Supreme Court of India · 2011
R. Vijayan v. Baby
(2012) 1 SCC 260 · AIR 2012 SC 528 · Criminal Appeal No. 1902 of 2011
Court
Supreme Court of India
Bench
R.V. Raveendran & R.M. Lodha, JJ.
Decided
11 October 2011
Subject
NI Act S.138 — Fine and Compensation
Background & Facts
A cheque dated 31 March 1995 for Rs.20,000, issued towards alleged repayment of a loan, was dishonoured. After a demand notice dated 20 April 1995, the complainant (the appellant, R. Vijayan) filed a Section 138 complaint before a First Class Magistrate in Thiruvananthapuram. On 30 November 1996 the Magistrate convicted the accused, sentenced her to a fine of Rs.2,000 (with default imprisonment), and directed payment of Rs.20,000 as compensation.
The Sessions Court acquitted the accused on 26 November 2001, holding that service of the notice was not proved. The High Court held that service was proved and restored the conviction and the fine, but not the compensation, because compensation under Section 357(3) CrPC could not co-exist with a fine. The complainant appealed to the Supreme Court, seeking restoration of the Rs.20,000 either as compensation under Section 357(3) or out of an increased fine under Section 357(1)(b).
Key Holdings of the Court
Holding 1 — No Section 357(3) Compensation Where Fine Forms Part of the Sentence
Section 357(3) CrPC “is categorical that the compensation can be awarded only where fine does not form part of the sentence” (para 7). Where a fine is imposed, compensation is paid out of the fine under Section 357(1)(b). Since the Magistrate had imposed a fine of Rs.2,000, separate compensation was impermissible; and as a First Class Magistrate could then impose a fine of no more than Rs.5,000 under Section 29(2) CrPC, the fine could not be raised to cover the Rs.20,000 loss (para 10). The High Court was justified, and the appeal was dismissed (paras 11, 19).
Holding 2 — Section 143 Removes the Section 29(2) Fine Ceiling for Cheque Cases
The Court noted that Section 143 of the NI Act, inserted by Act 55 of 2002 with effect from 6 February 2003, removes the ceiling in Section 29(2) CrPC for these cases: in a Section 138 prosecution a First Class Magistrate may impose a fine exceeding Rs.5,000, “the ceiling being twice the amount of the cheque” (para 12).
Holding 3 — Chapter XVII Is Both Punitive and Compensatory
Chapter XVII “blurs the dividing line between civil and criminal jurisdictions”; its object “appears to be both punitive as also compensatory and restitutive” (para 14). The Court observed that in practice complainants, particularly financing institutions, often treat Section 138 proceedings as proceedings for recovery of the cheque amount (para 15).
Holding 4 — Fine up to Twice the Cheque Amount, Paid as 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” (para 16). The Court left to the Law Commission the suggestion of an amendment providing for a consequential fine covering the cheque amount with interest at 9% per annum on every conviction (para 18).
Practical Implications for Practitioners
On conviction, a complainant should ask the court to levy a fine sufficient to cover the cheque amount with reasonable interest and to direct its payment as compensation under Section 357(1)(b) CrPC, rather than rely on separate compensation under Section 357(3), which is unavailable once a fine forms part of the sentence.
The case also shows the cost of relying on the criminal complaint alone. Although the complainant secured a conviction, the Court noted that he “virtually lost” because he did not get compensation, and that the limitation for a civil suit had expired while the appeal was pending before the Sessions Court (para 13). The Court observed that by the time a criminal case is decided, the limitation for a civil claim will often have expired (para 16).
Relevant Statutory Provisions
Dealing With a Cheque Bounce Case?
Whether you are a creditor seeking to prosecute a cheque dishonour or an accused defending a Section 138 complaint, Unified Chambers and Associates advises on cheque bounce litigation. Contact Advocate Subodh Bajpai for a confidential consultation.