The Uttarakhand High Court has held that the statutory minimum deposit of 20 percent of the fine or compensation under Section 148 of the Negotiable Instruments Act is mandatory and cannot be reduced by the appellate court, setting aside orders that reduced the deposit to 10 percent and cancelled bail for non-compliance with the reduced amount.
Background & Facts
The Dispute
The applicant, Chaman Das, was convicted for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 by the Additional Chief Judicial Magistrate, Haridwar, in Criminal Case No. 3356 of 2024. The conviction and sentence were challenged before the Sessions Judge, Haridwar, leading to a series of orders on deposit conditions and bail that formed the subject of this criminal miscellaneous application.
Key Facts
- The applicant was convicted vide judgment and order dated 28.07.2025 passed by the learned Additional Chief Judicial Magistrate, Haridwar
- The applicant was sentenced to undergo rigorous imprisonment for a period of six months and directed to pay a fine of ₹9,50,000/-
- Of the fine amount, ₹9,30,000/- was directed to be paid to respondent no. 2 towards compensation, while ₹20,000/- was directed to be deposited in the State Treasury
- In default of payment of fine, the applicant was directed to undergo additional simple imprisonment for a period of one month
- Aggrieved by the conviction, the applicant preferred Criminal Appeal No. 116 of 2026 before the learned Sessions Judge, Haridwar, along with an application seeking suspension of sentence and grant of bail
Procedural History
The case progressed through the following chronological sequence:
- 15.06.2026: Learned Sessions Judge granted bail to the applicant
- 17.07.2026: Learned Sessions Judge directed the applicant to deposit 20% of the fine amount before the learned trial court within a period of 30 days
- 24.08.2026: Learned Sessions Judge allowed the applicant's modification application and reduced the deposit amount from 20% to 10%
- 22.09.2026: Learned Sessions Judge rejected the applicant's further application for extension of one month to deposit the reduced amount and cancelled the bail granted to the applicant
- 31.10.2026: Present criminal miscellaneous application decided by the High Court
The Parties' Positions
The applicant contended that Section 148 of the NI Act prescribes a statutory minimum of 20% which the appellate court cannot reduce. The applicant further argued that non-compliance was due to financial inability, not deliberate disobedience, and that the Sessions Judge failed to consider the pleaded circumstances before cancelling bail.
Relief Sought
The applicant sought quashing of the orders dated 17.07.2026 and 22.09.2026 passed by the learned Sessions Judge, Haridwar, in Criminal Appeal No. 116 of 2026.
The Legal Issue
The central question was whether the appellate court, having imposed a deposit condition under Section 148 of the Negotiable Instruments Act, can reduce the deposit amount below the statutory minimum of 20 percent of the fine or compensation awarded by the trial court, and whether bail can be cancelled for non-deposit of such an illegally reduced amount.
Arguments Presented
For the Applicant
Learned counsel for the applicant submitted that Section 148 of the NI Act empowers the appellate court to direct an appellant convicted under Section 138 to deposit an amount which shall not be less than 20% of the fine or compensation awarded by the trial court. Counsel argued that once the appellate court decides to impose a deposit condition, it cannot reduce the amount below the statutory minimum of 20%. Counsel further submitted that the applicant had not deliberately disobeyed the condition but was unable to comply due to financial constraints, and that the appellate court rejected the extension prayer without properly considering the circumstances. Reliance was placed on Muskan Enterprises and Another v. The State of Punjab and Another, reported in (2024) 20 SCC 85, where the Supreme Court observed that once the appellate court considers a deposit necessary, it may in an appropriate case direct the appellant to deposit an amount exceeding 20% of the fine or compensation awarded by the trial court.
For the Respondent
The respondent, represented by Mr. Pradeep Lohani, A.G.A., did not raise specific contentions recorded in the judgment beyond opposing the application.
The Court's Analysis
The Court examined the scope of Section 148 of the Negotiable Instruments Act, which mandates that the appellate court may order the appellant to deposit such sum as it considers appropriate, which shall not be less than 20% of the fine or compensation awarded by the trial court. The Court noted that the statutory language "shall not be less than 20%" establishes a mandatory floor.
The Court relied on the Supreme Court's decision in Muskan Enterprises and Another v. The State of Punjab and Another (2024) 20 SCC 85, which clarified that once the appellate court considers a deposit necessary, it may direct the appellant to deposit an amount exceeding 20% of the fine or compensation. The implication is clear: the 20% threshold is a minimum, not a maximum, and the appellate court lacks jurisdiction to go below it.
The Court found that the learned Sessions Judge, by order dated 24.08.2026, had reduced the deposit from 20% to 10%, which was contrary to the statutory mandate. Subsequently, the rejection of the extension application and cancellation of bail vide order dated 22.09.2026 for non-deposit of the illegally reduced amount could not be sustained. The Court held that the impugned orders were passed without jurisdiction inasmuch as they violated the statutory minimum prescribed by Section 148.
"In view of the aforesaid legal position, the impugned orders dated 17.07.2026 and 22.09.2026, passed by learned Sessions Judge, Haridwar, cannot be sustained and are liable to be set aside."
The Verdict
The applicant succeeded. The High Court set aside the impugned orders dated 17.07.2026 and 22.09.2026 passed by the learned Sessions Judge, Haridwar, in Criminal Appeal No. 116 of 2026. The criminal miscellaneous application was disposed of. The effect is that the bail granted on 15.06.2026 stands restored, and the illegal reduction of deposit to 10% is nullified.
What This Means For Similar Cases
Statutory Minimum Is Non-Negotiable
The 20% deposit floor under Section 148 NI Act is a jurisdictional requirement, not a discretionary guideline. Appellate courts cannot reduce the deposit below this threshold even on grounds of financial hardship. Practitioners must ensure that any deposit condition imposed complies with the statutory minimum; orders reducing it are liable to be set aside.
Bail Cancellation For Non-Compliance With Illegal Condition Is Impermissible
Where an appellate court imposes a deposit condition below the statutory minimum and subsequently cancels bail for non-compliance with that illegal condition, the cancellation is unsustainable. The bail originally granted remains in effect. Counsel should challenge both the reduction order and the consequential bail cancellation in a single proceeding.
Financial Inability Does Not Override Statutory Mandate
While financial constraints may be relevant for seeking extension of time to deposit the statutory minimum, they cannot justify a reduction below 20%. The proper remedy is to seek additional time to arrange the mandated amount, not a reduction of the amount itself. The Supreme Court in Muskan Enterprises affirmed that the appellate court may direct deposit exceeding 20% in appropriate cases, reinforcing that 20% is the absolute floor.
- Always verify that deposit conditions under Section 148 meet the 20% minimum
- Challenge any reduction below 20% immediately as jurisdictionally defective
- Seek extension of time for deposit rather than reduction of amount
- Cite Muskan Enterprises v. State of Punjab (2024) 20 SCC 85 for the proposition that 20% is a mandatory floor
