Bank Liable for Deficiency in Service for Failure to Present Cheques Within Validity; Compensation Must Be Reasonable and Not Speculative: Supreme Court

Case Name: Canara Bank v. Kavita Chowdhary
Citation: 2026 INSC 363
Date of Judgment/Order: April 15, 2026
Bench: Justice Ujjal Bhuyan, B.V. Nagarathna

Held: The Supreme Court held that a bank acting as an agent for collection of cheques is under a duty to exercise due diligence in presenting them within their validity period, and failure to do so without reasonable explanation constitutes deficiency in service under consumer law. However, the Court further held that compensation for such deficiency must be reasonable, fair, and commensurate with the actual or proximate loss suffered, and cannot be based on speculative or indeterminate outcomes such as hypothetical success of proceedings under the Negotiable Instruments Act.

Summary: The case arose from a consumer dispute where the respondent deposited two high-value cheques with the appellant bank within their validity period, but due to delay in re-presentment after initial return during a bank strike, the cheques became stale and could not be encashed. The National Consumer Disputes Redressal Commission held the bank liable for deficiency in service and awarded compensation at 10% of the cheque value with interest. Before the Supreme Court, the bank contended that the delay was due to circumstances beyond its control, including a strike, and that no negligence was attributable to it. The Court examined provisions of the Negotiable Instruments Act relating to presentment, delay, and reasonable time, along with the concept of “deficiency” under consumer protection law. It found that even if the initial delay was excusable, the bank failed to re-present the cheques within the remaining validity period despite having sufficient opportunity, thereby breaching its duty of care. At the same time, the Court held that the actual loss suffered by the complainant was uncertain, as recovery under Section 138 proceedings was not guaranteed and depended on multiple contingencies.

Decision: The Supreme Court partly allowed the appeals by upholding the finding of deficiency in service but modifying the quantum of compensation, reducing it from 10% to 6% of the cheque amount with 6% interest from the date of complaint, while maintaining litigation costs and disposing of the appeals accordingly.