IMPORTANT POINT
Compensation awarded is payable even after undergoing default sentence.

JUDGMENT

R.F. NARIMAN, J.

1. Leave granted.

2. The present appeals raise an interesting question as to whether when compensation is ordered as payable for an offence committed under Section 138 of the Negotiable Instruments Act, and in default thereof, a jail sentence is prescribed and undergone, is compensation still recoverable.

3. In the present case, the facts are that the complainant approached the Magistrate under Section 138 of the Negotiable Instruments Act in a transaction where the accused had borrowed a sum of Rs.2.75 lakh from the complainant. When the complainant demanded the amount, the accused issued a cheque for the said amount which was returned as dishonoured due to insufficiency of funds. The requisite demand notice was sent by the complainant to the accused followed by the complaint. Ultimately, the accused was found guilty of the offence under Section 138, and was convicted, stating:

“Considering the fact that this is an offence u/s 138 of the Negotiable Instruments Act I do not consider this to be a fit case to be proceeded under the Probation of Offenders Act. I am of the view that simple imprisonment for 4 months for the offence u/s 138 of the Negotiable Instruments Act would meet the ends of justice. The accused is further directed to pay a compensation of Rs.2,75,000/-to the complainant u/s 357(3) of Cr.P.C. In default of payment of compensation, he shall undergo simple imprisonment for 1 month.”

4. The accused challenged the aforesaid judgment before the Court of Sessions, and the Appellate Court, by an order dated 27th April, 2006, confirmed the conviction, but reduced the sentence to imprisonment till rising of the Court. The order to pay compensation with the default clause was, however, sustained. The accused underwent imprisonment till the rising of the Court and also underwent the default sentence for non-payment of compensation. The second respondent filed CMP No.2018 of 2008 before the learned Judicial Magistrate under Section 421 of the Criminal Procedure Code for realising compensation by issuing a distress warrant against the accused. This CMP was allowed on 19th July, 2008, and a distress warrant for the realisation of compensation was issued. A recalling petition filed by the accused was dismissed on 8th March, 2011. The High Court, by the impugned judgment dated 29th August, 2012, held that despite the fact that the default sentence was undergone, yet, under the provisions of the Code of Criminal Procedure, compensation was recoverable, and upheld the orders of the learned Judicial Magistrate.

5. Shri Siddharth Dave, learned counsel appearing on behalf of the Appellant, has argued before us that an accused who is directed to pay fine, or undergo sentence of which fine forms a part, and from which compensation is to be paid, then a court would proceed against the accused in the manner provided under Section 421 even though he may have undergone the default sentence awarded to him. However, if the sentence is of fine or sentence of which fine forms a part and there is no order of payment of compensation from the fine imposed, the court would have to record special reasons in writing before proceeding against the accused under Section 421. Likewise, compensation under Section 357(3) would be covered by the proviso if the accused has undergone the default sentence awarded and special reasons in writing would have to be recorded before action under Section 421 can be initiated. As in the present case, at the time of issuance of warrant, the Magistrate did not record special reasons in writing for proceeding against the accused person, the Division Bench judgment ought to be set aside.

6. Shri C.K. Sasi, learned counsel for the Respondent, has repelled the above submissions. According to the learned counsel, by operation of the deeming fiction contained in Section 431 Cr.P.C. compensation can be realized even if the accused had undergone the default sentence. The exception provided in the pr