Punjab & Haryana High Court: Bail Can’t Be Denied Where Appeal’s Final Adjudication Pending Over Non-Payment Of 20% Of Compensation Amount U/S 148 NI Act

The Punjab and Haryana High Court held that the right of bail cannot be taken away by the Appellate Court, where final adjudication of the Appeal is pending, due to non-payment of 20% of the compensation amount under Section 148 of the Negotiable Instruments Act, 1881 (NI Act).

The Court held thus in two Petitions filed by M/s Coromandel International Limited against Shri Ambica Sales Corporation and Shri Ambalica Agro Solutions.

A Division Bench comprising Justice Anoop Chitkara and Justice Sanjay Vashisth observed, “… the answer to the third proposition is that the right of bail cannot be taken away by the Appellate Court, where final adjudication of the appeal is pending, due to non-compliance with the direction of paying 20% of the compensation amount under Section 148 of the NI Act. Whenever an Appellate Court directs a deposit under Section 148 of the NI Act and imposes conditions on the suspension of sentence, such conditions must be just conditions.”

The Bench clarified that non-deposit of 20% of the compensation or fine amount would not disentitle the accused from availing any of his substantive rights, including the right of Appeal.

Advocates Ashok Singla and Ankush Singla represented the Petitioner while Advocate Deepender Singh was appointed as the Amicus Curiae.

Issues for Consideration

The two connected cases were placed before the Division Bench of the High Court to answer the following legal propositions –

(a) Whether imposition of condition to deposit 20% of the compensation amount awarded by the Trial Court, is sustainable or not, while deciding the application for suspension of sentence in an Appeal, when the Judgment of conviction and Order of sentence is still awaiting confirmation?

(b) Whether the right of the convict-Appellant being on bail in pending Appeal, can be subjected to the compliance of direction to pay 20% of the compensation amount under Section 148 of the NI Act?

(c) Whether the right of bail can be taken away by the Appellate Court, where final adjudication of the Appeal is pending, due to non-compliance of the direction to pay 20% of the compensation amount under Section 148 of the NI Act, for any justifiable or un-justifiable reason, as discussed in the cases of Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. & Ors. (2003); and Muskan Enterprises and another v. State of Punjab and another (2024)?

(d) Whether it is a pre-condition to deposit 20% of the compensation amount awarded by the Trial Court, for getting an Appeal decided?

Court’s Observations

In view of the first the issue, the High Court said, “… After analyzing the statutory provision vis-à-vis the judicial precedents referred to above, the answer to the first proposition is that the imposition of condition to deposit 20% of the compensation amount awarded by the Trial Court, is sustainable, while deciding the application for suspension of sentence in an appeal, when the judgment of conviction and order of sentence is still awaiting confirmation.”

With regard to the second issue, the Court reiterated that when an Appellate Court suspends the sentence on a condition, then the failure to comply with that condition adversely affects the continuation of the suspension.

“The Appellate Court that has suspended the sentence on a condition, after observing non-compliance, could reasonably hold that the suspension stood vacated due to the non-compliance, and it is the responsibility of the said Appellate Court, which granted the suspension, to consider the non-compliance and make an appropriate decision. Nonetheless, non-compliance with the suspension condition is enough to declare that the suspension has been vacated”, it noted.

Coming to the third issue, the Court observed that imposition of heavy conditions, which the Appellant is unable to meet, would amount to denial of bail to him, though it has been so ordered in view of the existing provision and the end result of doing so would be to keep the Appellant in jail, even in cases where they could have enjoyed their liberty by coming out on bail under normal circumstances.

“Here it requires to be understood that once the issue regarding deposit of 20% of the compensation or fine amount, payable under Section 148 of NI Act, is decided by the concerned Appellate Court by following the spirit of the observations made in the judgments of Jamboo Bhandari (supra) and Muskan Enterprises (supra), and condition, if any, is imposed while suspending the sentence, the same would be deemed to be just and fair, and undoubtedly such condition requires its fulfillment at the end of the appellant, who seeks suspension of sentence”, it emphasised.

With respect to the fourth issue, the Court explained that 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 offence under Section 138 of the NI Act is bailable, and when in a complaint, the summons is issued against an accused, bail is a right subject to the furnishing of bonds. … If the trial results in a conviction and consequent sentence, fine, and compensation, it is the free will of every convict, whether to undergo the sentence or to challenge it before the Appellate Court by filing an Appeal”, it further noted.

The Court enunciated that the very purpose of Section 430 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) which corresponds to Section 389 of the Criminal Procedure Code, 1973 (CrPC) is to restore the liberty curtailed post-conviction until the decision of the Appeal challenging such conviction and sentence.

“When the convict challenges the conviction, sentence, or compensation by filing an appeal, the requirement to deposit 20% or more of the fine amount or compensation is not an absolute rule and is subject to exceptions mentioned in Jamboo Bhandari (supra) and Muskan Enterprises (supra), it can be reduced to below the statutory minimum of 20% or even waived in exceptional cases by assigning reasons”, it also observed.

Furthermore, the Court held that the deposit of a minimum 20% amount is not an absolute rule and the legislative sanction given to an Appellate Court to direct an Appellant who has challenged the conviction, sentence, and compensation amount, by filing an Appeal, to deposit at least 20% of the compensation amount under Section 148 of the NI Act, miserably fails on the proportionality test.

“The provision of Section 148 is based on proclivities and thus arbitrary; on the contrary, as per the literal and practical meaning, it does not authorize the Appellate Court to suspend the sentence by mandatorily imposing a condition of deposit. The purpose Section 148 intended to achieve was to ensure that at least 20% of the compensation amount is handed over to the holder of the cheque whose debt or other liability amount was withheld due to the dishonor of the cheque. However, due to ambiguous drafting because of the absence of clear procedures for quick recovery, e.g., freezing bank accounts to the extent of the deposit, attachment of property, etc., has led to the recovery of the deposits by imposition of conditions while suspending the sentence in a bailable offence”, it remarked.

Conclusion

The Court was of the view that suspending the sentence based on the deposit does not affect juristic persons because they cannot be imprisoned and thus cannot seek a suspension of sentence or Appeal, as these are statutory rights that cannot be subjected to the deposit.

“Given the above, the legislatures’ dominant purpose has failed miserably on two counts; first it does not impact juristic persons, and second, individuals whose cheques are often security cheques taken by the money lenders, and these individuals face forced recoveries, which may discourage some from even challenging their convictions, before the first appellate Court itself, disconnecting rationality behind the legislative objectives that section 148 NI Act projected to achieve, by not affecting the juristic persons on the one hand and discouraging the impoverished on the other, and thus, miserably fails to strike a fair, rationale, and a reasonable balance between the obligations of elected representatives towards the society’s poorest segments, who at the time of emergency situations when they are in urgent need of money, the financial institutions rarely give any loan or immediate loan and these poor people, who have a weaker community support, turn to the money lenders, who in turn, mostly keep blank signed undated cheques as security for unsecured debts”, it added.

The Court, therefore, concluded that whenever the deposits are expensive than the liberty, and the Appellate Courts are convinced that the convicts are not in a position to deposit and likely to forego their liberty even when the first Appeal is yet to be decided, the Appellate Courts must make efforts to prioritize hearing Appeals filed against the convictions under Section 148 NI Act and decide those preferably within sixty days of filing, and not later than ninety days, which clearly aligns with the legislators’ intentions; however, the time of sixty days should be extended to the extent to which the decision of the Appeal is delayed because of the Complainant.

Accordingly, the High Court sent back the matters to the Single Bench and directed the Registry to send copies of its Order to all the Judicial Officers in the States of Punjab, Haryana, and the Union Territory of Chandigarh.

Cause Title- M/s Coromandel International Limited v. Shri Ambica Sales Corporation (Case Number: CRM-M-7799-2025)

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