Legal Review and Analysis of Bharat Mittal vs State of Rajasthan & Ors 2025 INSC 1459
Case Synopsis
Bharat Mittal vs State of Rajasthan & Ors., 2025 INSC 1459.
Synopsis Interpreting the 'Drawer': A Referral for Clarification. The Supreme Court, confronting a conflict between strict textualism and legislative intent, has referred to a Larger Bench the pivotal question of whether directors convicted vicariously under the NI Act can be ordered to deposit compensation pending appeal, when the company-drawer is shielded by legal impediments, highlighting the need for a purposive construction of the statute's remedial framework.
1. Heading of the judgment
Case Title: Bharat Mittal vs State of Rajasthan & Ors
Citation: 2025 INSC 1459
Court: Supreme Court of India
Judges: Justice Aravind Kumar, Justice N.V. Anjaria
Date of Judgment: December 18, 2025
2. Related laws and sections
Negotiable Instruments Act, 1881 (NI Act):
Section 7: Defines "drawer" as the maker of a cheque.
Section 138: Criminalizes the dishonor of a cheque due to insufficient funds.
Section 141: Provides for vicarious liability of every person in charge of, and responsible to, a company for the conduct of its business, for an offence committed by the company under Section 138.
Section 143A: Empowers a trial court to order the "drawer" to pay interim compensation during trial.
Section 148: Empowers an appellate court to order the convict-appellant (the "drawer") to deposit a minimum of 20% of the fine/compensation awarded, pending appeal.Code of Criminal Procedure, 1973 (CrPC): Sections 357(3) (compensation), 374 (appeal), 389 (suspension of sentence).
Companies Act, 1956: Sections relating to winding up of a company.
Key Precedents Discussed:
Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., (2012) 5 SCC 661.
Shri Gurudatta Sugars Marketing P. Ltd. v. Prithviraj Sayajirao Deshmukh, 2024 SCC OnLine SC 1800.
Bijay Agarwal v. Medilines, 2024 SCC OnLine SC 4094.
Jamboo Bhandari v. M.P. State Industrial Development Corporation, (2023) 10 SCC 446.
3. Basic judgment details
Facts of the Case
The appellant, Bharat Mittal, was a director of Shiv Mahima Ispat Pvt. Ltd. The company issued a cheque which was dishonored. A complaint under Section 138 of the NI Act was filed against both the company and its directors. During the pendency of the trial, the company was ordered to be wound up. Consequently, the trial proceeded only against the appellant-director, who was convicted and sentenced to imprisonment and directed to pay compensation. On appeal, the Sessions Court suspended his sentence but imposed a condition, under Section 148 of the NI Act, that he must deposit 20% of the compensation amount (₹8.10 crores). The appellant challenged this deposit condition, arguing that as a director and not the juristic "drawer" (the company), he could not be compelled to deposit under Section 148, especially since the company was under liquidation.
Issues Framed by the Court
The central legal question was
"Whether, upon a conviction under Section 138 read with Section 141, the appellate deposit contemplated by Section 148 may be directed against a convicted director/authorized signatory, or whether such deposit is confined to the juristic 'drawer' alone in all situations?"
Ratio Decidendi (Court's Reasoning)
The two-judge bench of the Supreme Court undertook a detailed analysis but ultimately expressed its inability to agree with recent precedents on the issue. The core reasoning is as follows:
Conflict with Previous Precedents: The Court meticulously analyzed the rulings in Gurudatta Sugars and Bijay Agarwal, where Coordinate Benches held that the term "drawer" in Sections 143A and 148 refers strictly to the company (the juristic entity) and cannot include directors or authorized signatories. These rulings were based on a strict, literal interpretation of the statutory definition.
Need for Purposive Interpretation: The present bench disagreed with this strict literalism. It emphasized that proceedings under Section 138 of the NI Act are "quasi-criminal" and predominantly compensatory in nature. The legislative intent behind introducing Sections 143A and 148 via the 2018 Amendment was to provide interim relief to complainants and deter frivolous appeals causing delay.
Flaw in Literal Interpretation: The Court reasoned that if the strict interpretation from Gurudatta and Bijay Agarwal is followed, it would create an anomaly and defeat legislative intent. In cases where a company cannot be prosecuted due to a legal snag (like winding up), the person vicariously liable and convicted (the director) would escape the deposit condition meant to secure the complainant's interest during appeal. This would render the remedial purpose of Section 148 "nugatory" in a large category of cases.
No Blanket Exemption: The Court held that a director in such situations cannot claim a blanket exemption from the deposit under Section 148. Whether exemption is warranted should depend on the facts of each case, to be evaluated under the "exceptional circumstances" doctrine recognized in Jamboo Bhandari.
Reference to Larger Bench: Since the bench was of co-equal strength to those that decided Gurudatta and Bijay Agarwal, it could not outright overrule them. Therefore, expressing respectful disagreement, the Court referred the substantial question of law to a Larger Bench for an authoritative pronouncement.
4. Core principle and judicial analysis
The Central Issue: Literal Text vs. Legislative Intent
The core of this judgment is a direct judicial conflict over statutory interpretation in a commercially significant area of law. The issue pivots on whether the term "drawer" in Section 148 NI Act should be bound by its technical definition in Section 7 (favoring the company alone) or be interpreted purposively to include persons held vicariously liable and convicted when the company is legally immune.
The Supreme Court's Address: Advocating for a Purposive Construction
The Court, in its analysis, sided with a purposive and harmonious construction of the statute. It argued that:
The 2018 Amendment had a clear remedial objective: to alleviate the hardship of payees and curb delay.
A strict interpretation creates an illogical gap: a convicted individual, who is personally facing punishment, can avoid the compensatory deposit meant to balance the rights of the appellant and the complainant during the appeal.
The quasi-criminal, compensatory nature of the NI Act proceedings demands an interpretation that advances the remedy, not one that allows a technicality to obstruct it.
The Court concluded that the earlier view immunizes a class of convicted persons from a key procedural safeguard for complainants, which is contrary to the amendment's intent. However, bound by judicial discipline, it stopped short of deciding and instead referred the question for resolution by a Larger Bench.
5. Final outcome and directions
The Supreme Court did not decide the merits of the appellant's case. It made the following specific directions:
Expressed Disagreement: The bench recorded its inability to concur with the interpretations in Shri Gurudatta Sugars Marketing Pvt. Ltd. and Bijay Agarwal v. Medilines.
Referral to Larger Bench: It referred the following substantial question of law to a Larger Bench for an authoritative decision:
*"Whether, upon a conviction under Section 138 read with Section 141, the appellate deposit contemplated by Section 148 may be directed against a convicted director/authorized signatory, or whether such deposit is confined to the juristic 'drawer/company' alone in all scenarios?"*Administrative Direction: The registry was directed to place the papers before the Hon'ble Chief Justice of India for the constitution of the Larger Bench.
6. MCQ Questions based on the judgment
Question 1: In Bharat Mittal vs State of Rajasthan & Ors. (2025 INSC 1459), why did the Supreme Court refer the interpretation of "drawer" in Section 148 of the NI Act to a Larger Bench?
a) To clarify the procedure for winding up a company.
b) Because it agreed with the strict literal interpretation in the Bijay Agarwal case.
c) Because it disagreed with earlier precedents and sought an authoritative ruling on whether a purposive interpretation should include vicariously liable directors.
d) To determine the exact percentage of deposit required under Section 143A.
Question 2: According to the Supreme Court's analysis in the Bharat Mittal judgment, what is the primary character of proceedings under Section 138 of the Negotiable Instruments Act that justifies a purposive interpretation of Sections 143A and 148?
a) Purely criminal and punitive.
b) Strictly formal and procedural.
c) Quasi-criminal and predominantly compensatory.
d) Entirely civil and contractual.
Blog Posts
