Case at a Glance
A customer deposited two cheques worth over ₹1.06 crore with Canara Bank a few days before their validity expired. Owing to a bank strike, the cheques were returned and then not re-presented in time, so they became stale — costing her the remedy under Section 138 of the Negotiable Instruments Act against the drawer. The NCDRC found deficiency in service and awarded 10% of the cheque amount as compensation. The Supreme Court upheld the finding of negligence, holding that a collecting bank acts as the customer’s agent, but reduced compensation to 6% of the cheque amount with 6% interest, since the actual loss was indeterminate.
Two cheques dated 3 March 2018, together worth ₹1,06,10,768, were issued by a company, Assotech Ltd., on Vijaya Bank, Noida, in favour of the complainant. On 29 May 2018 she deposited them at a Canara Bank branch in Delhi. Bank employees were on strike on 30–31 May 2018, and return memos dated 30 May 2018 recorded ‘bank on strike’. After the amounts were credited and then reversed, the cheques were eventually returned as ‘out dated/stale’ in June 2018, with collection charges deducted each time.
The complainant (and a family member with a connected complaint) approached the National Consumer Disputes Redressal Commission under the Consumer Protection Act, 1986. On 24 September 2024 the NCDRC held the bank deficient in service and directed it to pay 10% of the cheque amount with 8% interest from the date of filing, plus ₹50,000 costs to each complainant. The bank appealed, invoking Section 75A of the Negotiable Instruments Act (excused delay), Section 105 (reasonable time) and RBI circulars, and argued that the drawer company was in any case under insolvency.
The Key Question Before the Court
Was the collecting bank deficient in service for failing to present the cheques within their validity, and was compensation of 10% of the cheque amount justified?
The Collecting Bank as the Customer’s Agent
The Court accepted that the cheques were first returned on 30 May 2018 during the strike, but found that two full working days — 1 and 2 June 2018 — remained before validity expired at the close of 2 June. On the bank’s failure to re-present in that window, the Court noted “there is no explanation at all, not to speak of any reasonable explanation.” It emphasised that “a bank receiving cheques for collection acts as an agent of the customer” and, finding the NCDRC’s conclusion to be a finding of fact that was not perverse, held that “there was negligence on the part of the appellant in presentation of the two cheques.”
Drawing on Lucknow Development Authority v. M.K. Gupta, (1993) 11 SC CK 0040, Arun Bhatia v. HDFC Bank and Chief Administrator, Haryana Urban Development Authority v. Shakuntla Devi, (2016) 12 SC CK 0100, the Court examined whether compensation was proportionate. Since the drawer was in insolvency and the complainant’s real loss could not be measured, the Court held that 10% was on the higher side because “the loss itself is indeterminate despite the finding of deficiency in service,” and reduced it to 6%.
What the Court Actually Held
- The bank, as the collecting agent of its customer, was negligent in not presenting the cheques within their validity period; deficiency in service was upheld.
- A strike explained the first return, but not the failure to re-present on the two working days still available.
- Compensation was reduced from 10% to 6% of the total cheque amount, with interest at 6% from the date of filing of the complaint.
- The rest of the NCDRC order was not interfered with; the appeals were disposed of without costs.
Why This Judgment Matters
- It confirms that banks owe customers a duty of care when collecting cheques and can be liable under consumer law if a cheque turns stale through their negligence.
- It recognises the real harm of losing the Section 138 NI Act remedy because of a bank’s lapse.
- It shows how courts calibrate compensation where the actual loss is uncertain.
What Should Advocates Take Away From the Judgment?
For Bank Customers
- Deposit cheques well before the three-month validity runs out, and keep the deposit slip.
- If a cheque is returned for technical reasons such as a strike, ask the bank to re-present it immediately.
- Use RTI (for public sector banks) to obtain return memos if the bank’s account is unclear.
For Counsel
- Plead the collecting bank’s agency duty and the loss of the Section 138 remedy as the injury.
- Map the timeline day by day — available working days before expiry can decide negligence.
- Be prepared to justify the quantum; where loss is indeterminate courts may moderate compensation.
Key Takeaways
- Collecting banks act as agents of the customer.
- A strike excuses only the delay it actually causes.
- Losing the cheque-bounce remedy because of a bank’s lapse is compensable.
- Compensation must be proportionate where loss is uncertain.
Frequently Asked Questions
Can I file a consumer case if my bank lets my cheque expire?
Yes. In this case the Supreme Court upheld the NCDRC’s finding of deficiency in service against the collecting bank for failing to present the cheques within validity.
Does a bank strike protect the bank?
Only for the delay the strike actually caused. Here two working days remained after the strike, and the bank gave no explanation for not re-presenting.
How much compensation was finally awarded?
6% of the total cheque amount with 6% interest from the date of filing, instead of the 10% with 8% interest awarded by the NCDRC.
Conclusion
Canara Bank v. Kavita Chowdhary, (2026) 04 SC CK 0490 reminds banks that cheque collection is a service owed to the customer, not a mechanical exercise. Where a lapse destroys the customer’s legal remedy against the drawer, the bank must answer for it — though compensation will be measured with an eye to the actual, provable loss.
Practical takeaway: If your bank lets a cheque turn stale without good reason, you can seek compensation for deficiency in service; keep deposit records and press for re-presentation within validity.
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