Canara Bankv.Kavita Chowdhary

Legal Analysis: Canara Bank vs. Kavita Chowdhary

Citation: 2026 INSC 363
Court: Supreme Court of India
Bench: Justice Ujjal Bhuyan (Division Bench – single judge named, but “we” indicates at least two judges)
Judgment Author: Justice Ujjal Bhuyan
Date of Decision: April 15, 2026
Nature of Judgment: Civil Appeal under Section 23 of the Consumer Protection Act, 1986 / Section 67 of the Consumer Protection Act, 2019 against order of National Consumer Disputes Redressal Commission (NCDRC).

Synopsis of the Judgment

The respondent deposited two cheques totalling ₹1.06 crores into her savings account with Canara Bank. The cheques were returned due to a bank strike. The bank failed to re-present them within the validity period, causing them to become stale. The NCDRC held that there was deficiency in service and awarded 10% of the cheque amount (₹10.61 lakhs) as compensation with 8% interest. The Supreme Court upheld the finding of deficiency in service but reduced the compensation to 6% of the cheque amount (₹6.36 lakhs) with 6% interest, holding that the actual loss from inability to prosecute the drawer under Section 138 NI Act was indeterminate. The Court affirmed that banks acting as collecting agents owe a duty of due diligence; failure to present cheques within validity constitutes negligence and deficiency in service.

1. Basic Information of the Judgment

Field Details Case Title Canara Bank vs. Kavita Chowdhary (with connected appeal) Civil Appeal Nos. 2587 of 2025 and 2588 of 2025 Bench Justice Ujjal Bhuyan (Division Bench)Date of Decision April 15, 2026 Citation 2026 INSC 363 Appeal From Order dated 24.09.2024 of National Consumer Disputes Redressal Commission (NCDRC) in Consumer Complaint No. 123/2019 and connected complaint

2. Legal Framework

Laws Involved:

• Consumer Protection Act, 1986: Section 2(1)(g) (deficiency), Section 2(1)(o) (service), Section 21(a)(i) (jurisdiction of NCDRC).

• Consumer Protection Act, 2019: Section 2(11) (deficiency – expanded definition including negligence and omission), Section 2(42) (service).

• Negotiable Instruments Act, 1881 (NI Act): Section 6 (cheque), Section 64 (presentment for payment), Section 72 (presentment to charge drawer), Section 75A (excuse for delay due to circumstances beyond control), Section 84 (effect of non-presentment and actual damage), Section 105 (reasonable time), Section 138 (dishonour of cheque – conditions precedent).

• Indian Contract Act, 1872: Section 73 (compensation for breach of contract / failure to discharge obligation).

• Insolvency and Bankruptcy Code, 2016: Reference to liquidation of drawer company.

Precedents Cited:

• Lucknow Development Authority v. M.K. Gupta (1994) 1 SCC 243 – Definition of “service” includes statutory bodies; consumer forum can award compensation for injustice.

• Managing Director, Maharashtra State Financial Corporation v. Sanjay Shankarsa Mamarde (2004) – Banking and financing services covered under Consumer Protection Act; deficiency depends on facts.

• Arun Bhatia v. HDFC Bank (2017) – Scope of “deficiency” is wide.

• Charan Singh v. Healing Touch Hospital (2000) – Compensation depends on facts; no hard and fast rule.

• Chief Administrator, HUDA v. Shakuntla Devi (2020) – Sine qua non for compensation is proof of loss or injury; compensation must be fair and reasonable.

• MSR Leathers v. S. Palaniappan (2013) – Three conditions for Section 138 NI Act; cheque can be presented multiple times within validity.

• Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India (2024) – Section 138 proceedings are criminal, not recovery proceedings; IBC does not extinguish criminal liability.

• Vishnoo Mittal v. M/s Shakti Trading Company (2021) – Cause of action under Section 138 arises only after demand notice and failure to pay.

• Consolidated Construction Consortium Ltd. v. Software Technology Parks of India (2020) – Section 73 Contract Act; compensation for breach.

3. Relevant Facts

• Complainant (respondent): Kavita Chowdhary, holder of savings bank account with Canara Bank, Maharani Bagh Branch, New Delhi.

• Cheques deposited: On 29.05.2018, she deposited two CTS cheques:
  Cheque No. 46382 dated 03.03.2018 for ₹11,36,868/-
  Cheque No. 46381 dated 03.03.2018 for ₹94,73,900/-

• Drawer: Assotech Limited, account with Vijaya Bank, SSI Branch, Noida.

• Initial credit: Bank credited both amounts on 01.06.2018 (recorded at 13:01:34 and 14:55:06 hours).

• Debit on same day: Both amounts were debited with caption “online cheque return”.

• Return memos: Cheques were returned on 30.05.2018 with reason “bank on strike” (strike on 30-31 May 2018).

• Re-presentation attempts: Bank re-presented cheques on 04.06.2018 and 08.06.2018 – after validity expired (validity up to 02.06.2018 as 03.06.2018 was Sunday). Return memos cited “instrument out dated/state”.

• Collection charges: Bank deducted ₹177/- on each occasion.

• Legal notice: Respondent sent notice on 26.07.2018 (corrected on 02.08.2018) claiming compensation for loss of ₹1,06,10,768/-.

• Consumer complaint: Filed before NCDRC under Section 21(a)(i) of Consumer Protection Act, 1986.

• NCDRC order (24.09.2024): Held deficiency in service; directed bank to pay 10% of total cheque amount (₹10.61 lakhs) with 8% interest from date of complaint + ₹50,000 litigation costs.

• Appeal to Supreme Court: Bank challenged the order.

4. Issues

1. Whether the National Commission was correct in holding that there was deficiency in service on the part of the bank in not re-presenting the cheques within their validity period.

2. Whether the compensation awarded (10% of cheque amount) was just, fair and reasonable, or whether it should be reduced given the indeterminate nature of the loss.

5. Ratio Decidendi

• Bank’s duty as collecting agent: A bank receiving cheques for collection acts as an agent of the customer. It is under an obligation to exercise due diligence in presenting the instruments within the prescribed validity period. Failure to do so, without reasonable explanation, constitutes negligence and deficiency in service under consumer protection law (Para 59).

• No reasonable explanation for delay: The bank claimed the cheques were returned on the evening of 01.06.2018 due to the strike. However, the return memos showed return on 30.05.2018. Even assuming return on 01.06.2018, the bank had 02.06.2018 (working day) to re-present, but did not. The excuse of “technical failure” was beyond pleadings and not proved. Hence, deficiency established (Para 54, 58).

• Section 75A NI Act – not a blanket excuse: While delay due to circumstances beyond control (bank strike) is excused under Section 75A, the moment the cause of delay ceases, presentment must be made within a reasonable time. Here, after the strike ended on 31.05.2018, the bank had reasonable time on 01.06.2018 and 02.06.2018 to re-present, but failed (Para 56).

• Banking service covered under Consumer Protection Act: Relying on Lucknow Development Authority and Sanjay Shankarsa Mamarde, the Court held that banking services are covered under the definition of “service”; deficiency includes negligence in performance (Para 57).

• Finding of deficiency is factual – no perversity: The Commission’s finding of deficiency was based on pleadings and evidence. The bank failed to show any patent error or perversity. Hence, interference not warranted (Para 60).

• Compensation reduced because loss is indeterminate: The Commission awarded 10% as “token compensation”. The Supreme Court noted that even if the cheques had been presented in time and dishonoured, that alone would not constitute an offence under Section 138 NI Act – the complainant would have to serve a demand notice and wait 15 days. The outcome of any such proceeding is uncertain. Therefore, 10% was on the higher side. Reduced to 6% of cheque amount with 6% interest (Para 69-72).

6. New Legal Principles Established / Reiterated

• Bank’s negligence in presenting cheques within validity period constitutes deficiency in service: Even if the initial delay was caused by a bank strike (circumstance beyond control), the bank is not absolved from its duty to re-present the cheques within the remaining validity period once the strike ends. Failure to do so without reasonable explanation is deficiency.

• Compensation for deficiency in banking service for cheque collection: Where the actual loss from inability to initiate Section 138 proceedings is indeterminate, compensation should be a reasonable percentage (here 6% of face value) rather than the full amount, because the success of such proceedings is uncertain.

• Indeterminate loss principle: The Court applied the principle that where the loss caused by deficiency is not directly quantifiable (e.g., loss of a cause of action that may or may not succeed), compensation must be moderate and reasonable, not the full face value of the cheque.

7. Court’s Analysis and Examination of Concepts

• Examination of the bank’s contradictory statements: The Commission noted that the bank’s affidavit claimed return on 01.06.2018 evening, but the return memo was dated 30.05.2018. The Supreme Court did not resolve this contradiction but held that even on the bank’s own version (return on 01.06.2018), there was no explanation for not re-presenting on 02.06.2018 (Para 54).

• Rejection of “technical failure” plea: During oral arguments, the bank raised a new plea of “technical failure” on 02.06.2018. The Court rejected this as it was beyond the pleadings and affidavits. This reinforces the rule that parties cannot raise new factual pleas at the stage of final hearing without amendment (Para 24.2).

• Section 138 NI Act – not a guaranteed remedy: The Court held that even timely presentation and dishonour would not automatically lead to conviction under Section 138. The complainant would have to complete the notice and payment default conditions. Moreover, the drawer company was under liquidation, which could affect recovery. Hence, the loss was indeterminate (Para 69).

• Moderation of compensation: Following Charan Singh and Shakuntla Devi, the Court held that compensation must be fair, reasonable and commensurate to the loss. Since the loss was indeterminate, a token percentage (6%) was appropriate. The Commission’s 10% was reduced to 6% (Para 71-72).

8. Critical Analysis

Strengths: The judgment correctly balances consumer protection with commercial reality. It affirms that banks cannot be careless with customers’ cheques, especially when the validity period is short. The reduction of compensation from 10% to 6% is pragmatic – it acknowledges that the customer lost a chance to pursue legal remedies, but that chance is not equivalent to the full cheque amount. The distinction between “deficiency” (upheld) and “quantum of compensation” (reduced) is sound.

Potential concerns: The Court did not explicitly resolve the contradiction between the return memo (30.05.2018) and the bank’s affidavit (01.06.2018). This leaves some ambiguity. Also, the Court did not discuss whether the bank could have been held liable for the full cheque amount if it had acted in bad faith – but here, negligence was the finding, not fraud. The 6% figure appears somewhat arbitrary; the judgment does not explain why 6% rather than 5% or 8%. However, such discretion is inherent in compensation assessment.

Practical impact: This judgment will be cited by banks to limit compensation in similar cases where cheques become stale due to their negligence – they will argue that the loss is indeterminate and only a small percentage should be awarded. Conversely, consumers will rely on the finding that non-presentation within validity is deficiency in service, even if initial delay was due to a strike.

9. Final Outcome

Appeals partly allowed. The finding of deficiency in service by the NCDRC is upheld. However, the compensation is reduced from 10% of the total cheque amount (₹1,06,10,768/-) to 6% of that amount, and the interest rate reduced from 8% per annum to 6% per annum from the date of filing the complaints. The rest of the NCDRC order (litigation costs of ₹50,000/-) remains undisturbed. No order as to costs.

10. Practical Application (Use in Court)

• By consumers (depositors): When a bank fails to present or re-present cheques within their validity period, file a consumer complaint alleging deficiency in service. Use this judgment to argue that such failure constitutes negligence, even if the initial delay was due to a bank strike. The burden is on the bank to explain why it did not re-present within the remaining validity.

• By banks: To limit compensation, argue that the loss from inability to pursue Section 138 proceedings is indeterminate. The success of such proceedings is not guaranteed (drawer may have no funds, may be under liquidation, or may successfully defend). Therefore, compensation should be a reasonable percentage (not the full face value). Cite the reduction from 10% to 6% in this judgment.

• By consumer courts: When awarding compensation for deficiency in cheque collection, assess the actual loss suffered. If the only loss is the loss of a cause of action under Section 138 NI Act (which is contingent on many factors), award token compensation (e.g., 5-10% of cheque amount) rather than the full amount. The compensation must be fair and reasonable, not punitive.

11.  Court Lines

“A bank receiving cheques for collection acts as an agent of the customer and is under an obligation to exercise due diligence in presenting the instruments within the prescribed validity period. Failure to do so resulting in the instrument becoming stale, in the absence of any reasonable explanation, would result in negligence in the discharge of banking duties which would constitute deficiency in rendering service within the meaning of the consumer protection law.” (Para 59)

“If there is a delay in presentment for acceptance or payment of the cheque, such a delay would be excused under Section 75A if it is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence. But the moment the cause of delay ceases to operate, presentment must be made within a reasonable time.” (Para 56)

“Even if the cheques were presented within time and would have been dishonoured, that would not have ipso facto led to commission of an offence under Section 138 of the NI Act. … It would be difficult to foretell with any degree of certainty the outcome of such a proceeding. All these are within the realm of imponderability.” (Para 69)

“In our view, having regard to the totality of the facts and circumstances of the case, compensation assessed at 6 percent of the total amount … would be a reasonable compensation and thereby meet the ends of justice.” (Para 72)

12. Legal Strategy Insight

For the consumer (complainant): When filing a consumer complaint against a bank for stale cheques, do not claim the full cheque amount as compensation unless you can prove that the drawer was solvent and would have honoured the cheque. Instead, claim a reasonable percentage (10-15%) with interest, and also claim litigation costs. Use this judgment to argue that the bank’s negligence deprived you of the chance to initiate Section 138 proceedings, and that chance has value even if uncertain.

For the bank (defendant): In defence, argue that the customer’s loss is purely speculative. Show that the drawer company was under liquidation or had insufficient funds – this proves that even timely presentation would have resulted in dishonour without recovery. Also, argue that the customer can still pursue civil remedies against the drawer. If the initial delay was due to a bank strike or technical glitch, promptly re-present the cheque as soon as possible and document every step. If re-presentation is delayed beyond validity, offer a token compensation (e.g., 5-6%) early to avoid litigation costs.