R.Vijayan Vs. Baby
J U D G M E N T
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 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 respondent, under section
138 of the Act before the First Class 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 pay Rs.20,000/- as compensation to the complainant and in default to
undergo simple imprisonment for three months.
first respondent challenged the said judgment and the criminal appeal filed by her
was allowed by the First Additional Sessions Judge, Thiruvananthapuram by judgment
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 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 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 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.
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 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 under section 357(3) or from the
fine under section 357(1)(b) of the Code, by increasing the fine.
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 any other provision of the Act, be punished with imprisonment for a term which
may extend to one year or 4with 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 from
6.2.2003) increasing and the period of imprisonment imposable to two years.
357 relates to Order to pay compensation. "
to pay compensation.--(1) When a Court 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
(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
is, in the opinion of the Court, recoverable by such person in a Civil Court; (c)
& (d) x x x x (not relevant) (2) x x x x x (not relevant) (3) When a Court
imposes a sentence, of which fine does 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
(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. (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. 57. 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 663], this Court
"A reading of
sub-section (3) of Section 357 would show that the question of award of
compensation would arise where the court imposes a sentence of which fine does
not form a part."This Court also held that section 357(3) will not apply
where a sentence of fine has been imposed.
Sivasuriyan vs. Thangavelu [2004 (13) SCC 795], 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 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:
"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 form a
part. In the case in hand, a court having sentenced to imprisonment, as also
fine, the 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."
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 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 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 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
compensation under section 357(3).
difficulty arises in this case because of two 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 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
As noticed above,
section 138 of the Act authorizes the learned 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 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 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 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 8Rs.5,000/-. Therefore, it is 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.
first respondent was a widow and police woman. On the facts and circumstances
the learned 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 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 directing payment of
compensation. The High Court was also justified in not converting the sentence from
fine to imprisonment, so enable itself to award compensation, as the facts and circumstances
of the case did not warrant imprisonment. Therefore, we are of the view that
the order of High Court does not call for interference.
is of some interest to note, though may not be of any assistance in this case,
that the difficulty caused by the ceiling 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 9143(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 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 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
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.
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 has also lost the opportunity of
recovering the amount by way 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 of this Court in Damodar S.Prabhu vs. Sayed Babalal H. [2010
(5) SCC 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 `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 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
(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 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 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 before the Supreme Court, the figure would increase to
20% of the cheque amount. x x x x x
The graded scheme for
imposing costs is a means to 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 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 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."
propose to address an aspect of the cases under 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 credibility of the instrument". In
effect, its object appears to be both punitive as also compensatory 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 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
(i) The provision for
levy of fine which is linked to the cheque amount and may extend to twice the amount
of the 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 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 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 the Code;
(v) The provision
making all offences punishable under section 138 of the Act compoundable.
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 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 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 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 1the 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 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 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 dishonour, becoming secondary.
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 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, as invariably, by the time the criminal case is decided,
the limitation for filing civil cases would have expired. As the 1provisions 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 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 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 of cheque as a negotiable instrument, but
also the credibility of courts of justice.
are conscious of the fact that proceedings under section 138 of the Act cannot
be treated as civil suits for recovery of the cheque amount with interest. We
are also 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 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 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
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 complainants get the cheque amount also, it is
their duty to have uniformity and consistency, with other courts dealing with
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 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 the fine amount. This 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 of India to consider.
appeal is dismissed. We place on record our appreciation for the assistance
rendered by Dr. Rajiv Dhavan as Amicus Curiae.
(R V Raveendran)
(R M Lodha)