Punjab & Haryana High Court Holds Deposit of 20% Compensation in NI Act Appeals Not Automatic; Sets Aside Mechanical Suspension Orders and Remands Matters for Fresh Consideration
Case Name: V.K. Construction and Another v. Tej Veer and Another
Date of Judgment: 26 December 2025
Citation: CRM-M-28757-2025 and connected cases
Bench: Hon’ble Mr. Justice Sanjay Vashisth
Held: The Punjab and Haryana High Court disposed of a batch of petitions challenging appellate court orders that mechanically imposed a condition of depositing 20% of compensation while suspending sentence in appeals arising from convictions under Section 138 of the Negotiable Instruments Act. The Court held that while imposition of such a condition is legally permissible under Section 148 of the NI Act, it is not automatic and must be guided by the principles laid down by the Supreme Court and the Division Bench of the High Court. The Court ruled that appellate courts are required to apply their mind to the question whether the deposit is just, reasonable, or whether exceptional circumstances warrant waiver or modification, and mechanical orders cannot be sustained.
Summary: The batch of petitions arose from complaints under Section 138 of the Negotiable Instruments Act in which the petitioners had been convicted by trial courts and had preferred appeals. While suspending sentence during pendency of the appeals, the respective appellate courts imposed a uniform condition directing the petitioners to deposit 20% of the compensation amount awarded by the trial court, failing which suspension of sentence would stand vacated.
The petitioners challenged these orders on the ground that the appellate courts had imposed the condition mechanically, without considering individual circumstances, financial capacity, or the parameters governing exercise of discretion under Section 148 of the NI Act. In some cases, applications seeking waiver or extension were rejected solely on the ground of statutory bar under Section 362 CrPC / Section 403 BNSS, without examining whether the case warranted relaxation.
The High Court examined the statutory scheme under the Negotiable Instruments Act, the Bharatiya Nagarik Suraksha Sanhita, and the jurisprudence laid down by the Supreme Court in Surinder Singh Deswal, Jamboo Bhandari, and Muskan Enterprises. The Court also relied extensively on the answers rendered by a Division Bench of the High Court in M/s Coromandel International Limited v. Shri Ambica Sales Corporation, which clarified that deposit of 20% compensation is not an absolute or inflexible rule and that liberty cannot be sacrificed mechanically at the altar of deposit.
The Court reiterated that suspension of sentence is intended to restore liberty pending appeal and that deposit conditions must be just, reasonable, and proportionate. It was held that appellate courts must consciously assess whether insisting on deposit would result in a situation where liberty becomes illusory, particularly when appeals are likely to take time. The High Court emphasised that appellate courts are duty-bound to balance the rights of the complainant with the fundamental right to personal liberty of the convict-appellant.
Decision: All the petitions were disposed of. The impugned orders passed by the respective appellate courts were set aside. The matters were remanded to the concerned appellate courts for fresh consideration of applications for suspension of sentence, strictly in accordance with the principles laid down by the Division Bench in M/s Coromandel International Limited v. Shri Ambica Sales Corporation. It was directed that until fresh orders are passed, the condition of depositing 20% compensation shall remain inoperative and bail shall not be cancelled on account of non-deposit.