The need for awarding compensation has been considered by Justice Shetty in the case of Hari Singh v. Sukhbir Singh (1984) 4 SCC 551. Although subsection (3) should be exercised liberally, the amount of compensation awarded under it must always be reasonable.

Before determining the reasonableness of the compensation to be awarded in a given case, the court must decide whether the case is one in which compensation should be granted. If compensation is deemed necessary, the court must consider various factors, including the accused's capacity to pay, the nature of the crime, the justness of the claim, and the context of the victims or their family members.

The purpose of awarding compensation under subsection (3) is not to enrich the victim but to compensate for the pecuniary loss suffered due to the offense. There is also the possibility of recovering this amount from the accused through a civil suit. The direction to pay compensation under Section 357(3) assumes a basic civil liability on the part of the offender to redress the victim or their dependents through compensation.

In the case of Anurag Garg (2004) 8 SCC 251, where the accused allegedly accepted and appropriated dower in contravention of the Dowry Prohibition Act, 1961, the Apex court refused to award compensation. The reason was that the complainant could not have filed a civil suit to recover the dower amount, as the payment itself was illegal and prohibited by law.