R. VIJAYANversusBABY AND ANR.

                   [2011) 14 (ADDL.) S.C.R. 712


A                            R. VIJAYAN
                                   v.
                          BABY AND ANR.
                (Criminal Appeal No. 1902 of 2011)

                        OCTOBER 11, 2011
8
          [R.V. RAVEENDRAN AND R.M. LODHA, JJ.]

        Negotiable instruments Act, 1881:

c      s. 138 - Sentencing under - Respondent found guilty u/
  s.138 - Magistrate sentenced her to pay a fine of Rs.2000
  and in default to undergo imprisonment and also directed her
  to pay Rs. 20, 000 as compensation to the complainant and
  in default to undergo simple imprisonment for three months
D - Held: Magistrate having levied fine of Rs. 2, 0001-, it was
  impermissible to levy any compensation having regard to
  s.357(3), Cr.P.C. - Code of Criminal Procedure, 1973 -
  s.357(3).

       s. 138 - Methods to improve the disposal of cases ul
E s. 138 of the Act - Suggested.

       s. 138 - Purpose of enactment - Held: Cases arising ul
  s. 138 are really civil cases masquerading as criminal cases
  - The avowed object of Chapter XVII of the Act is to
F •encourage the culture of use of cheques and enhance the
  credibility of the instrument" - It provides a single forum and
  single proceeding, for enforcement of criminal liability (for
  dishonouring the cheque) and for enforcement of the civil
  liability (for realization of the cheque amount) thereby
G obviating the need for the creditor to move two different fora
  for relief - The apparent intention is to ensure that not only the
  offender is punished, but also ensure that the complainant
  invariably receives the amount of the cheque by way of
  compensation uls.357(1)(b), Cr.P.C. - Uniformity and
H                                712
            R. VIJAYAN v. BABY AND ANR.                   713


consistency in deciding similar cases by different courts, not   A
only increase the credibility of cheque as a negotiable
instrument, but also the credibility of courts of justice.

     s.143(1) - Imposition of fine - Held: s.143(1) provides
that notwithstanding anything contained in the Code of 8
Criminal Procedure, 1973, all offences under Chapter XVII of
the Act should be tried by a Judicial Magistrate of the First
Class or by a Metropolitan Magistrate and the provisions of
ss.262 to 265 of the Code (relating to summary trials) shall,
as far as may be, apply to such trials - The proviso thereto
provides that it shall be lawful for the Magistrate to pass a C
sentence of imprisonment for a term extending one year and
an amount of fine exceeding Rs.5,0001-, in case of conviction
in a summary trial under that section - In view of conferment
of such special power and jurisdiction upon the First Class
Magistrate, the ceiling as to the amount of fine stipulated in D
s.29(2) of the Code is removed-' Consequently, in regard to
any prosecution for offences punishable u/s. 138 of the Act, a
First Class Magistrate may impose a fine exceeding Rs.50001
-, the ceiling being twice the amount of the cheque.
                                                               E
      Code of Criminal Procedure, 1973:

     s.357(3) - Award of compensation - Heid: Sub-section
(3) of s.357 is categorical that compensation can be awarded
only where fine does not form part of the sentence - Where
                                                             F
the sentence imposed does not include a fine, that is, where
the sentence relates to only imprisonment, the court, when
passing judgment, can direct the accused to pay, by way of
compensation, such amount as may be specified in the order
to the person who has suffered any loss or injury by reason G
of the act for which the accused person has been so
sentenced- Sub-section (1) of s.357 provides that where the
court imposes a sentence of fine or a sentence of which fine
forms a part, the Court may direct the ftne amount to be
applied in the payment to any person of compensation for
any loss or injury caused by the offence, when compensation H
     714    SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A is, in the opinion of the court, recoverable by such person in
     a Civil Court - Thus, if compensation could be paid from out
     of the fine, there is no need to award separate compensation
     - Only where the sentence does not include fine but only
     imprisonment and the court finds that the person who has
s    suffered any loss or injury by reason of the act of the accused
     person, requires to be compensated, it is permitted to award
     compensation uls.357(3) - Negotiable instruments Act, 1881
     - Compensation.

           The accused-first respondent issued a cheque for
C    Rs.20,000 in favour of the complainant-appellant towards
     repayment of a loan. The cheque got dishonoured when
     presented for payment. The appellant sent notice to the
     first respondent but no payment was made. The appellant
     filed complaint under Section 138 of the Negotiable
D    Instruments Act before the Magistrate. The Magistrate
     found the respondent guilty under Section 138 of the Act
     and sentenced her to pay a fine of Rs.2000 and in default
     to undergo imprisonment for one month. He also directed
     the respondent to pay Rs.20,0001- as compensation to the
E    appellant and in default to undergo simple imprisonment
     for three months. The Session Judge set aside the
     conviction and sentence imposed on the first respondent.
     The High Court allowed the appeal in part. It held that the
     appellant had not discharged the burden to prove that the
·F   notice was duly served on the first respondent. As a
     consequence it restored the order of conviction passed
     by the Magistrate. However the High Court held that it
     could only restore the fine of Rs.2000/- imposed by the
     Magistrate with the default sentence but not the direction
G    for payment of compensation under section 357(3),
     Ct .P.C. as it could not co-exist with the imposition of fine.
      In the instant appeal, it was contended for the
  appellant that sections 29 and 357, Cr.P.C. and section
  138 of the Negotiable Instruments Act should be read
H harmoniously and complementarv to each other; and if
          R. VIJAYAN v. BABY AND ANR.               715

so done, compensation could be awarded in cases under      A
section 138 of the Act to meet the loss sustained by the
dishonour and that if compensation could not be
awarded for any reason, fine could be levied upto twice
the cheque amount; and, therefore, the High Court ought
to have restored the direction for payment of Rs.20,000/   B
- to the appellant either by way of compensation under
section 357(3), Cr.P.C. or from the fine under section
357(1)(b), Cr.P.C. of the Code, by increasing the fine.

    Dismissing the appeal, the Court
                                                           c
     HELD: 1. Section 138 of the Negotiable Instruments
Act provided that where a cheque is dishonoured, the
person drawing the cheque shall be deemed to have
committed an offence and shall, without prejudice to any
other provision of the Act, be punished with D
imprisonment for a term which may extend to one year
or with fine which may extend to twice the amount of the
cheque or with both. Subsequent to the judgment of the ·
Magistrate, the said Section 138 was amended (with effect
from 6.2.2003) increasing and the period of imprisonment E
imposable to two years. Sub-section (3) of section 357,
Cr.P.C. is categorical that the compensation can be
awarded only where fine does not form part of the
sentence. It is evident from Sub-Section (3) of section 357,
Cr.P.C., that where the sentence imposed does not F
include a fine, that is, where the sentence relates to only
imprisonment, the court, when passing judgment, can
direct the accused to pay, by way of compensation, such
amount as may be specified in the order to the person
who has suffered any loss or injury by reason of the act G
for which the accused person has been so sentenced.
The reason for this is obvious. Sub-section' (1) of section
357 provides that where the court imposes a sentence of
fine or a sentence of which fine forms a part, the Court
may direct the fine amount to be applied in the payment H
    716   SUPREME COURT REPORTS {2011] 14 (ADDL.) S.C.R.

A to any person as compensation for any loss or injury·
  caused by the offence, when compensation is, in the
  opinion of the court, recoverable by such person in a Civil
  Court. Thus, if compensation could be paid from out of
  the fine, there is no need to award separate
B compensation. Only where the sentence does not include
  fine but only imprisonment and the court finds that the
  person who has suffered any loss or injury by reason of
  the act of the accused person, requires to be
  compensated, it is permitted to award compensation
c under section 357(3),Cr.P.C. [Paras 5, 7, 9] [724-C-O; 725-
  0-E; 726-0-H]

        State of Punjab vs. Gurmej Singh 2002 (6) SCC 663:
    2002 (1) Suppl.SCR 427; Sivasuriyan vs. Thangavelu 2004
    (13) sec 795 - relied on.
D
       2. The difficulty arose in this case because of two
  circumstances. The fine levied was only Rs.2000/-. The
  compensation required to cover the loss/injury on
  account of the dishonour of the cheque was Rs.20,000/-
E . The Magistrate having levied fine of Rs.2,000/-, it was
  impermissible to levy any compensation having regard
  to section 357(3), Cr.P.C. The question is whether the fine
  can be increased to cover the sum of Rs. 20,000/- which
  was the loss suffered by the complainant, so that the said
  amount could be paid as compensation under section
F 357(1)(b), Cr.P.C. Section 138 of the Act authorizes the
  Magistrate to impose by way of fine, an amount which
  may extend to twice the amount of the cheque, with or
  without imprisonment. Section 29, Cr.P.C. deals with the
  sentences which Magistrates may pass. The Chief
G Judicial Magistrate is empowered to pass any sentence
  authorized by law (except sentence of death or
  imprisonment for life or imprisonment for a term
  exceeding seven years). On the other hand, sub-section
  (2) of Section 29 empowers a court of a Magistrate of First
H
              R. VIJAYAN v. BABY AND ANR.                  717

  Class to pass a sentence of imprisonment for a term not         A
  exceeding three years or fine not exceeding Rs.5,000/- or
· of both. By Act No.25 of 2005, sub-section (2) of Section
  29 was amended with effect from 23.6.2006 and the
  maximum fine that could be levied by the Magistrate of
  First Class, was increased to Rs.10,000/-. At the relevant      B
  point of time, the maximum fine that the First Class
  Magistrate could impose was Rs.5,000/-. Therefore, it was
  also not possible to increase the fine to Rs.22,000/- so that
  Rs.20,000/- could be awarded as compensation, from the
  amount recovered as fine. [Para 10) [727-A-F]                   c
      3. The first respondent-accused was a widow and
 police woman. On the facts and circumstances, the
 Magistrate thought fit to impose only a fine and not
 imprisonment. When the conviction was set aside, the
 appellant filed a revision, challenging the non-grant of         D
 compensation of Rs.20,000/-. He did not, however,
 challenge the non-imposition of sentence of
 imprisonment. The High Court was, therefore, justified in
 holding that once the sentence consists of only fine, the
 power under Section 357(3) could not be invoked for              E
 directing payment of compensation. The High Court was
 also justified in not c.onverting the sentence from fine to
 imprisonment, so as to enable itself to award
 compensation, as the facts and circumstances of the
 case did not warrant imprisonment. Therefore, the order          F
 of High Cl)urt does not call for interference. [Para 11)
 [727-G-H; 728-A-B]
     4. The difficulty caused by the ceiling imposed by
 section 29(2), Cr.P.C. has been subsequently solved by
 insertion of section 143 in the Act (by Amendment Act            G
 No.55 of 2002) with effect from 6.2.2003. Section 143(1)
 provides that notwithstanding anything contained in the
 Code, all offences under Chapter XVII of the Act should
 be tried by a Judicial Magistrate of the First Class or by
 a Metropolitan Magistrate and the provisions of sections         H
    718   SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.


f. 262 to 265 of the Code (relating to summary trials) shall,
  as far as may be, apply to such trials. The proviso thereto ··
  provides that it shall be lawful for the Magistrate to pass
  a sentence of imprisonment for a term extending one year
  and an amount of fine exceeding Rs.5,000/-, in case of
B conviction in a summary trial under that section. In view
  of conferment of such special power and jurisdiction
  upon the First Class Magistrate, the ceiling as to the
  amount of fine stipulated in section 29(2),Cr.P.C. is
  removed. Consequently, in regard to any prosecution for
c offences punishable under section 138 of the Act, a First
  Class Magistrate mi:y impose a fine exceeding
  Rs.5000/-, the ceiling being twice the amount of the
  cheque. [Para 12) [728-C-F]
      Damodar S.Prabhu vs. Sayed Baba/al H. 2010 (5) SCC
D 663: 2010 (5)  SCR 678 - relied on.
         5.1. Suggestions of methods to improve the disposal
    of cases under Section 138 of the Negotiable Instruments
    Act, 1881. It is sometimes said that cases arising under
E   section 138 of the Act are really civil cases masquerading
    as criminal cases. The avowed object of Chapter XVII of
    the Act is to "encourage the culture of use of cheques and
    enhance the credibility of the instrument". In effect, its
    object appears to be both punitive as also compensatory
F   and restitutive, in regard to cheque dishonour cases.
    Chapter XVII of the Act is an unique exercise which blurs
    the dividing line between civil and criminal jurisdictions.
    It provides a single forum and single proceeding, for
    enforcement of criminal liability (for dishonouring the
    cheque) and for enforcement of the civil liability (for
G   realization of the cheque amount) thereby obviating the
    need for the creditor to move two different fora for relief.
    This is evident from the following provisions of Chapter
    XVII of the Act. (i)The provision for levy of fine which is
    linked to the cheque amount and may extend to twice the
H   amount of the cheque (section 138) thereby rendering
            R. VIJAYAN v. BABY AND ANR.                719

 section 357(3) virtually infructuous in so far as cheque     A
 dishonour cases. (ii)The provision enabling a First Class
 Magistrate to levy fine exceeding Rs.5,000/- (Section 143)
 notwithstanding the ceiling to the fine, as Rs.5,000/-
 imposed by section 29(2) of the Code; (iii) The provision
 relating to mode of service of summons (section 144) as      B
 contrasted from the mode prescribed for criminal cases
 in section 62 of the Code; (iv) The provision for taking
 evidence of the complainant by affidavit (section 145)
 which is more prevalent in civil proceedings, as
 contrasted from the procedure for recording evidence in      c
 the Code; (v) The provision making all offences
 punishable under section 138 of the Act compoundable.
 [Para 14) [730-E-H; 731-A-E]
        5.2. The apparent intention is to ensure that not only
  the offender is punished, but also ensure that the D
  complainant invariably receives the amount of the
· cheque by way of compensation under section 357(1 )(b),
  Cr.P.C. Though a complaint under section 138 of the Act
  is in regard to criminal liability for the offence of
  dishonouring the cheque and not for the recovery of the E
  cheque amount, (which strictly speaking, has to be
  enforced by a civil suit), in practice once the criminal
  complaint is lodged under section 138 of the Act, a civil
  suit is seldom filed to recover the amount of the cheque.
  This is because of the provision enabling the court to F
  levy a fine linked to the cheque amount and the usual
  direction in such cases is for payment as compensation,
  the cheque amount, as loss incurred by the complainant
  on account of dishonour of cheque, under section 357
  (1 )(b), Cr.P.C. and the provision for compounding the G
  offences under section 138 of the Act. Most of the cases
  (except those where liability is denied) get compounded
 at one stage or the other by payment of the ch~que
  amount with or without interest. Even where the offence
  is not compounded, the courts tend to direct payment of H
  compensation equal to the cheque amount (or even
    720   SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.

A something more towards interest) by levying a fine
  commensurate with the cheque amount. A stage has
  reached when most of the complainants, in particular the
  financing institutions (particularly private financiers) view
  the proceedings under section 138 of the Act, as a
B proceeding for the recovery of the cheque amount, the
  punishment of the drawer of the cheque for the offence
  of dishonour, becoming secondary. Having reached that
  stage, if some Magistrates go by the traditional view that
  the criminal proceedings are for imposing punishment on
C the accused, either imprisonment or fine or both, and
  there is no need to compensate the complainant,
  particularly if the complainant is not a 'victim' in the real
  sense, but is a well-to-do financier or financing institution,
  difficulties and complications arise. In those cases where
  the discretion to direct payment of compensation is not
0
  exercised, it causes considerable difficulty to the
  complainant, as invariably, by the time the criminal case
  is decided, the limitation for filing civil cases would have
  expired. As the provisions of Chapter XVII of the Act
  strongly lean towards grant of reimbursement of the loss
E by way of compensation, the courts should, unless there
  are special circumstances, in all cases of conviction,
  uniformly exercise the power to levy fine upto twice the
  cheque amount (keeping in view the cheque amount and
  the simple interest thereon at 9% per annum as the
F reasonable quantum of loss) and direct payment of such
  amount as compensation. Direction to pay compensation
  by way of restitution in regard to the loss on account of
  dishonour of the cheque should be practical and realistic,
  which would mean not only the payment of the cheque
G amount but interest thereon at a reasonable rate.
  Uniformity and consistency in deciding similar cases by
  different courts, not only increase the credibility of
  cheque as a negotiable instrument, but also the credibility
  of courts of justice. [Paras 15,16) [731-E-H; 732-A-H; 733-
H A]
             R. VIJAYAN v. BABY AND ANR.                 721

      6. Proceedings under section 138 of the Act cannot        A
 be treated as civil suits for recovery of the cheque
 amount with interest. Also, compensation awarded under
 section 357(1 )(b) is not intended to be an elaborate
 exercise taking note of interest etc. There is need to have
 uniformity and consistency in decision making. In same         B
 type of cheque dishonour cases, after convicting the
 accused, if some courts grant compensation and if some
 other courts do not grant compensation, the
 inconsistency, though perfectly acceptable in the eye of
 law, will give rise to certain amount of uncertainty in the    c
 minds of litigants about the functioning of courts. Citizens
 will not be able to arrange or regulate their affairs in a
 proper manner as they will not know whether they should
 simultaneously file a civil suit or not. The problem is
 aggravated having regard to the fact that in spite of          0
 section 143(3) of the Act requiring the complaints in
 regard to cheque dishonour cases under section 138 of
 the Act to be concluded within six months from the date
 of the filing of the complaint, such cases seldom reach
 finality before three or four years let alone six months.
                                                                E
 These cases give rise to complications where civil suits
 have not been filed within three years on account of the
 pendency of the criminal cases. While it is not the duty
 of criminal courts to ensure that successful complainants
 get the cheque amount also, it is their duty to have
 uniformity and consistency, with other courts dealing          F
 with similar cases. [Para 17] [733-B-F]

      7. One other solution is a further amendment to the
 provision of Chapter XVII so that in all cases where there
 is a conviction, there should be a consequential levy of       G
 fine of an amount sufficient to cover the cheque amount
 and interest thereon at a fixed rate of 9% per annum
~interest, followed by award of such sum as
 compensation from ttie fine amount. This would lead to
 uniformity in decisions, avoid multiplicity of proceedings     H
    722     SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R


·A (one for enforcing civil liability and another for enforcing
   criminal liability) and achieve the object of Chapter XVII
   of the Act, which is to increase the credibility of the
   instrument. This is however a matter for the Law
   Commission of India to consider. [Para 18] [733-G-H; 734-
B A-BJ
                          Case Law Reference:
          2002 (1) Suppl. SCR 427      relied on        Para 7
          2004 (13) sec 795       relied on             Para 8
c
          2010 (5) SCR 678        relied on             Para 13
        CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
    No. 1902 of 2011
D       From the Judgment & Order dated 8.11.2006 of the High
    Court of Kerala at Ernakulam in Criminal Appeal No. 1071 of
    2002.

          Rajeev Dhawan, C.K. Sasi for the Appellant.
E
          G. Prakash and K. Sarada Devi for the Respondent.

          The Judgment of the Court was delivered by

          R.V. RAVEENDRAN, J. 1. Leave granted. Heard.
F
       2. The complainant in a complaint under section 138 of the
  Negotiable Instruments Act, 1881 ('Act' for short) is the
  appellant in this appeal by special leave. A cheque dated
  31.3.1995 for Rs.20,000/- issued by the first respondent drawn
G in favour of the complainant, towards alleged repayment of a
  loan was dishonoured when presented for payment. The
  appellant sent a notice dated 20.4.1995 demanding payment.
  According to the complainant, the notice was served on the first·.
  respondent but the payment was not made. Therefore on:
  25.5.1995 the appellant lodged a complaint against the first
H
             R. VIJAYAN v. BABY AND ANR.                    723
                 [R.V. RAVEENDRAN, J.]
respondent, under section 138 of the Act before the First Class       A
Magistrate -IV, (Mobile), Thiruvananthapuram. After trial, the
learned Magistrate by judgment dated 30.11.1996 found the
accused guilty under section 138 of the Act and sentenced her
to pay a fine of Rs.2000/- and in default to undergo
imprisonment for one month. He also directed the accused to           B
pay Rs.20,000/- as compensation to the complainant and in
default to undergo simple imprisonment for three months.

     3. The first respondent challenged the said judgment and
 the criminal appeal filed by her was allowed by the First
Additional Sessions Judge, Thiruvananthapuram by judgment             C
dated 26.11.2001. The conviction and sentence imposed on
the first respondent was set aside and the appellant was
acquitted. The first appellate court held that the accused having
denied her signature in the postal acknowledgement relating
to the notice dated 20.4.1995, the appellant ought to have            D
examined the postman who served the notice; and as the
appellant did not do so, the court held that the complainant had
not discharged the burden to prove that the notice was duly
served on the first respondent. The appellant filed criminal
appeal before the High Court. The High Court-allowed the              E
appeal in part. It held that the service of notice was duly proved.
As a consequence it restored the conviction entered by the
learned Magistrate in reversal of the judgment of the first
appellate court. However the High Court held that it could only
restore the fine of Rs.2000/- imposed by the Magistrate with          F
the default sentence but not the direction for payment of
compensation under section 357(3) of the Code, as it could not
co-exist with the imposition of fine. Therefore, the direction for
payment of compensation was not restored. The said judgment
is challenged in this appeal by special leave.                        G

    4. The appellant contends that sections 29 and 357 of the
.Code and section 138 of the Act should be read harmoniously
 and complementary to each other; and if so done,
 compensation could be awarded in cases under section 138
                                                                      H
    724     SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.


A of the Act to meet the loss sustained by the dishonour and that
  if compensation could not be awarded for any reason, fine·
  could be levied upto twice the cheque amount; and therefore
  the High Court ought to have restored the direction for payment
  of Rs.20,000/- to the appellant either by way of compensation
B under section 357(3) or from the fine under section 357(1 )(b)
  of the Code, by increasing the fine.

       5. Section 138 of the Act provided that where a cheque is
  dishonoured, the person drawing the cheque shall be deemed
  to have committed an offence and shall, without prejudice to
C any other provision of the Act, be punished with imprisonment
  for a term which may extend to one year or with fine which may
  extend to twice the amount of the cheque or with both. It may
  be mentioned that subsequent to the judgment of the learned
  Magistrate, the said Section 138 was amended (with effect
D from 6.2.2003) increasing and the period of imprisonment
  imposable to two years.

          6. Section 357 relates to Order to pay compensation.

          "357. Order to pay compensation.-(1) When a Court
E
          imposes a sentence of fine or a sentence (including a
          sentence of death) of which fine forms a part, the Court
          may, when passing judgment order the whole or any part
          of the fine recovered to be applied -

F         (a) in defraying the expenses properly incurred in the
          prosecution;

          (b) in the payment to any person of compensation for any
          loss or injury caused by the offence, when compensation
G         is, in the opinion of the Court, recoverable by such person
          in a Civil Court;

          (c) & (d) xx xx (not relevant)

          (2) xx x xx (not relevant)
H
             R. VIJAYAN v. BABY AND ANR.                     725
                 [R.V. RAVEENDRAN, J.]
     (3) When a Court imposes a s~ntence, of which fine does        A
     not form a part, the Court may, when passing judgment
     order the accused person to pay, by way of compensation
     such amount as may be specified in the order to the
     person who has suffered any loss or injury by reason of
     the act for which the accused person has been so               B
     sentenced." .

     (4) An order under this section may also be made by an
     Appellate' Court or by the High Court or Court of sessions
     when exercising its power of revision.
                                                                    c
     (5) At the time of awarding compensation in any
     subsequent civil suit relating to the same matter, the court
     shall take into account any sum paid or recovered as
     compensation under this section.
                                                                D
     7. Sub-section (3) of section 357, is categorical that the
compensation can be awarded only where fine does not form
part of the sentence. Section 357(3) has been the subject- ·
matter of judicial interpretation by this Court in several
decisions. In State of Punjab vs. Gurmej Singh [2002 (6) SCC
                                                                E
663), this Court held :                                    ·

     "A reading of sub-section (3) of Section 357 would show
     tha.t the question of award of compensation would arise
   · where the court imposes a sentence of which fine does
     not form a part."                                              F

    This Court also held that section 357(3) will not apply where
a sentence of fine has been imposed.

     8. In Sivasuriyan vs. Thangavelu [2004 (13) SCC 795],          G
this Court held :

    "In view of the submissions made; the only question that
    arises for consideration is whether the court can direct ·
    payment of compensation in exercise of power under sub-
    section (3) of Section 357 in a case where fine already H
    726     SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A         forms a part of the sentence. Apart from sub-section (3)
          of Section 357 there is no other provision under the Code
          whereunder the court can exercise such power:"

        After extracting section 357(3) of the Code, the Court
    proceeded to hold thus:
8
          "On a plain reading of the aforesaid provision, it is crystal
          clear that the power can be exercised only when the court
          imposes sentence by which fine does not farm a part. In
          the case in hand, a court having sentenced to
C         imprisonment, as also fine, th~ power under sub-section
          (3) of Section 357 could not have been exercised. In that
          view of the matter, the impugned direction of the High
          Court directing payment of compensation to the tune of Rs.
          one lakh by the appellant is set aside."
D
          9. It is evident from Sub-Section (3) of section 357 of the
    Code, that where the sentence imposed does not include a
    fine, that is, where the sentence relates to only imprisonment,
    the court, when passing judgment, can direct the accused to
E   pay, by way of compensation, such amount as may be specified
    in the order to the person who has suffered any loss or injury
    by reason of the act for which the accused person has been
    so sentenced. The reason for this is obvious. Sub-section (1)
    of section 357 provides that where the court imposes a
    sentence of fine or a sentence of which fine forms a part, the
F   Court may direct the fine amount to be applied in the payment
    to any person of compensation for any loss or injury caused by
    the offence, when compensation is, in the opinion of the court,
    recoverable by such person in a Civil Court. Thus, if
    compensation could be paid from out of the fine, there is no
G   need to award separate compensation. Only where the
    sentence does not include fine but only imprisonment and the
    court finds that the person who has suffered any loss or injury
    by reason of the act of the accused person, requires to be
    compensated, it is permitted to award compensation under
H   compensation under section 357(3).
            R. VIJAYAN v. BABY AND ANR.                     727
                [R.V. RAVEENDRAN, J.]
      10. The difficulty arises in this case because. of two       A
circumstances. The fine levied is only Rs.2000/-. The
compensation required to cover the loss/injury on account of
the dishonour of the cheque is Rs.20,000/-. The learned
Magistrate having levied fine of Rs.2,000/-, it is impermissible
to levy any compensation having regard to section 357(3) of        B·
the Code. The question is whether the fine can be increased
to cover the sum of Rs. 20,000/- which was the loss suffered
by the complainant, so that the said amount could be paid as
compensation under section 357(1)(b) of the Code. As noticed
above, section 138 of the Act authorizes the learned Magistrate    c
to impose by way of fine, an amount which may extend to twice
the amount of the cheque, with or without imprisonment. Section
29 of the Code deals with the sentences which Magistrates
may pass. The Chief Judicial Magistrate is empowered to pass
any sentence authorized by law (except sentence of death or        0
imprisonment for life or imprisonment for a term exceeding
seven years). On the other hand, sub-section (2) of Section 29
empowers a court of a Magistrate of First Class to pass a
sentence of imprisonment for a term not exceeding three years
or fine not exceeding Rs.5,000/- or of both. (Note : By Act
No.25 of 2005, sub-section (2) of Section 29 was amended with      E
effect from 23.6.2006 and the maximum fine that could be
levied by the Magistrate of First Class, was increased to
Rs.10,000/-). At the relevant point of time, the maximum fine
that the First Class Magistrate could impose was Rs.5,000/-.
Therefore, it is also not possible to increase the fine to         F
Rs.22,000/- so that Rs.20,000/- could be awarded as
compensation, from the amount recovered as fine.

      11. The first respondent was a widow and police woman.
On the facts and circumstances the learned Magistrate thought . G
fit to impose only a fine and not imprisonment. When the
conviction was set aside, the appellant filed a revision,
challenging the non-grant of compensation of Rs.20,000/-. He
did not however challenge the non-imposition of sentence of
imprisonment. The High Court was, therefore, justified in holding H
    728    SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R


A that once the sentence consists of only fine, the power under
  Section 357{3) could not be invoked for directing payment of
  compensation. The High Court was also justified in not
  converting the sentence from fine to imprisonment, so enable
  (tself to award compensation, as the facts and circumstances
B of the case did not warrant imprisonment. Therefore, we are
  of the view that the order of High Court does not call for
  interference.

          12. It is of some interest to note, though may not be of any
    assistance in this case, that the difficulty caused by the ceiling
C   imposed by section 29(2) of the Code has been subsequently
    solved by insertion of section 143 in the Act (by Amendment
    Act No.55 of 2002) with effect from 6.2.2003. Section 143(1)
    provides that notwithstanding anything contained in the Code,
    all offences under Chapter XVII of the Act should be tried by a
D   Judicial Magistrate of the First Class or by a Metropolitan
    Magistrate and the provisions of sections 262 to 265 of the
    Code (relating to summary trials) shall, as far as may be, apply
    to such trials. The proviso thereto provides that it shall be lawful
    for the Magistrate to pass a sentence of imprisonment for a
E   term extending one year and an amount of fine exceeding
    Rs.5,000/-, in case of conviction in a summary trial under that
    section. In view of conferment of such special power and
    jurisdiction upon the First Class Magistrate, the ceiling as to
    the amount of fine stipulated in section 29(2) of the Code is
F   removed. Consequently, in regard to any prosecution for
    offences punishable under section 138 of the Act, a First Class
    Magistrate may impose a fine exceeding Rs.5000/-, the ceiling
    being twice the amount of the cheque.

G        13. This case relates to dishonour of cheque in the year
    1995. Though the complainant-appellant has succeeded in
    obtaining a conviction, he has virtually lost in the sense he did
    not get compensation to recover the amount of the dishonoured
    cheque. As the limitation for filing a civil suit expired during the
    pendency of the appeal before the sessions court, the appellant
H
             R. VIJAYAN v. BABY AND ANR.                     729
                 [R.V. RAVEENDRAN, J.]

has also lost the opportunity of recovering the amount by way        A
of civil suit. In view of this peculiar position, we requested Dr.
Rajiv Dhavan, senior counsel, to assist us as an Amicus Curiae
to suggest methods to improve the disposal of cases under
section 138 of the Act and also improve the relief that could
be granted in such cases. In the meantime a three Judge Bench        B
of this Court in Damodar S.Prabhu vs. Sayed Baba/al H.
[2010 (5) sec      663], addressed the question of reluctance of
offenders to compound the cases at earlier stages of the case
prosecution leading to a huge pendency of cheque dishonour
cases, and issued the following guidelines proposing levy of         c
'a graded scale of fine' to encourage compounding at earlier
stages of the case :

    "(a) That directions can be given that the Writ of Summons
    be suitably modified making it clear to the accused that
    he could make an application for compounding of the              D
    offences at the first or second hearing of the case and that
    if such an application is made, compounding may be
    allowed by the court without imposing any costs on the
    accused.
                                                                     E
     (b) If the accused does not make an application for
    ·compounding as aforesaid, then if an application for
     compounding is made before the Magistrate at a
     subsequent stage, compounding can be allowed subject
     to the condition that the accused will be required to pay       F
     10% of the cheque amount to be deposited as a condition
     for compounding with the Legal Services Authority, or such
     authority as the Court deems fit.

    (c) Similarly, if the application for compounding is made
    before the Sessions Court or a High Court in revision or         G
    appeal, such compounding may be allowed on the
    condition that the accused pays 15% of the cheque amount
    by way of costs'.

     (d) Finally, if the application for compounding is made         H
    730     SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.


A         before the Supreme Court, the figure would increase to
          20% of the cheque amount.

          xxxxx

          The graded scheme for imposing costs i;> a means to
B         encourage compounding at an early stage of litigation. In
          the status quo, valuable time of the Court is spent on the
          trial of these cases and the parties are not liable to pay
          any Court fee since the proceedings are governed by the
          Code of Criminal Procedure, even though the impact of
c         the offence is largely confined to the private parties. Even
          though the imposition of costs by the competent court is a
          matter of discretion, the scale of costs has been suggested
          in the interest of uniformity. The competent Court can of
          course reduce the costs with regard to the specific facts
D         and circumstances of a case, while recording reasons in
          writing for such variance. Bona fide litigants should of
          course contest the proceedings to their logical end."

         14. We propose to address an aspect of the cases under
E section 138 of the Act, which is not dealt with in Damodar S.
    Prabhu. It is sometimes said that cases arising under section
    138 of the Act are really civil cases masquerading as criminal
  · cases. The avowed object of Chapter XVII of the Act is to
    "encourage the culture of use of cheques and enhance the
F credibility of the instrument". In effect, its object appears to be
    both punitive as also comp.ensatory and restitutive, in regard
    to cheque dishonour cases. Chapter XVII of the Act is an unique
    exercise which blurs the dividing line between civil and criminal
   jurisdictions. It provides a single forum and single proceeding,
    for enforcement of criminal liability (for dishonouring the
G cheque) and for enforcement of the civil liability (for realization
    of the cheque amount) thereby obviating the need for the
    creditor to move two different fora for relief. This is evident from
   the following provisions of Chapter XVII of the Act.

H         (i) The provision for levy of fine which is linked to the
            R. VIJAYAN v. BABY AND ANR.                      731
                [R.V. RAVEENDRAN, J.]
     cheque amount and may extend to twice the amount of the        A
     cheque (section 138) thereby rendering section 357(3)
     virtually infructuous in so far as cheque dishonour cases.

     (ii) The provision enabling a First Class Magistrate to levy
     fine exceeding Rs.5,000/- (Section 143) notwithstanding
                                                                    B
     the ceiling to the fine, as Rs.5,000/- imposed by section
     29(2) of the Code;

     (iii) The provision relating to mode of service of summons
     (section 144) as contrasted from the mode prescribed for
     crir:ninal cases in section 62 of the Code;                    c
     (iv) The provision for taking evidence of the complainant
     by affidavit (sec~ion 145) which is more prevalent in civil
     proceedings, as contrasted from the procedure for
     recording evidence in the Code;                             D
     (v) The provision making all offences punishable under
     section 138 of the Act compoundable.

      15. The apparent intention is to ensure that not only the
offender is punished, but also ensure that the complainant          E
invariably receives the amount of the cheque by way of
compensation under section 357(1 )(b) of the Code. Though a
complaint under section 138 of the Act is in regard to criminal
liability for the offence of dishonouring the cheque and not for
the recovery of the cheque amount, (which strictly speaking, has    F
to be enforced by a civil suit), in practice once the criminal
complaint is lodged under section 138 of the Act, a civil suit is
seldom filed to recover the amount of the cheque. This is
because of the provision enabling the court to levy a fine linked
to the cheque amount and the usual direction in such cases is       G
for payment as compensation, the cheque amount, as loss
incurred by the complainant on account of dishonour of cheque,
under section 357 (1)(b) of the Code and the provision for
compounding the offences under section 138 of the Act. Most
of the cases (except those where liability is denied) get           H
    732    SUPREME COURT REPORTS [2011) 14 (ADDL.) S.C.R.


A   compounded at one stage or the other by payment of the
    cheque amount with or without interest. Even where the offence
    is not compounded, the courts tend to direct payment of
    compensation equal to the cheque amount (or even something
    more towards interest) by levying a fine commensurate with the
B   cheque amount. A stage has reached when most of the
    complainants, in particular the financing institutions (particularly
    private financiers) view the proceedings under section 138 of
    the Act, as a proceeding for the recovery of the cheque amount,
    the punishment of the drawer of the cheque for the offence of
c   dishonour, becoming secondary.

          16. Having reached that stage, if some Magistrates go by
    the traditional view that the criminal proceedings are for
    imposing punishment on the accused, either imprisonment or
    fine or both, and there is no need to compensate the
D   complainant, particularly if the complainant is not a 'victim' in
    the real sense, but is a well-to-do financier or financing
    institution, difficulties and complications arise. In those cases
    where the discretion to direct payment of compensation is not
    exercised, it causes considerable difficulty to the complainant,
E   as invariably, by the time the criminal case is decided, the
    limitation for filing civil cases would have expired. As the
    provisions of Chapter XVII of the Act strongly lean towards grant
    of reimbursement of the loss by way of compensation, the courts
    should, unless there are special circumstances, in all cases of
F   conviction, uniformly exercise the power to levy fine upto twice
    the cheque amount (keeping in view the cheque amount and
    the simple interest thereon at 9% per annum as the reasonable
    quantum of loss) and direct payment of such amount as
    compensation. Direction to pay compensation by way of
G   restitution in regard to the loss on account of dishonour of the
    cheque should be practical and realistic, which would mean not
    only the payment of the cheque amount but interest thereon at
    a reasonable rate. Uniformity and consistency in deciding
    similar cases by different courts, not·only increase the credibility
H
             R. VIJAYAN v. BABY AND ANR.                     733
                 [R.V. RAVEENDRAN, J.]
of cheque as a !legotiable instrument, but also ttie credibility    A
of courts of justice.

      17. We are conscious of the fact that proceedings unde;
section 138 of th~ Act cannot be treated as civil suits for
recovery of the cheque amount with interest. We are also            B
conscious.of the fact that compensation awarded under section
357(1)(b) is not intended to be an elaborate exercise taking
note of interest etc. Our observations .are necessitated due to
the need to have uniformity and consistency in decision making.
In same type of. cheque dishonour cases, after convicting the       C
accused, if some courts grant compensation and if some other
courts do not grant compensation, the inconsistency, though
perfectly acceptable in the eye of law, will give rise to certain
amount of uncertainty in the minds of litigants about the
functioning of courts. Citizens will not be able to arrange or
regulate their affairs in a proper manner as they will not know     D
whether they should simultaneously file a civil suit or not. The
problem is aggravated having regard to the fact that in spite of
section 143(3) of the Act requiring the complaints in regard to
cheque dishonour cases under section 138 of the Act to be
concluded within six months from the date of the filing of the      E
complaint, such cases seldom reach finality before three or four
years let alone six months. These cases give rise to
complications where civil suits have not been filed within three
years on account of the pendency of the criminal cases. While
it is not the duty of criminal courts to ensure that successful     F
complainants get the cheque amount also, it is their duty to
have uniformity and consistency, with other courts dealing with
similar cases.

     18. One other sol•Jtion is a further amendment to the          G
provision of Chapter XVII so that in all cases where there is a
conviction, there should be a consequential levy of fine of an
amount sufficient to cover the cheque amount and interest
thereon at a fixed rate of 93· per annum interest, followed by
award of such sum as compensation from the fine amount. This        H
   734    SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.


A would lead to uniformity in decisions, avoid multiplicity of
  proceedings (one for enforcing civil liability and another for
  enforcing criminal liability) and achieve the object of Chapter
  XVII of the Act, which is to increase the credibility of the
  instrument. This is however a matter for the Law Commission
B of India to consider.

       19. The appeal is dismissed. We place on record our
   appreciation for the assistance rendered by Dr. Rajiv Dhavan
   as Amicus Curiae.

C D.G.                                       Appeal dismissed.