A friendly loan of ₹75,000, a cheque that bounced, and a challenge to the one thing that makes a compensation order bite
Justice Rakesh Kainthla dismissed a revision against concurrent convictions under Section 138, holding there is no infirmity in a sentence imposed in default of payment of compensation.
Two men had been friends for ten years. In October 2010 one approached the other and asked to borrow ₹75,000 for business, promising to return it within a month. The money was advanced. When it was asked for, the borrower issued a cheque for ₹75,000 drawn on UCO Bank, Rajgarh. It was dishonoured with the remark “funds insufficient”. The statutory notice was sent; the accused refused to accept it and the registered cover came back. A complaint under Section 138 of the Negotiable Instruments Act followed, and on 14 October 2026 the High Court dismissed the last challenge to the conviction that resulted.
Two courts, the same conclusion
The complainant examined one witness and himself. The accused denied the case under Section 313 of the Code of Criminal Procedure and led no defence evidence.
The Judicial Magistrate First Class, Rajgarh, held that the complainant had advanced the money, that the accused had issued a cheque to repay the debt, that there was nothing in the cross-examination to show the complainant lacked the funds to lend, that the cheque was dishonoured for insufficient funds, and that the notice was deemed served. All the ingredients of the offence being satisfied, he convicted the accused by judgment of 28 November 2013 and sentenced him to six months' simple imprisonment, compensation of ₹75,000, and in default of payment of compensation a further three months' simple imprisonment.
The Sessions Judge, Sirmaur District at Nahan, concurred on 30 July 2014. The complainant's testimony was reliable and nothing in his statement suggested falsity. The cheque carried the presumption that it was issued for consideration to discharge a debt or liability, and the accused had failed to rebut it. The dishonour was for insufficient funds. The notice was sent and he refused to accept it, which is deemed service. The sentence was not excessive.
The grounds in revision
The petitioner's case before the High Court was that both courts below had failed to appreciate the material properly. The cheque, he said, had been misused by the complainant, who had inserted the amount and his own name into the body of it. The complainant had failed to prove his financial capacity to lend ₹75,000. And there was a material alteration in the cheque, which made it void. Mr N.K. Tomar appeared for the petitioner, Mr C.S. Thakur for the first respondent, and Mr Jitender Sharma, Additional Advocate General, for the State.
The question of the default sentence
The part of the judgment with the widest reach concerns the sentence rather than the conviction, because the challenge was to the mechanism that makes a compensation order enforceable at all.
The Court set out the reasoning in the line of authority on Section 357(3) of the Code. A sentence of imprisonment can be granted for default in payment of compensation awarded under that provision, and the whole purpose of the provision is to accommodate the interests of victims in the criminal justice system. Sometimes the situation becomes such that no purpose is served by keeping a person behind bars, and directing the accused to pay compensation to the victim or affected party can ensure the delivery of total justice; the grant of compensation is sometimes in lieu of sending a person to prison, or in addition to a very light sentence. Hence, in default of payment of that compensation, there must be a just recourse. Not imposing a sentence of imprisonment would mean allowing the accused to get away without paying the compensation, and imposing another fine would be impractical, since it would mean a fine upon a fine and would not ensure proper enforcement of the order. The authorities also require that while passing an order under Section 357(3) courts look at the ability and capacity of the accused to pay, otherwise the very purpose of granting compensation would stand defeated.
That position was reiterated in R. Mohan v. A.K. Vijaya Kumar. The idea behind directing the accused to pay compensation to the complainant is to give him immediate relief to alleviate his grievance; compensation under Section 357(3) is awarded for the loss or injury suffered because of the act for which the accused is sentenced. If merely an order directing compensation were passed, it would be totally ineffective — an order without deterrence or the apprehension of immediate adverse consequences on non-observance. The whole purpose of giving relief to the complainant would be frustrated if he were driven to take recourse to Section 421 of the Code. An order under Section 357(3) must have the potential to secure its own observance, and deterrence can only be infused by providing for a default sentence. If Section 421 puts compensation ordered to be paid on a par with a fine so far as the mode of recovery is concerned, there is no reason why the court cannot impose a sentence in default of payment of compensation, as it can for default in payment of a fine under Section 64 of the Indian Penal Code. The decision in Vijayan had already held that the provisions enable a court to impose a sentence in default of compensation and rejected the submission that recourse can only be had to Section 421; and it had made clear that the observations in Hari Singh are as important today as when they were made. The conclusion is that an order to pay compensation may be enforced by awarding a sentence in default, and that a High Court errs in setting aside a default sentence so imposed.
On that authority the Court found no infirmity in the sentence in default of payment of compensation. No other point was urged. The revision failed and was dismissed, with all pending applications disposed of and a copy of the judgment and the records of the courts below to be sent back forthwith.