Dheeraj Kumar Vs Puran Chand

A. The Negotiable Instruments Act

"138. Dishonour of cheque for insufficiency, etc., of funds in the account- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit for that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [ a term which may extended to two years], or with fine which may extend to twoce the amount of the cheque, or with both............"

B. The Criminal Procedure Code

"357 Order 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 applied-

(b) in the payment to any person of compensation for any loss or injury caused by the offences, when compensation is, in the opinion of the court, recoverable by such person in a civil court;

(2) If the fine is imposed in a case which is subject to appeal, no such payment shall be made before the period allowed for presenting the appeal has elapsed, or if an appeal be presented, before the decision of the appeal.

(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 sentenced.

(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.

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421. Warrant for levy of fine -(1) When an offender has been sentenced to pay a fine, the court passing the sentence may take action for the recovery of the fine in either or both of following ways, that is to say, it may-

(a) issue a warrant for the levy of the amount by attachment and sale of any movable property belonging to the offender;

(b) issue a warrant to the collector of the district, authorizing him to realize the amount as arrears of land revenue from the movable or immovable property, or both, of the defaulter:

Provided that, if the sentence directs that in default of payment of fine, the offender shall be imprisoned, and if such offender has undergone the whole of such imprisonment in default, no court shall issue such warrant unless, for special reasons to be recorded in writing, it considers it necessary so to do, or unless it has made an order for the payment of expenses or compensation out of the fine under Section 357.

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431 Money ordered to be paid recoverable as a fine- Any money (other than a fine) payable by virtue of any order made under this Code, and the method of recovery of which is not otherwise expressly provided for, shall be recoverable as if it were a fine;"

"14. We propose to address an aspect of the case 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 signle forum and single proceeding, for enforcement of criminal liability (for dishonoring 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 For a 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 linked to the cheque amount and may extend to twice the amount of the cheque (section 138) thereby rendering section 357(3) virtually infructuous insofar 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.

15. The apparent intention is to ensure that not only the offender is punished, but also ensure that the complainant invariably receives the amount of 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 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 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 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 dirct 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 financers) view the proceeding for the recovery of the cheque amount, the punishment of the drawer of the cheque for the offence of 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 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 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 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.

17. We are conscious of the fact that proceedings under section 138 of the Act can not 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 complication 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 similar cases."

"4. Mr. KV Viswanathan, learned counsel for the petitioner invited our attention to the following observations made by this Court in K. Bhaskaran v. Sankarna Vaidhyan Balan, [1999] 7 SCC 510:

"If a Judicial Magistrate of the First Class were to order compensation to the paid to the complainant from out of the fine realised the complainant will be the loser when the cheque amount exceeded the said limit. In such a case a complainant would get only the maximum amount of rupees five thousand. But the Magistrate in such cases can alleviate the grievance of the complainant by making resort to Section 357(3) Cr.PC. The Supreme Court has emphasised the need for making liberal use of the provision. No limit is mentioned in the sub-section and therefore, a Magistrate can award any sum as compensation. Of Course while fixing the quantum of such compensation the Magistrate has to consider what would be the reasonable amount of compensation payable to the complainant. Thus, even if the trial was before a Court of a Magistrate of the first Class in respect of a cheque which covers an amount of Rs. 5000 the Court has power to award compensation to be paid to the complainant."

5. In the said decision this Court reminded all concerned that it is well to remember the emphasis laid on the need for making liberal use of Section 357(3) of the Code. This was observed by reference to a decision of this Court in [1988] 4 SCC 551 Hari Singh v. Sukbir Singh. In the said decision this Court held as follows:

"The quantum of compensation may be determined by taking into account the nature of crime, the justness of the claim by the victim and the ability of accused to pay. If there are more than one accused they may be asked to pay in equal terms unless their capacity to pay varies considerably. The payment may also vary depending upon the acts of each accused. Reasonable period for payment of compensation, if necessary by instalments, may also be given. The court may enforce the order by imposing sentence in default. (emphasis supplied)

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10. That a part, Section 431 of the Code has only prescribed that any money (other than fine) payable by virtue of an order made under the Code shall be recoverable "as if it were a fine". Two modes of the recovery of the fine have been indicated in Section 421 (1) of the Code. The proviso to the sub-section says that if the sentence directs that in default of payment of the fine, the offender shall be imprisoned, and if such offender has undergone the whole of such imprisonment in default, no court shall issue such warrant for levy of the amount.

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12. The total amount covered by the cheques involved in the present two cases was Rs. 4,50,000. There is no case for the respondent that the said amount had been paid either during the pendency of the cases before the trial court or revision before the High Court or this Court. If the amounts had been paid to the complainant there perhaps would have been justification for imposing a flee-bite sentence as had been chosen by the trial court. But in a case where the amount covered by the cheque remained unpaid it should be the look out of the trial Magistrates that the sentence for the offence under Section 138 should be of such a nature as to give proper effect to the object of the legislation. No drawer of the cheque can be allowed to take dishonour of the cheque issued by him light heartedly. The very object of enactment of provisions like Section 138 of the Act would stand defeated if the sentence is of the nature passed by the trial Magistrate. It is a different matter if the accused paid the amount atleast during the pendency of the case."

"7. Section 421 of Cr. P.C. provides for recovery of fine by one of the two ways or by both of them. One way of recovery is to issue a warrant for the levy of the amount by attachment and sale of any movable property belonging to the offender. The second mode of recovery is to issue a warrant to the Deputy Commissioner of the District, authorizing him to realize the amount as arrears of land revenue. Where the offender undergoes the whole of the imprisonment in default of payment of fine, before recovery or before issuance of warrant for recovery, no such warrant can be issued, unless the Court assigns special reasons as to how despite the accused undergoing default sentence, there is necessity of recovering fine. However, there is an exception to this rule that is, if the recovery is for realizing expenses of the complainant or the compensation awarded under S. 357 of Cr. P.C. the power of the Court to issue warrant for recovery of that amount, continues even after the accused undergoes the default sentence in full.

7A. Taking into consideration the necessity of recovery of compensation from the accused where he has been convicted for the offence punishable under S. 138 of NI Act, Supreme Court in the case of Hari Singh V. Sukhbir Singh reported in AIR 1988 SC 2127 provided for imposition of default sentence on the failure of the accused to pay the compensation awarded under S. 357 of Cr. P.C. That decision has been later affirmed by the Supreme Court in the case of Suganthi Suresh Kumar V. Jagdeeshan reported in (2002) 2SCC 420: (AIR 2002 SC 681) wherein it has been directed that what the Supreme Court held in Hari Singh''s case, shall be followed by all Courts in India, From the discussion made above, the following position of law emerges.

8. When compensation is awarded under S. 357 of Cr. P.C. either as part of the fine or independently, the recovery of the same gets precedence over the recovery of fine to be credited to the Government. Where compensation forms part of fine, the fine or portion of the fine has to be first applied for the payment of compensation under S. 357 of Cr. P.C. wherever there is an award of compensation and for the remaining amount of fine, if not paid or recovered, the accused has to be sent to prison to undergo the default sentence apart from the Court taking steps to recover the fine.

9. It may be noted that under the proviso to S. 421 (1) of Cr. P.C. the requirement on the Court to recover the amount of compensation by attachment and sale of accused''s property does not cease merely because the accused has undergone the whole of the imprisonment in default of payment of fine by then."