148 NI Act | Deposit of 20% Compensation Is Not a Precondition for Bail or Appeal:  Punjab & Haryana High Court

“Liberty of a Convict Cannot Be Denied Merely for Inability to Pay” – Punjab and Haryana High Court in a notable ruling authored by Justice Sanjay Vashisth, provided crucial clarity on the interplay between liberty and statutory financial conditions under Section 148 of the Negotiable Instruments Act, 1881. Disposing of six connected petitions filed under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), the Court held that the requirement to deposit 20% of compensation while suspending sentence during appeal is not mandatory and cannot be enforced mechanically at the cost of liberty.

The petitions arose from multiple cases where Appellate Courts had imposed conditions requiring deposit of 20% of the compensation amount as a prerequisite for suspending sentence under Section 138 of the NI Act. In several instances, these conditions were declared to result in automatic cancellation of bail upon default. The High Court categorically ruled such clauses to be legally unsustainable without proper judicial application of mind.

“The right to appeal and the right to bail are substantive rights. Section 148 does not override these rights, nor does it prescribe that non-deposit would forfeit them,” the Court observed, setting aside automatic vacation of bail for non-compliance of deposit orders.

“Section 148 NI Act Does Not Override Liberty” – High Court Applies Division Bench Ruling in Coromandel Case

Relying extensively on the Full Bench ruling in M/s Coromandel International Ltd. v. Shri Ambica Sales Corporation, 2025 (4) RCR (Cri) 490, the Court emphasized that Section 148 empowers appellate courts to direct deposit of compensation, but such power must be exercised judiciously and not as a rule of thumb.

“It would amount to re-writing Section 148 if courts start treating deposit as a prerequisite for filing or hearing an appeal,” Justice Vashisth noted. The Court referred to Paragraph 57 of the Coromandel judgment, which declared in no uncertain terms: “To get the appeal decided, there cannot be any precondition for depositing the amount ordered under Section 148 of the NI Act.”

It was clarified that neither the NI Act nor the BNSS mandates forfeiture of bail or suspension solely due to non-deposit of compensation.

“Bail Is Not a Bargaining Chip” – Appellate Courts Must Apply Mind to Liberty Versus Financial Capacity

In a direct rebuke to appellate courts treating deposit conditions as absolute, the Court noted that failure to deposit cannot ipso facto result in cancellation of bail without judicial satisfaction regarding the conduct and capacity of the appellant. “Whenever deposits become more expensive than liberty, the court’s duty is to safeguard the individual’s fundamental right,” the judgment reiterated.

The petitioners had cited reasons such as financial hardship, pending settlements, and inadvertent delay in compliance. In response, the High Court observed: “Financial incapacity, unless found to be fictitious or evasive, must be given due consideration before liberty is curtailed.”

The Court further stated, “Liberty cannot be made contingent on payment alone, particularly when the appeal is pending adjudication and the sentence is yet to attain finality.”

“Courts Must Not Weaponize Section 148 to Deny Justice” – Reconsideration of Deposit Conditions Ordered Within 15 Days

The High Court remanded all six matters to the respective appellate courts with a clear directive to reconsider the conditions imposed under Section 148 NI Act afresh, in line with the legal position laid down in Coromandel International. It categorically ordered that until such reconsideration is complete, the deposit conditions shall remain inoperative, and bail granted to the appellants shall not be cancelled.

In a strong procedural safeguard, the Court further mandated:
“The said exercise shall be undertaken by the appellate courts not later than 15 days from receipt of this order. If the appellate court finds the deposit unaffordable vis-à-vis liberty, it must prioritize hearing of the appeals within 60 to 90 days.”

This ensures that neither delay nor financial incapacity becomes a tool to punish an accused awaiting appeal.

“Section 148 Is Discretionary, Not a Weapon of Coercion” – High Court Preserves Right to Appeal and Bail

The Court rejected arguments made by the respondents that Section 148 imposes a strict liability to deposit compensation. Justice Vashisth clarified, “Statute provides discretion, not compulsion. Liberty is not to be exchanged for a financial deposit unless reasons warrant it.”

Citing Surinder Singh Deswal, Muskan Enterprises, Jamboo Bhandari, and Dalip Dahanukar, the Court harmonized precedent with the legislative intent of the BNSS and the NI Act. It held:
“Section 148 is a tool to prevent abuse of process, not to deny liberty. Where appeals are pending, and no mala fides are alleged, failure to deposit is not enough to cancel bail.”

In conclusion, the Court preserved the accused’s right to appeal and bail, while placing an obligation on appellate courts to act within constitutional parameters when imposing financial conditions. “Each case must turn on its own facts — judicial discretion must guide the imposition of financial conditions, not blanket directives.”

Date of Decision: December 26, 2025