspension of sentence and Section 148

In practice, the Section 148 issue often arises when the convicted drawer seeks suspension of sentence pending appeal. Counsel should separately address:

1. suspension of substantive sentence;
2. bail during appeal;
3. deposit under Section 148;
4. time for deposit;
5. release of deposited amount to the complainant; and
6. security or refund consequences if the appeal succeeds.

14. Time for Section 148 deposit

The statute provides the initial period for deposit and permits a further limited extension on sufficient cause. An appellant should seek extension before default rather than ignoring the order.

15. Can the complainant withdraw the appellate deposit?

Section 148 permits the appellate court to direct release of the deposited amount to the complainant during pendency of the appeal, subject to the statutory framework. If the conviction is later set aside, repayment obligations can arise.

16. Section 143A vs Section 148: quick table

17. Complainant strategy

A Section 143A application should explain why interim compensation is justified on the actual record, not simply quote the section. After conviction, a Section 148 response should emphasise the trial findings, statutory presumption, compensation order and absence of exceptional circumstances.

18. Accused/appellant strategy

At trial, oppose Section 143A by presenting the probable defence and pointing out why a pre-conviction payment order would be unjust on the available record. After conviction, recognise that the legal threshold is higher: an exemption application under Section 148 should demonstrate a genuinely exceptional case and directly engage with Jamboo Bhandari and Muskan Enterprises.

19. Frequently asked questions

Is 20% interim compensation mandatory at trial?

No. Section 143A is discretionary and 20% is the maximum.

Is 20% deposit mandatory in every appeal?

Normally the appellate court will require a deposit, but exceptional cases can justify no deposit if reasons are recorded. If deposit is ordered, the amount cannot be below 20% under Section 148.

Can Section 143A and Section 148 both apply in the same case?

Yes. Section 148 expressly treats its deposit as additional to interim compensation already paid under Section 143A.

Can deposited money be returned if the accused ultimately succeeds?

Yes, the statutory scheme contains restitution consequences where the accused is acquitted or the conviction is reversed.

Conclusion

Sections 143A and 148 should never be treated as interchangeable ‘20% rules’. One acts before conviction and is expressly discretionary; the other operates after conviction and strongly favours deposit while preserving a narrow exceptional discretion. Applications on either side should be reasoned, fact-specific and tied to the correct Supreme Court authority.

Legal information notice: General legal information only; not legal advice or solicitation.