[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.