Introduction
The Delhi High Court has held that a complainant cannot retain an amount released to him under Section 148 of the Negotiable Instruments Act, 1881 (NI Act), when the accused is subsequently acquitted in the appeal. In Arun Malhotra v. State Govt. of NCT of Delhi & Anr., decided on 9 September 2026, Justice Chandrasekharan Sudha considered whether the complainant could challenge an order directing him to return ₹5,44,000 that had been deposited by the accused during the pendency of their appeal and subsequently released to the complainant.
The Court ultimately dismissed the complainant’s petition and held that the proviso to Section 148(3) of the NI Act clearly requires repayment when the appellant is acquitted. The Court also took note of the undertaking given by the complainant before the appellate court that he would repay the amount received by him depending upon the final outcome of the appeal. Since the accused persons were ultimately acquitted, the complainant was held bound to refund the amount.
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Case Details
| Particular | Details |
|---|---|
| Case Name | Arun Malhotra v. State Govt. of NCT of Delhi & Anr. |
| Court | High Court of Delhi at New Delhi |
| Case Number | CRL.M.C. 9373/2023 |
| Connected Applications | CRL.M.A. 35060/2023 & CRL.M.A. 30405/2025 |
| CNR No. | DLHC010551462023 |
| Judgment Reserved | 1 September 2026 |
| Judgment Pronounced | 9 September 2026 |
| Bench | Hon’ble Ms. Justice Chandrasekharan Sudha |
| Principal Provision | Section 148, Negotiable Instruments Act, 1881 |
| Related Provision | Section 138, Negotiable Instruments Act, 1881 |
| Amount Involved | ₹5,44,000 |
| Final Decision | Petition dismissed |
Background of the Case
The dispute originated from a complaint filed under Section 142 of the Negotiable Instruments Act alleging commission of an offence punishable under Section 138 of the NI Act. The complainant had instituted Complaint Case No. 11160/2017 against the two accused persons before the Metropolitan Magistrate, NI Act-03, South District, Saket Courts, Delhi. The trial court ultimately found both accused guilty of the offence under Section 138 of the NI Act. By judgment dated 22 October 2021 and order on sentence dated 18 November 2021, the accused persons were convicted and directed to pay a fine of ₹27,20,000 jointly and severally, which was to be paid as compensation to the complainant within 45 days.
The accused persons challenged the conviction by filing Criminal Appeal No. 134 of 2021 before the Court of Session. During the pendency of the appeal, the appellate court considered an application under Section 148 of the NI Act. By order dated 1 October 2022, the appellate court directed the appellants to deposit 20% of the fine amount, namely ₹5,44,000, in the form of a Fixed Deposit Receipt in the name of the complainant. The amount was thereafter released in favour of the complainant during the pendency of the appeal. However, the appeal ultimately resulted in the setting aside of the trial court’s judgment of conviction and sentence, and both accused persons were acquitted by the appellate court on 30 October 2023.
After the accused persons were acquitted, the question arose regarding the ₹5,44,000 that had been deposited pursuant to the Section 148 order and released to the complainant. The parties approached the trial court in relation to the amount, and by order dated 13 December 2023, the trial court directed the complainant to refund ₹5,44,000 to the accused persons. The complainant challenged that order before the Delhi High Court under Section 482 of the Code of Criminal Procedure, 1973.
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What Was the Complainant’s Argument?
The complainant argued before the Delhi High Court that there was no statutory requirement requiring him to refund the deposited amount merely because the accused persons had been acquitted. According to the complainant, there was also no independent application filed by the accused seeking such refund, and therefore the trial court ought not to have passed the impugned order. It was further argued that the order had been passed in haste without adequately considering the complainant’s objections, particularly because the matter was already pending before the High Court.
The complainant also relied upon the subsequent proceedings before the Supreme Court. It was argued that the Supreme Court, while dismissing the Special Leave Petition on 22 August 2025, had directed that ₹5,44,000 be deposited and kept in a short-term interest-bearing fixed deposit, but had not specifically directed that the amount be released to the accused persons. On this basis, the complainant contended that the amount could not simply be ordered to be refunded by the trial court. It was also submitted that, if any refund was to be ordered, such an order should have been passed by the appellate court rather than by the trial court.
What Was the Response of the Accused?
The accused persons opposed the petition and submitted that there was no infirmity in the trial court’s order requiring repayment of the amount. The State also drew the High Court’s attention to the order dated 1 October 2022 passed by the appellate court while allowing the application under Section 148 of the NI Act. Importantly, that order recorded the complainant’s undertaking that he would repay the amount or FDR received by him, subject to the final disposal of the appeal. This undertaking became significant in the High Court’s final determination because the appeal had ultimately resulted in the acquittal of the accused persons.
Issue Before the Delhi High Court
The Delhi High Court identified the central question in the petition as whether there was any infirmity in the impugned order that warranted interference by the High Court. Although the dispute involved several procedural developments concerning the deposit and subsequent custody of ₹5,44,000, the ultimate legal question was whether the complainant could retain the amount after the conviction had been set aside and the accused persons had been acquitted in appeal.
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Proceedings Before the Delhi High Court and Supreme Court
The High Court also considered the subsequent conduct of the complainant concerning the amount. On 30 April 2025, the High Court directed the complainant to deposit ₹5,44,000 with the Registrar General of the Court within three weeks. The complainant subsequently informed the Court that he had approached the Supreme Court against that direction and sought an adjournment, stating that if he failed to obtain relief from the Supreme Court, he would comply with the High Court’s direction. The Supreme Court dismissed the Special Leave Petition on 22 August 2025 in SLP (Crl.) No. 12216/2025.
Despite these proceedings, the High Court recorded that the amount continued to be retained by the complainant. On 1 April 2026, the Court was informed that its earlier directions had not been complied with and that there was no representation on behalf of the complainant. The Court therefore directed the complainant to appear personally or through counsel. Subsequent proceedings also recorded the Court’s concern regarding continued non-compliance with its directions.
On 7 April 2026, the complainant produced a demand draft dated that day for ₹5,44,000. The High Court directed that the amount be deposited before the Registrar so that the directions contained in the Supreme Court’s order could be complied with. The High Court observed that the complainant had attempted to avoid compliance with the Court’s directions and deposited the amount only when he had no further choice.
Section 148 of the Negotiable Instruments Act
Power of Appellate Court to Order Deposit
Section 148 of the NI Act deals with the power of the appellate court to order payment pending an appeal against conviction under Section 138. Under Section 148(1), the appellate court may direct the appellant to deposit a sum which must be at least 20% of the fine or compensation awarded by the trial court. The provision operates notwithstanding the provisions of the Code of Criminal Procedure and specifically applies to an appeal filed by the drawer against a conviction under Section 138.
The provision further states that the amount is to be deposited within 60 days from the date of the order, although the court may permit a further period not exceeding 30 days where sufficient cause is shown. Section 148 therefore creates a statutory mechanism through which a portion of the fine or compensation can be secured during the pendency of an appeal against conviction.
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Release of the Amount to the Complainant
Section 148(3) gives the appellate court power to direct release of the deposited amount to the complainant at any time during the pendency of the appeal. However, the legislature has also specifically dealt with the situation where the appellant is ultimately acquitted. The proviso to Section 148(3) states that where the appellant is acquitted, the court shall direct the complainant to repay the amount released to him, together with interest at the bank rate published by the Reserve Bank of India and prevalent at the beginning of the relevant financial year. The repayment is to be made within 60 days from the date of the order, subject to a further extension of up to 30 days where sufficient cause is shown.
Delhi High Court’s Interpretation of Section 148(3)
The Delhi High Court placed considerable emphasis on the wording of the proviso to Section 148(3). According to the Court, the statutory language is unequivocal: once the accused is acquitted, the complainant is required to repay the amount that had been released to him during the pendency of the appeal. The Court therefore rejected the proposition that the complainant could continue to retain the amount merely because it had earlier been released to him pursuant to an order under Section 148.
The Court’s reasoning is based on the temporary character of the amount released under Section 148. The money is not treated as an unconditional and final entitlement of the complainant merely because it has been released during the pendency of the appeal. Its ultimate status depends upon the result of the appellate proceedings. Where the conviction survives, the consequences are different; but where the accused is acquitted, the statutory proviso expressly requires repayment. Therefore, after the conviction was set aside and the accused persons were acquitted, the complainant had no legal basis to continue retaining the interim compensation.
Could the Trial Court Pass the Refund Order?
An important procedural issue considered by the High Court was whether the trial court was competent to pass the order directing refund. The Delhi High Court expressly observed that, strictly speaking, the refund order should have been passed by the appellate court rather than the trial court. Thus, the Court did recognise a procedural defect in the forum from which the refund order had originated.
However, the High Court declined to interfere with the impugned order solely on this ground because of the subsequent developments in the case. The Court took into account the directions issued during the proceedings, the Supreme Court’s order, the complainant’s continued retention of the amount and the eventual deposit of ₹5,44,000 before the Registrar. In the circumstances, the Court considered that setting aside the refund order merely because it had been passed by the trial court would not be justified.
Effect of the Supreme Court’s Order
The complainant also relied upon the Supreme Court’s order dated 22 August 2025. The Supreme Court had dismissed the Special Leave Petition but clarified that ₹5,44,000 was to be deposited before the appellate court. The appellate court was directed to ensure that the amount was invested in a short-term interest-bearing fixed deposit account of a nationalised bank, with the deposit being renewed until further orders were passed by the High Court.
The Delhi High Court considered the complainant’s argument that the Supreme Court had not ordered release of the amount to the accused. The High Court accepted that the Supreme Court had directed the amount to be maintained in a fixed deposit and that the appellate court had been directed to keep renewing the deposit until further orders. However, the High Court found that the Supreme Court’s order did not prevent it from finally deciding the pending criminal miscellaneous petition on its merits. The Court therefore proceeded to determine the complainant’s liability to refund the amount by examining Section 148 and the undertaking recorded in the appellate court’s order.
Importance of the Undertaking Given by the Complainant
A significant factor in the High Court’s decision was the undertaking recorded in the appellate court’s order dated 1 October 2022. While allowing the Section 148 application, the appellate court had directed the accused persons to deposit 20% of the fine amount in the form of an FDR. The FDR was to be released to the complainant when requested. At the same time, the order expressly recorded that the complainant undertook to repay the amount or FDR received by him, subject to the final disposal of the appeal.
The undertaking became directly enforceable in the factual context of the case because the appeal did not result in confirmation of the conviction. Instead, the appellate court set aside the trial court’s judgment of conviction and sentence and acquitted both accused persons. Thus, the very contingency contemplated by the undertaking occurred. The complainant had received the money during the pendency of the appeal, while the final outcome of the appeal was an acquittal. The High Court consequently found that the complainant was bound to return the amount.
Final Decision of the Delhi High Court
The Delhi High Court dismissed the complainant’s petition and upheld the consequence that the ₹5,44,000 had to be returned to the accused persons. The Court held that the complainant was bound to refund the amount both because of the undertaking recorded in the appellate court’s order and because of the express requirement contained in the proviso to Section 148(3) of the NI Act.
The Court granted liberty to the respondents, namely the accused persons, to withdraw the amount that had been deposited by the complainant pursuant to the High Court’s order dated 7 April 2026. Any pending applications were also ordered to stand closed.
Ratio Decidendi
The principal legal proposition emerging from the judgment is that where an amount deposited under Section 148 of the Negotiable Instruments Act is released to the complainant during the pendency of an appeal, and the accused is subsequently acquitted, the complainant is required to repay the amount in accordance with the proviso to Section 148(3), along with the applicable interest.
The Court also made it clear that the amount released under Section 148 is connected to the outcome of the appeal and cannot be treated as an unconditional final payment merely because the complainant obtained possession of it during the appellate proceedings. Once the conviction is set aside and the accused is acquitted, the statutory mechanism requires repayment. In the present case, this statutory requirement was further reinforced by the complainant’s express undertaking before the appellate court to repay the amount depending upon the final result of the appeal.
Why This Judgment Is Important
This judgment is significant for proceedings under Section 138 of the Negotiable Instruments Act because Section 148 permits the appellate court to direct the accused to deposit a minimum of 20% of the fine or compensation awarded by the trial court. The provision also permits the appellate court to release that amount to the complainant during the pendency of the appeal. The present decision highlights that such release does not convert the amount into an irrevocable or unconditional benefit for the complainant. Its treatment remains subject to the statutory consequences prescribed by Section 148(3).
The judgment also demonstrates the importance of the result of the criminal appeal. A conviction at the trial stage may lead to an order for payment of compensation and a corresponding deposit during the appeal, but if the conviction is subsequently overturned and the accused is acquitted, the complainant cannot continue to retain money that was released only during the pendency of the appeal. The statutory scheme seeks to balance the interests of both parties by permitting release during the appeal while simultaneously providing for repayment if the conviction ultimately fails.
Practical Takeaways for Lawyers and Litigants
For complainants in Section 138 proceedings, the judgment serves as a reminder that money received under Section 148 during an appeal should not be treated as permanently realised compensation unless the legal proceedings ultimately support such entitlement. The complainant must remain conscious of the statutory repayment obligation because an acquittal can trigger the requirement to return the amount along with the applicable interest.
For accused persons challenging a conviction under Section 138, the judgment confirms the significance of the proviso to Section 148(3). If the conviction is ultimately set aside and the accused is acquitted, the amount released to the complainant during the appeal is not intended to remain with the complainant. The statutory framework specifically contemplates repayment following acquittal.
The judgment is also relevant from a procedural perspective because the High Court acknowledged that the refund order ordinarily ought to have been passed by the appellate court rather than the trial court. However, the Court did not consider that procedural issue sufficient, in the circumstances of the case, to invalidate the refund direction. The subsequent conduct and orders passed during the litigation were considered while deciding whether interference was warranted.
Key Takeaways
- Section 148 of the NI Act permits the appellate court to direct the accused to deposit at least 20% of the fine or compensation awarded by the trial court.
- The appellate court may release the deposited amount to the complainant during the pendency of the appeal.
- If the accused is ultimately acquitted, Section 148(3) requires repayment of the amount released to the complainant.
- Repayment under the proviso to Section 148(3) is accompanied by interest at the bank rate published by the RBI and applicable at the beginning of the relevant financial year.
- A complainant cannot claim an unconditional right to retain the amount merely because it was released during the pendency of the appeal.
- An undertaking given by the complainant before the appellate court to refund the amount subject to the result of the appeal can reinforce the repayment obligation.
- The Delhi High Court observed that the refund order ought to have been passed by the appellate court, although it declined to interfere with the order solely on that procedural ground in the circumstances of the case.
Frequently Asked Questions
Can a complainant keep money received under Section 148 of the NI Act if the accused is acquitted?
No. The Delhi High Court held that the proviso to Section 148(3) requires the complainant to repay the amount released to him when the accused is acquitted in the appeal. The repayment is also required to be made with the interest prescribed by the provision.
What was the amount involved in Arun Malhotra v. State Govt. of NCT of Delhi?
The dispute concerned ₹5,44,000, representing 20% of the ₹27,20,000 fine/compensation imposed by the trial court. The amount had been deposited pursuant to an order under Section 148 of the NI Act and was subsequently released to the complainant during the appeal.
What happened to the conviction of the accused?
The trial court had convicted the accused persons under Section 138 of the NI Act. However, the appellate court subsequently set aside the judgment of conviction and sentence and acquitted both accused persons on 30 October 2023.
Does Section 148 require repayment with interest after acquittal?
Yes. The proviso to Section 148(3) states that where the appellant is acquitted, the complainant must repay the amount released to him along with interest at the bank rate published by the Reserve Bank of India and prevalent at the beginning of the relevant financial year.
Did the Delhi High Court say that the trial court should have passed the refund order?
The High Court observed that the refund order should have been passed by the appellate court rather than the trial court. However, considering the subsequent developments and the conduct surrounding compliance with the Court’s directions, it declined to set aside the order solely on that ground.
What did the Supreme Court do regarding the ₹5,44,000?
The Supreme Court dismissed the Special Leave Petition on 22 August 2025 and clarified that ₹5,44,000 was to be deposited before the appellate court and maintained in a short-term interest-bearing fixed deposit in a nationalised bank until further orders of the High Court.
Conclusion
The Delhi High Court’s decision in Arun Malhotra v. State Govt. of NCT of Delhi & Anr. clarifies the legal consequence of an acquittal where compensation has been released to the complainant under Section 148 of the Negotiable Instruments Act during the pendency of an appeal. The Court relied upon the express language of Section 148(3), particularly its proviso, and found that there was no basis for permitting the complainant to retain the amount after the conviction had been set aside.
The decision is particularly important because it demonstrates that the amount deposited under Section 148 remains connected to the outcome of the appeal. Where the accused is ultimately acquitted, the complainant’s entitlement to retain the amount comes to an end and repayment follows under the statutory scheme. In the present case, that conclusion was further supported by the complainant’s own undertaking before the appellate court to repay the amount subject to the final disposal of the appeal. Since the appeal ended in acquittal, the Delhi High Court held that the complainant was bound to refund ₹5,44,000 and dismissed the petition challenging the refund direction.
