Holding

The Supreme Court held that the court’s power to award compensation under Section 357 CrPC is unrestricted and may be exercised even when a fine is imposed, and that Section 377 CrPC does not apply; therefore the respondent must pay Rs.7,00,000 as compensation in lieu of the fine.

Summary

The appellant and respondent were partners in a firm with a joint bank account. The respondent allegedly withdrew Rs.12 lakh and later gave the appellant a post‑dated cheque of Rs.7 lakh as security under a police‑station compromise; the cheque was dishonoured and a complaint under Section 138 of the Negotiable Instruments Act was filed. The trial court imposed a fine of Rs.7,05,000, including Rs.7,00,000 as compensation, which was later altered by the Sessions Court to a fine of Rs.5,000 and the compensation order set aside; the High Court affirmed the conviction but not the compensation. On appeal, the Supreme Court examined whether compensation could be awarded under Section 357 of the CrPC despite a fine, and whether Section 377 CrPC applied for sentence enhancement. The Court held that the power to award compensation is not limited, Section 377 was inapplicable as the respondent had not appealed, and the amendment to the NI Act was not applicable. Consequently, the Court directed the respondent to pay Rs.7,00,000 as compensation in lieu of the fine, and disposed of the appeal.

Issues considered

Whether a court may award compensation under Section 357 CrPC in addition to or in place of a fine for an offence under Section 138 of the Negotiable Instruments Act.
Whether Section 377 of the CrPC is applicable for enhancement of sentence when the accused has not filed an appeal.
Whether the amendment to the Negotiable Instruments Act (2002) extending imprisonment and fine limits applies to the present case.
Whether the compromise entered into between the partners affects the liability under Section 138.

Legislation cited

Code of Criminal Procedure, 1973s. 29, s. 357, s. 357(3), s. 377
Negotiable Instruments Act, 1881s. 138
Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002

Subjects

Negotiable Instruments ActSection 138compensationfinepartnershippost‑dated chequeCriminal Procedure CodeSection 357Section 377amendment 2002joint bank accountcompromise

Judgment

P. SURESH KUMAR
A
II.

R.SHANKAR

MARCH 8, 2007

[S.B. SINHA AND MARKANDEY KATJU, JJ.] B

Negotiable lnstrumpnts Act/Negotiable Instruments (Amendment and
Misc. Provisions Act, 2002; S.138/Code of Criminal Procedure, 1973; Ss.
357 and 377:
c
Partnership firm-Joint Bank Account-Respondent allegedly
withdrawn a sum of rupees twelve lakhs from the bank-Compromise-As per
settlement respondent-accused handed over a post-dated Cheque for the
amount in question in favour of other partner-Cheque dishonored-
Complaint-Trial Court awarding seven lakhs as compensation and also
imposed fine-Appeal filed by accused partly allowed by Sessions Court D
affirming conviction under Section 138 of the Act but order of trial Court
awarding compensation set aside-Revision petition dismissed by High
Court-On appeal, Held: Power of the Court to award compensation is not
limited-Payment of compensation is somewhat different from payment of
fine-Purpose of imposition offine/compensation must be considered having E
regard to relevant provisions under Cr.P.C.-Accused-partner admitted his
liability and it was found so by Courts below-Respondent not preferring
any appeal thereagainst-Section 377 Cr.P.C. not attracted-Hence, such
findings of the Courts below do not warrant any interference-Accused has
not been charged with any fraudulent action-Complainant had not preferred
any appeal for enhancement of sentence-Interest ofjustice would be served F
,,); by directing accused to pay a sum of Rupees Seven Lakhs by way of
compensation to appellant-partner-Directions issued.

Appellant and respondent were partners in a partnership business.
There was joint account in the bank which had to be operated jointly by them. G
Respondent alone as a partner, thus, could not have taken out any money from
, ,I ~
the bank. Respondent allegedly taken out money from the bank. Later, a
' compromise on certain terms was entered into by and between the respondent
and other partner in a police Station. Pursuant to the agreement, the

649
H
650 SUPREME COURT REPORTS [2007] 3 S.C.R.

A respondent allegedly handed over a post-dated Cheque for a sum of Rs.
7,00,000/- to the appellant. As the said Cheque was dishonoured on 'I
presentation, a complaint petition was filed by the appellant. Rejecting the
defence of the respondent, Trial Court imposed a fine of Rs. 7,05,000/- on the
accused-partner, and in default to undergo three months simple imprisonment.
An appeal filed thereagainst was partly allowed by the Court of Sessions.
B Revision Petition filed by both the parties were dismissed by the High Court
affirming the conviction of the respondent under the provisions of the Act as
also the order qua the question of the payment of fine. Hence the present
appeal !
C Appellant contended that the District Court and the High Court
committed a serious error in passing the impugned judgment insofar as they
failed to take into consideration that the quantum of punishment should be
commensurate with the gravity of the offence and having regard to the
amendment in the Act, it is a fit case where the respondent should have been
awarded substantial punishment.
D
Respondent submitted that having regard to the fact that this Court had
issued notice on enhancement of sentence; in terms of Section 377 of the
Code of Criminal Procedure, the respondent would be entitled to contend that y
no case had been made out for recording a judgment of conviction by the courts
below; and that the defence of the respondent having regard to entering into
E a compromise by and between the parties was wrongly not accepted by the
courts below, the same should have been considered by the courts in the light
of the averments made by the complainant in the complaint petition.

Disposing of the appeal, the Court

F HELD: I.I. Section 138 of the Negotiable Instruments Act is a special
statute. It provides inter alia. for imposition offine which may extend to twice
the amount of the cheque. [Para 13] (656-B]

1.2. Although the power of the court to impose a fine may or may not be
G limited, it is not in dispute that the power to award compensation is not. The
purpose for which such compensation is to be granted to the complainant
whether in terms of clause (b) of Sub-section 1 of Section 357 of the Code of
Criminal Procedure or Sub-section (3) of Section 357 is not of much
significance for the purpose, although there cannot be any doubt whatsoever
that consideration for payment of compensation is somewhat different from
H
P. SURESH KUMAR v. R. SHANKAR 651
payment offine. [Para 16) [656-D-El
A
Rachhpal Singh v. State of Punjab, [2002/ 6 SCC 462, relied on.

1.3. Purpose of imposition of fine and/or compensation, however, must
be considered having regard to the relevant factors in mind as envisaged under
Section 357 of the Code of Criminal Procedure. [Para 18) [657-E, Fl B
State of Punjab v. Gurmej Singh, [20021 6 SCC 663, referred to .
..,
j.
1.4. Section 377 of the Code of Criminal Procedure has no application
in the instant case. Respondent has not preferred any appeal. Even otherwise
the complainant had categorically stated in his complaint petition that although c
his claim was for a sum of Rs. 12 lakhs which amount the respondent is said
to have withdrawn from the bank in contravention of the terms and conditions
of the deed of partnership, he accepted his liability at least to the extent of Rs.
7,90,000/-. It was found as of fact to be so by the courts below. The said findings
do not warrant any interference. [Para 201 (658-B-CJ
, D
Sube Singh v. State of Haryana, [2006) 3 SCC 178, relied on.

-y 2. I. The question which arises for consideration is as to whether no
case for awarding a substantial sentence has been made out. Therefore, grant
of compensation would subserve the purpose. [Para 21) (658-F)
E
2.2. Respm~dent has not been charged with any fraudulent action. He
had a probable defence. Appellant furthermore had not preferred any appeal
against the judgment of the Trial Court for enhancement of the sentence. It
may be that quantum of compensation has been altered to that of the fine but
in effect and substance the same did not matter. Interest of justice would.be F
subserved, if the respondent is directed to pay a compensation of
..,.>. Rs. 7,00,000/- instead and place ofa fine of Rs. 5,000/-, as has been directed
by the High Court. Thus, the appellant would be entitled to get the sum of
Rs.7,00,000/- by way of compensation. [Paras 24 and 25) (658-G-H; 659-A]

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 1335 of G
2005.
.. "' From the Final Judgment and Order dated 17.4.2003 of the High Court
of Madras, in Criminal R.C. No. No. 1213/2001.

Kailash Vasdev, P.R. Kovilan Poongkuntran, V. Vasudevan and Rakesh H
652 SUPREME COURT REPORTS [2007] 3 S.C.R.
A K. Sharma for the Appellant.
V. Prabhakar, Ramjee Prasad, V. Subramani and Revathy Raghavan for
the Respondent.

The Judgment of the Court was delivered by
B S.B. SINHA, J. I. The parties hereto were partners. The partnership
business ran into rough weather. Appellant intended to initiate some criminal
proceedings against the respondent. Allegedly, the bank account was to be
operated jointly. Respondent alone as a partner, thus, could not have taken
out any money from the bank. However, allegedly, he did so. According to
C the respondent, a compromise was. entered into by and between the parties
in a police station on the following terms:

"(!) Both the firms accounts right from inception till date shall be
finalized and the share of profits determined by an independent auditor,
Mr. R. Kasi Viswanathan. His determination shall be final and binding
D on both the parties.

(2) The above scrutiny and finalization shall be completed before
31.1.1996. Until such time, we shall not raise any dispute against each
other.

E (3) Till such finalization, Mr. Shankar shall handover a cheque (cheque
No. 551661 dated 31.1.96) for Rs. 7 lakhs to Mr. Suresh Kumar as
security deposit.

(4) If the share of profits for Mr. Suresh Kumar is more than 7 lakhs,
he shall encash the cheque and shall also receive the balance amount
F from Shankar forthwith. If the share of profits is less than 7 lacs,
Suresh Kumar shall return the said cheque and Shankar shall pay
Suresh Kumar a draft for the amount of profits determined. If any
profit is due to Shankar, Suresh Kumar shall pay the same to Shankar
forthwith."
G 2. Pursuant thereto or in furtherance thereof, the respondent allegedly
handed over a post dated cheque for a sum of Rs. 7,00,000/- to the appellant.
As the said cheque was dishonoured on presentation, a complaint petition
was filed by the appellant inter alia alleging:

"3 ... Further the accounts in the Bank are joint accounts and the
H
P. SURESH KUMAR v. R. SHANKAR [S.B. SINHA, J.] 653
cheques can be drawn only by both of partners on any account and A
not by one partner.

4. The Complainant submits that the accused has taken some amounts
from the Bank and the bills also encashed by him for his own gain
without concern of complainant. Therefore the accused has agreed to
pay the profits sharing of a sum of Rs. 12 lacs towards the complainant. B
But he agreed to pay advance share of profit which he owes to the
complainant till appropriate audit and accounting is made, the accused
has given a sum of Rs. 7 lacs by cheque No. 551661 dated 31.1.1996
drawn of Syndicate Bank, Kodambakkam Branch as assured. The
accused is to settle the entire due towards the complainant before
31.1.1996. c
5. The complainant submits that the accused has not informed the
complainant anything about the stop payment or requesting not to
present the cheque. Therefore, in good faith the complainant has
presented the cheque on 31.1.1996 through his Bankers Syndicate
Bank, Kodambakkam Branch through his S.B. Account No. 10521. D
And the complainant has received an intimation from the Bankers that
the payment stopped by the drawer and thus the cheque is
dishonoured. The complainant has also verified whether the accused
has sufficient funds in the Bank account on 31.1.96 but to his shock
found that the accused was not having sufficient funds to honour the E
cheque on 31.1.96. Therefore the complainant has issued a lawyer's
notice dt. 3.2.1996 to the accused stating that the dishonouring of the
cheque and the accused caused complainant mental agony and
demanded the cheque amount to be paid to the complainant within 15
days from the date ofreceipt of the notice. The accused has received
the notice on· 6.2.1996 but he has preferred no reply to the notice even F
after 15 days and he has not paid the cheque amount till date."

3. The learned Trial Judge, however, found the said defence of the
respondent to be not acceptable. The learned Magistrate by a judgment and
order dated 12.10.1998 imposed a fine of Rs. 7,05,000/- and directed that if the G
respondent fails to remit, he will undergo three months simple imprisonment.
Out of the said amount, he was directed to pay a sum of Rs. 7,00,000/- by
way of compensation and the remaining sum of Rs. 5000/- was to be credited
to· the Government.

4. An appeal thereagainst was filed by the respondent. The learned H
654 SUPREME COURT REPORTS (2007] 3 S.C.R.

A Additional Sessions Judge partially allowed the said appeal stating:
"22. In the result, this Criminal Appeal is partly allowed thereby the
finding of conviction against the accused under Sec. 138 of Negotiable
Instrument Act is confirmed and the sentence is modified to the effect
that the appellant/ accused should pay a fine of Rs. 5,000/- (Rupees
B five thousand only) under Sec. 138 of Negotiable Instrument Act and
in default to undergo three months simple imprisonment and the order
of the learned Magistrate in awarding compensation is set aside.
There is no order as to cost. The appellant/ accused will be entitled
to get back the amount deposited by him less the fine amount, now
imposed, and entitled to get back the bank guarantee and other
c security deeds filed by him in this case after the time for revision or
appeal is over or after the revision or after if any preferred is over."
5. Appellant herein preferred a revision application before the High
Court which was marked as R.C. No. 1213 of2001 whereby and whereunder
D modification was made by the appellate court in relation to the quantum of
fine.
6. Respondent filed a criminal revision against the said order which was
marked as Criminal R.C. No. 713 of2001. The High Court dismissed both the
civil revisions confirming the conviction of the respondent under the provisions
E of the Act as also the order qua the question of the payment of fine.

7. Respondent herein has not approached this Court from the said order.
Only Appellant has. By an order dated 6.10.2005, a 3-Judge Bench of this
Court while granting leave directed: ·

"Notice shall issue to the respondent to show cause why the sentence
F be not enhanced and the sentence of fine be not substituted by order
for imprisonment as also an order for payment of compensation under
Section 357(3) of the Code of Criminal Procedure read with Section 138
of the Negotiable Instruments Act, returnable after four weeks.'
8. It is not in dispute that the Negotiable Instruments Act (for short "the
G Act") was amended by the Negotiable Instruments (Amendment & Misc.
Provisions) Act, 2002 which came into force with effect from 6.02.2003 in terms
whereof the accused could also be imprisoned for a term which may extend ?t •
to one year or with fine which may ext¢nd to twice the amount of the cheque
or with both. The amended provision, ~owever, is not applicable in the instant
H case.
P. SURESH KUMAR v. R. SHANKAR [S.B. SINHA, J.) 655
9. Mr. Kailash Vasudev, learned senior counsel appearing on behalf of A
the appellant, would submit that the learned District Judge and the High Court
committed a serious error in passing the impugned judgment insofar as they
failed to take into consideration that the quantum of punishment should be
commensurate with the gravity of the offence and having regard to the
amendment in the Act which came into force on 6.02.2003, it is a fit case where
the respondent should have been awarded substantial punishment. B

I 0. Mr. V. Prabhakar, learned counsel appearing on behalf of the
respondent, on the other hand, would submit that having regard to the fact
that this Court had issued notice on enhancement of sentence; in terms of
Section 377 of the Code of Criminal Procedure, the respondent would be C
entitled to contend that no case had been made out for recording a judgment
of conviction by the courts below. According to the learned counsel, the
defence of the respondent having regard to entering into a compromise by
and between the parties hereto was wrongly not accepted by the courts
below, as the same should have been considered by the courts below in the
light of the averments made by the complainant in the complaint petition D
wherefrom it would be evident that :

(i) the share of the profit in the partnership business was still to be
ascertained;

(ii) the cheque was issued in anticipation of the accounts to be E
audited by a named auditor;

(iii) Only upon finalization of the accounts by the auditor, the debt
or liability of the respondent could have been clearly ascertained
so as to make him liable for payment of any amount pursuant
thereto or in furtherance thereof.
F
11. In the instant case, it was urged, as the appellant himself in his
complaint petition categorically stated that the actual amount of the liability
of the respondent Was yet to be ascertained, the courts concerned must be
held to have committed a manifest error in recording a judgment of conviction.

12. It was further submitted that the appellate court and consequently, G
the High Court also committed a manifest error inasmuch as they failed to take
into consideration that the burden of proof on the accused can be discharged
by showing only preponderance of probabilities; the standard of proof not
being the proof beyond all reasonable doubt. Our attention has further been
drawn to the fact that although the learned Trial Judge had directed payment H
656 SUPREME COURT REPORTS [2007] 3 S.C.R.

A of compensation and fine of Rs. 7,05,000/-, the appellant had not filed any 1
appeal thereagainst and in that view of the matter, the revision petition filed
by it was not maintainable.

13. Section 138 of the Act is a special statute. It provides inter alia for
B imposition of fine which may extend to twice the amount of the cheque.
14. We, as at present advised, need not go into the question as to
whether having regard to the provisions contained in Sub-section (2) of ).
1
Section 29 of the Code of Criminal Procedure, the jurisdiction of the Magistrate
would .~e to ilnpose a fine for a sum of Rs. 5,000/- or not in view of the
C decisions t:Jf this Court in Pankajbhai Nagjibhai Patel v. State of Gujarat,
(2001] 2 SCC 595 and K. Bhaskaran v. Sankaran Vaidhyan Ba/an, (1999] 7
sec 5IOJ.
15. The question arising in this case, in our opinion, should be considered
absolutely from a different angle.
D
16. Although the power of the court to impose a fine may or may not
be limited, it is not in dispute that the power to award compensation is not.
The purpose for which such compensation is to be granted to the complainant y
whether in terms of clause (b) of Sub-section 1 of Section 357 of the Code
of Criminal Procedure or Sub-section (3) of Section 357 is not of much
E .significance for our purpose, although there cannot be any doubt whatsoever
that consideration for payment of compensation is somewhat different from
payment of fine. [See Rachhpal Singh v. State of Punjab, (2002] 6 SCC 462]

17. In State ofPunjab v. Gurmej Singh, (2002] 6 SCC 663 it was stated:

F "9. The next contention raised by the learned counsel for the appellant
is that the surviving victim, namely, the daughter of Jagjit Singh may
be awarded some compensation under Section 357(3) of the Code of
Criminal Procedure. In support of his submission he has also referred
to a decision of this Court in Rachhpal Singh v; State of Punjab. in
the said case this Court allowed compensation under sub-section (3)
G of Section 357 CrPC to the victims but it would not be applicable in
the present case since a sentence of fine has also been imposed. 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. The decision in Rachhpal
H Singh does not take any contrary view nor hold that compensation
P. SURESH KUMAR v. R. SHANKAR [S.B. SINHA. J.) 657
may be awarded over and above the sentence of fine. A perusal of
~ A
sub-section (3) of Section 357 CrPC would make the position clear.

11. In the present case, sentence of fine has also been imposed, as
indicated in the earlier part of this judgment. Out of the fine, a sum
of Rs 1000 each had been ordered to be given to the three injured
persons, namely, Dalip Singh, Amarjit Kaur and Gurmeet Kaur. The B
balance amount is to go to the legal heirs of Jagjit Singh. We had
heard the learned counsel for both parties on this aspect. Learned
~ -t counsel for the appellant submitted that Gurmeet Kaur lost both her
parents as well as her brother in the incident and now she is alone
and would have become of marriageable age or may have to start
some work of her own. She would need some money. In case she c
cannot be compensated, the amount of fine may be enhanced to some
extent. Learned counsel for the respondent has, however, submitted
that out of seven acres of land belonging to his father, the same has
been divided into three equal shares and some of it is also under
mortgage and he has got two daughters and a son and his wife. He
D
has also submitted that whenever the respondent was released on

,.. parole he met Gurmeet Kaur and his wife also keeps on going to meet
her. Their relations are normal and cordial. If that is so, nothing better
can be thought of in the prevailing circumstances. However, we are
not considering for awarding any compensation to Gurmeet Kaur
under Section 357(3) CrPC but the amount of fine imposed, can in any E
case be reasonably enhanced."

18. Purpose of imposition of fine and/ or compensation, however, must
be considered having regard to the relevant factors in mind as envisaged
under Section 357 of the Code of Criminal Procedure.
F
19. We may notice that in Sube Singh v. State of Haryana, [2006] 3 SCC
178, the law has been stated in the following terms :

" ... The quantum of compensation will, however, depend upon the
facts and circumstances of each case. Award of such compensation
(by way of public law remedy) will not come in the way of the G
aggrieved person claiming additional compensation in a civil court, in
the enforcement of the private law remedy in tort, nor come in the way
of the criminal court ordering compensation under Section 357 of the
Code of Criminal Procedure."

H
658 SUPREME COURT REPORTS [2007] 3 S.C.R.

A 20. The basic question, however, which arises for consideration before -~
us is as to whether we, in the peculiar facts and circumstances of this case,
can delve deep into the matter so as to find out the culpability of the
respondent herein and pass a judgment of acquittal in his favour. We do not
think that we should do so. Section 377 of the Code of Criminal Procedure
has no application in the instant case. Respondent has not preferred any
B
appeal. Even otherwise the complainant had categorically stated in his
complaint petition that although his claim was for a sum of Rs. 12 lakhs which
amount the respondent is said to have been withdrawn from the bank in
contravention of the terms and conditions of the deed of partnership, he
,. ~

accepted his liability at least to the extent of Rs. 7,00,000/-. It appears from
c a plain reading of the complaint petition that the respondent had admitted his
liability to the extent of Rs. 7,00,000/-. It was found as of fact to be so by the
courts below. The said findings do not warrant any interference. The defence
raised by the respondent to the effect that the parties had entered into a
compromise in the police station and he had to sign a cheque under some
threat or coercion had not been accepted by the courts below. There cannot
D be any doubt whatsoever that had the respondent been able to show that the
cheque had been issued not in discharge of a debt but by way of a security
pending determination of his liability by an auditor, the matter would have ..,....
been different. In such an event, the court could have arrived at a finding that
the cheque having been issued on the basis of an anticipated profit which
E by itself did not create any liability in presenti and the result of the audit
might have gone either way, no case under Section 138 of the Act was made
out. But, the same is not the case here.

21. The question which now arises for consideration is as to whether
any case for awarding a substantial sentence has been made out. We do not
F think so. Grant of compensation, in our opinion, would subserve the purpose.

22. Appellant may also file a suit for damages and/ or for other reliefs.
We do not know what was found by the auditor upon scrutiny of the books
of account of the partnership firm.

G 23. The relationship between the parties is not disputed.

24. Respondent has not been charged with any fraudulent action. He
had a probable defence. Appellant furthermore had not preferred any appeal
against the judgment of the learned Trial Judge for enhancement of the
•
H sentence. It may be that quantum of compensation has been altered to that
P. SURESH KUMAR 1·. R. Sl!ANKAR [S.B. SINHA. J.] 659
of the fine but in effect and substance the same did not matter. A
25. In our opinion, therefore, interest of justice would be subserved, if
the respondent is hereby directed to pay a compensation of Rs.7,00,000/- in
stead and place of a fine of Rs.5,000/-, as has been directed by the High Court.
Thus, the appellant would be entitled to get the aforementioned sum of
Rs.7,00,000/- by way of compensation. B
26. This appeal is disposed of accordingly. Respondent should pay the
amount of compensation within a period of eight weeks, if not already
)
deposited, failing which steps may be taken for recovery thereof in accordance
with law.

S.K.S. Appeal disposed of.

. .A -.I.