Court holds failure to present cheque within validity period amounts to negligence; modifies compensation awarded to customer
The Supreme Court has held that a bank’s failure to present a cheque within its validity period, without reasonable explanation, amounts to deficiency in service under consumer law.
The ruling came in Canara Bank v. Kavita Chowdhary, where the respondent had deposited two high-value cheques amounting to ₹1.06 crore with the bank on May 29, 2018.
The cheques, dated March 3, 2018, were valid for three months and were set to expire on June 2, 2018. Although initially processed, the cheques were returned and debited with remarks such as “online cheque return.” The bank failed to re-present them within the validity period, and when eventually presented, they were dishonoured as “stale.”
The National Consumer Disputes Redressal Commission (NCDRC) had held the bank liable for deficiency in service and awarded compensation at 10% of the cheque amount.
Challenging this, the bank approached the Supreme Court contending that the delay was due to a bank strike and operational issues.The matter was heard by a Bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan.
The Court held that a bank acts as an agent of the customer while collecting cheques and is under a duty to exercise due diligence in presenting them within the prescribed validity period.
It observed that failure to do so, without reasonable explanation, constitutes negligence and amounts to deficiency in service under the Consumer Protection Act.
Rejecting the bank’s defence of strike-related delay, the Court noted that even after normal functioning resumed, the bank had sufficient time to re-present the cheques but failed to act promptly.
Referring to statutory provisions, the Court clarified that delay in presentment may be excused only when caused by circumstances beyond control, and once such circumstances cease, the instrument must be presented within a reasonable time.
Upholding the finding of deficiency in service, the Supreme Court affirmed the bank’s liability but modified the compensation awarded.
The Court reduced the compensation from 10% to 6% of the cheque amount, holding that the earlier amount was excessive given the nature of loss suffered.
The appeal was accordingly disposed of.
