Bank Liable For Delay In Presenting Cheque : Supreme Court Upholds Penalty Under Consumer Protection Act

The Supreme Court on Wednesday (April 15) held that a failure of the bank to present the cheque within the prescribed validity period of the cheque without any reasonable explanation would amount to 'deficiency in service' under the Consumer Protection Act.

A bench of Justice BV Nagarathna and Justice Ujjal Bhuyan upheld the liability of the Canara Bank for deficiency in rendering service to its customer, who had deposited the cheque with the bank, but the bank failed to present the instruments before the expiry of the validity period of the cheque, rendering the check to be dishonoured with the remark “stale cheque.”

“A bank receiving cheques for collection acts as an agent of the customer and is under an obligation to exercise due diligence in presenting the instruments within the prescribed validity period. Failure to do so resulting in the instrument becoming stale, in the absence of any reasonable explanation, would result in negligence in the discharge of banking duties which would constitute deficiency in rendering service within the meaning of the consumer protection law.”, the Court said.

The dispute arose when the respondent deposited two high-value cheques (drawn on Vijaya Bank) into her account with Canara Bank on May 29, 2018, having a total value of ₹1,06,10,768.

Both cheques were dated March 3, 2018, and were valid for three months, expiring on June 2, 2018.

Soon after the deposit, the cheques were initially processed and credited. They were then returned and debited with remarks such as “online cheque return”. Instead of being promptly re-presented within the validity period, the bank delayed the process, and when re-presented after expiry of the validity period, both cheques were returned unpaid with the remark “instrument out dated/stale”.

The bank made a defence that there was a bank strike on May 30–31, to justify the delay; however ignored the fact that it still had working days on June 1 and June 2 to re-present the cheques before expiry, but failed to do so.

Aggrieved by the NCDRC's order holding it liable for the deficiency in service and granting 10% of the cheque amount as compensation, the bank appealed to the Supreme Court.

Upholding the liability for deficiency in service, the judgment authored by Justice Bhuyan observed:

“we are in agreement with the view taken by the Commission that there was negligence on the part of the appellant in presentation of the two cheques of the respondent within the validity period of the cheques leading to deficiency in service on the part of the appellant qua the respondent.”

The bank argued that the delay was due to a strike and operational issues. However, the Court rejected this defence, observing that once normal functioning resumed, the bank was duty-bound to act promptly.

The absence of any credible explanation for not re-presenting the cheques within the remaining validity period was held to be decisive.

"If there is a delay in presentment for acceptance or payment of the cheque, such a delay would be excused under Section 75A if it is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence. But the moment the cause of delay ceases to operate, presentment must be made within a reasonable time. What is a reasonable time for the purpose of presentment for acceptance or payment of a cheque is provided for in Section 84(2) as well as Section 105 which say that for determining what is a reasonable time, regard shall be had to the nature of the instrument, the usage of trade and of bankers and the facts of the particular case.", the court observed.

However, the Court modified the impugned order to the extent that the compensation amount, which was 10% of the cheque value, was reduced to 6%.

“…the compensation fixed by the Commission appears to be on the higher side by applying the standard of reasonable compensation having regard to the peculiar facts of the present case. 10 percent of the face value of the cheque amount as a token compensation would not accurately reflect the nature of the loss suffered by the complainant because the loss itself is indeterminate despite the finding of deficiency in service.”, the court observed.

Accordingly, the appeal was disposed of.

Headnote

Consumer Protection – Banking Service – Deficiency in Service – Negligence in Presenting Cheques – Section 2(g) of the Consumer Protection Act, 1986 / Section 2(11) of the Consumer Protection Act, 2019 – A bank receiving cheques for collection acts as an agent of the customer and is obligated to exercise due diligence in presenting the instruments within the prescribed validity period - Failure to present cheques before they become stale, without a reasonable explanation, constitutes negligence and a "deficiency in service" - In this case, the Appellant bank failed to re-present cheques on available working days (June 1st and 2nd, 2026) after a bank strike ended, causing the instruments to expire - The Supreme Court upheld the finding of deficiency but modified the quantum of compensation. [Paras 50-69]

Negotiable Instruments – Delay in Presentment – Section 75A of the Negotiable Instruments Act, 1881 – While delay in presentment is excused if caused by circumstances beyond the holder's control (such as a strike), the presentment must be made within a "reasonable time" as soon as the cause of delay ceases to operate - The bank's failure to act on the immediate working days following the strike precluded the protection of Section 75A. [Paras 56]

Consumer Protection – Compensation – Reasonable Quantum – Section 73 of the Indian Contract Act, 1872 – Compensation under consumer law must be fair, reasonable, and commensurate with the loss or injury. Where the loss is indeterminate because the outcome of potential legal proceedings (e.g., Section 138 NI Act) is "imponderable" compensation should be assessed on the principle of moderation - Supreme Court reduced the NCDRC's award of 10% of the cheque amount to 6% as a "token compensation," noting that the actual loss was difficult to accurately reflect. [Relied on Lucknow Development Authority v. M.K. Gupta (1994) 1 SCC 243; Chief Administrator, HUDA v. Shakuntla Devi (2017) 2 SCC 301; MSR Leathers v. S. Palaniappan (2013) 1 SCC 177; Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd. (2023) 10 SCC 545; Paras 59 - 72]

Cause Title: CANARA BANK VERSUS KAVITA CHOWDHARY

Citation : 2026 LiveLaw (SC) 375

Click here to download judgment

Appearance:

For Appellant(s) : Mr. Brijesh Kumar Tamber, AOR Mr. Vinay Singh Bist, Adv. Ms. Arani Mukherjee, Adv. Mr. Sahas Bhasin, Adv. Mr. Yashu Rustagi, Adv.

For Respondent(s) : Mr. Vinod Agarwal, Adv. Mr. Ashish Pandey, AOR