Case at a Glance
A Bhopal resident financed a Mahindra KUV100 with a ₹3.5 lakh loan repaid through post-dated EMI cheques. An EMI cheque of September 2016 was returned by his bank with the reason “connectivity failure” even though his account had enough money; the lender did not re-present it, demanded cash and levied penal interest and cheque-return charges. The District and State Commissions found deficiency in service and ordered compensation, a bar on penal charges and correction of his CIBIL record. The NCDRC agreed that the borrower had not defaulted and that it was for the lender to ensure collection, but held that the CIBIL correction direction was excessive and replaced it with ₹10,000 additional compensation.
The complainant bought a Mahindra KUV100 costing about ₹6,40,134, paying ₹2,90,134 as margin money and taking a loan of ₹3,50,000 from Mahindra & Mahindra Financial Services, repayable in 60 monthly instalments of about ₹7,800 through post-dated cheques. A cheque dated 25 September 2016 was returned by HDFC Bank citing “connectivity failure”; his account then held ₹15,637.21, rising to ₹53,099.84 by 20 October 2016. The lender did not present the cheque again but demanded cash, treated him as a defaulter, and charged penal interest and cheque-return charges. He said this damaged his CIBIL score and filed a complaint in December 2016.
On 3 September 2019 the District Commission, Bhopal found deficiency in service and unfair trade practice. It awarded ₹50,000 for mental agony and ₹5,000 costs, barred penal interest and cheque-return charges from 25 September 2016 until repayment was restored, and directed correction of his CIBIL rating. The State Commission, Madhya Pradesh dismissed the lender’s appeal on 24 July 2022, noting that cheques for other instalments had also been returned for connectivity reasons. The lender argued in revision that the loan obligation was the borrower’s, that the bank’s connectivity failure was not its fault, and that it had no control over CIBIL records.
The Key Question Before the Court
When an EMI cheque is returned for a technical reason like ‘connectivity failure’ despite sufficient funds, is the borrower in default, and can the lender levy penal interest and bounce charges instead of re-presenting it?
The Lender’s Job to Collect, Not the Borrower’s Fault
The NCDRC found that the cheque was not dishonoured for want of funds: “There was sufficient balance maintained by the complainant in his bank account.” The borrower had therefore done what he was required to do by the due date. “It was thereafter for the revisionist to ensure timely presentation to, and collection by, its own Banker.” Rather than re-presenting the cheque, the lender demanded cash and imposed penal interest and charges, which the Commission held to be a deficiency in service. Relying on the Supreme Court’s decision in Canara Bank v. Kavita Chowdhary, (2026) 04 SC CK 0490, it held that “there was no further obligation on the complainant-respondent.” It distinguished the lender’s authorities, including Indian Oil Corporation v. Consumer Protection Council, Kerala, (1993) 12 SC CK 0011, on facts.
On the credit record, however, the Commission accepted the lender’s point. Since the finance company is neither responsible for nor capable of correcting the CIBIL score, “the direction to the petitioner for ensuring correction in CIBIL score is excessive and uncalled for.” It replaced that direction with “a direction for additional compensation of Rs. 10000/-” and held that the “Balance directions of the fora below are upheld.” The revision was partly allowed.
What the Court Actually Held
- Where an EMI cheque is returned for ‘connectivity failure’ and the borrower’s account has sufficient funds, the borrower has fulfilled his payment obligation and is not in default.
- It is for the lender to ensure timely presentation and collection through its own banker; demanding cash and levying penal interest and cheque-return charges instead was deficiency in service.
- The direction to the lender to ensure correction of the borrower’s CIBIL score was excessive, since the lender cannot itself correct the score; it was replaced with ₹10,000 additional compensation.
- The remaining directions, including ₹50,000 compensation, ₹5,000 costs and the bar on penal interest and cheque-return charges, were upheld; the revision was partly allowed.
Why This Judgment Matters
- Millions of borrowers repay vehicle and personal loans by cheque, ECS or NACH, and technical returns are common; this ruling protects them from penalties for the bank’s glitch.
- It places the duty to re-present and collect squarely on the lender when the borrower’s account is funded.
- It also signals the limits of consumer relief: a lender may not be ordered to correct a credit score it does not control.
What Should Advocates Take Away From the Judgment?
For Borrowers
- Keep bank statements for EMI dates; proof of sufficient balance was decisive here.
- Ask your bank for the return memo; a technical reason such as ‘connectivity failure’ is not a dishonour for insufficient funds.
- Penal interest and bounce charges levied for such technical returns can be challenged before a Consumer Commission.
For Counsel
- Cite Canara Bank v. Kavita Chowdhary for the proposition that a duly funded cheque discharges the borrower’s obligation for that instalment.
- Frame CIBIL relief against the appropriate entity; the NCDRC held the lender could not be directed to correct the score.
- Emphasise the limited scope of revision where findings are concurrent.
Key Takeaways
- A cheque returned for a technical reason, with funds in the account, is not the borrower’s default.
- The lender must re-present and collect; penal interest and bounce charges in such cases are a deficiency in service.
- A lender cannot be directed to correct a borrower’s CIBIL score; compensation was awarded instead.
- Total relief: ₹50,000 plus ₹10,000 compensation, ₹5,000 costs and no penal charges.
Frequently Asked Questions
My EMI cheque was returned for a technical reason though I had money in my account. Am I a defaulter?
According to the NCDRC, no. Where the account had sufficient balance and the cheque was returned for ‘connectivity failure’, the borrower had fulfilled his obligation, and it was for the lender to ensure collection through its banker.
Can the lender charge penal interest and bounce charges in such a case?
The NCDRC upheld the lower fora’s direction barring penal interest and cheque-return charges, and held that demanding cash and levying such charges was a deficiency in service.
Will the Consumer Commission order my CIBIL score to be corrected?
Not against the lender in this case. The NCDRC held that the finance company is neither responsible for nor capable of correcting the CIBIL score, and replaced that direction with ₹10,000 additional compensation.
Conclusion
The NCDRC drew a clear line: a borrower who keeps money in the account has paid, and a bank’s technical failure cannot be turned into a default with penal charges. At the same time, it declined to make the lender answerable for a credit score it does not control.
Practical takeaway: If an EMI cheque or mandate is returned for a technical reason, preserve your bank statement and the return memo, write to the lender asking it to re-present, and challenge any penal charges before the Consumer Commission.
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