In a significant ruling clarifying the scope of Section 148 of the Negotiable Instruments Act, 1881 (NI Act), a Division Bench of the Punjab and Haryana High Court has held that directing a convict to deposit a minimum of 20% of the fine or compensation is not a mandatory pre-condition for suspending their sentence pending appeal. The court ruled that appellate courts possess the discretion to waive or reduce this amount in exceptional cases for reasons to be recorded in writing.
The judgment was delivered by a bench comprising Justice Anoop Chitkara and Justice Sanjay Vashisth on September 24, 2025. The bench was constituted to answer four key legal questions regarding the interplay between an appellant’s right to bail and the appellate court’s power to order a deposit under Section 148 of the NI Act.
The court concluded that the right to seek suspension of sentence is a statutory right independent of the deposit requirement and that an appeal cannot be dismissed solely for non-deposit of the compensation amount.
Background of the Case
The Division Bench was tasked with adjudicating the following legal propositions arising from two connected petitions filed by M/s Coromandel International Limited:
- Whether imposing a condition to deposit 20% of the compensation amount is sustainable while suspending a sentence in an appeal against conviction under Section 138 of the NI Act.
- Whether the right of a convict to be on bail pending appeal can be subjected to the compliance of a direction to pay 20% of the compensation amount.
- Whether the right to bail can be revoked by the appellate court due to non-compliance with the deposit direction.
- Whether the deposit of 20% of the compensation is a pre-condition for an appeal to be decided on its merits.
Arguments of the Parties
Mr. Ashok Singla, counsel for the petitioner, argued that the Supreme Court has already settled the law, affirming that appellate courts can impose the condition to deposit a minimum of 20% of the compensation amount as stipulated under Section 148 of the NI Act.
Mr. Deepender Singh, acting as Amicus Curiae, presented a counter-argument. He submitted that the right to suspension of sentence under Section 389 of the Code of Criminal Procedure, 1973 (CrPC) (now Section 430 of the Bharatiya Nagarik Suraksha Sanhita, 2023) is an independent statutory right. Citing the Supreme Court’s decision in G.J. Raja v. Tejraj Surana, he contended that the remedy for non-payment of compensation is recovery through the procedure established under Section 421 CrPC (now Section 461 BNSS), and it should not be a pre-condition for granting bail.
The Amicus Curiae further argued that cancelling bail for non-payment would be an unduly harsh measure, especially since the offence under Section 138 is bailable. He highlighted that while Section 148 provides for the refund of the deposited amount upon acquittal, it offers no remedy for the incarceration suffered by an appellant who was unable to make the deposit.
Court’s Analysis and Decision
The High Court meticulously analyzed each legal proposition by examining the statutory provisions and relevant Supreme Court precedents.
On the First Proposition: Sustainability of the Deposit Condition
The Court held that imposing a condition to deposit 20% of the compensation amount is sustainable. However, it clarified that this is not an absolute rule. Relying on the Supreme Court judgments in Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. and Muskan Enterprises & Anr. v. The State of Punjab & Anr., the bench stated, “normally, Appellate Court will be justified in imposing the condition of deposit as provided in Section 148. However, in a case where the Appellate Court is satisfied that the condition of deposit of 20% will be unjust or imposing such a condition will amount to deprivation of the right of appeal of the appellant, exception can be made for the reasons specifically recorded.”
The Court further observed that the power to grant a full exemption implies the power to reduce the deposit to below 20%, depending on the convict’s financial capacity.
On the Second and Third Propositions: Linking Bail with Deposit Compliance
Addressing whether the right to bail can be subjected to and taken away for non-compliance, the Court navigated between established precedents. While acknowledging the Supreme Court’s observation in Surinder Singh Deswal v. Virender Gandhi that non-compliance can lead to the vacation of the suspension of sentence, the bench balanced this with the principles of liberty laid down in cases like Guddan alias Roop Narayan v. State of Rajasthan.
The Court concluded that “the right of bail cannot be taken away by the Appellate Court… due to non-compliance with the direction of paying 20% of the compensation amount.” It emphasized that any conditions imposed must be just and should not be so onerous as to effectively deny bail, particularly in a case involving a bailable offence with a maximum sentence of two years.
On the Fourth Proposition: Deposit as a Pre-condition for Appeal
The Court definitively answered that depositing 20% of the compensation is not a pre-condition for getting an appeal decided on its merits. Citing the Supreme Court’s rulings in Noor Mohammed v. Khurram Pasha and Vijay D. Salvi v. State of Maharashtra, the bench held that non-deposit cannot disentitle an accused from their substantive right of appeal. “To get the appeal decided, there cannot be any precondition for depositing the amount ordered under Section 148 of the NI Act by the Appellate Court,” the judgment stated.
Final Ratio and Directions
In its cumulative findings, the High Court held that the statutory rights to appeal and seek suspension of sentence are independent of the directive power under Section 148 of the NI Act.
The bench also made a critical observation on the proportionality of Section 148, noting that it “miserably fails on the proportionality test” as it does not impact juristic persons (who cannot be imprisoned) and disproportionately affects impoverished individuals, potentially discouraging them from challenging their convictions.
As a solution, the Court advised that “whenever the deposits are expensive than the liberty,” appellate courts should prioritize hearing such appeals and decide them preferably within sixty to ninety days, which aligns with the legislative intent of speedy disposal.
The matters were sent back to the Single Bench for decisions on their individual merits in light of the propositions answered.
