SC finds Canara bank guilty of service deficiency in cheque case

The Supreme Court of India on Wednesday underscored that banks act as agents of their customers and are under a statutory obligation to exercise due diligence while handling cheques, warning that failure to present them within the validity period amounts to a deficiency in service under consumer law.

A bench of Justices B V Nagarathna and Ujjal Bhuyan held Canara Bank guilty of negligence for not presenting cheques before they became “stale.” The court, however, reduced the compensation awarded to the complainants.

The ruling came on an appeal filed by Canara Bank against an order of the National Consumer Disputes Redressal Commission , which had ruled in favour of customers Kavita and Priya Chowdhary. In May 2018, the sisters deposited two cheques worth about ₹1.06 crore issued by Assotech Limited, dated March 3 and valid until June 2.

Although a nationwide bank strike on May 30-31 caused initial delay, the court noted that June 1 and 2 were working days. The bank failed to re-present the cheques within this period, leading to their rejection as stale.

Rejecting the bank’s defence of technical issues and the issuer company’s liquidation, the court held that timely presentation even if dishonoured would have enabled the complainants to initiate proceedings under Negotiable Instruments Act, 1881 . The delay, it said, effectively deprived them of this legal remedy.

While upholding the finding of negligence, the court reduced compensation from 10% to 6% of the cheque value , citing the uncertainty of actual loss, and retained ₹50,000 as litigation costs.

The judgment reinforces banks’ accountability in cheque processing and strengthens consumer protection jurisprudence.