Bank's Failure to Present Cheque Within Validity Period Amounts to Deficiency in Service — Supreme Court
Case Overview: Canara Bank Vs Kavita Chowdhary (Supreme Court of India)
The Supreme Court of India, in a significant ruling concerning banking negligence and consumer rights, held that a bank's failure to present cheques for clearing within their valid period constitutes a deficiency in service under the Consumer Protection Act. As a direct consequence of such negligence, the affected consumer is entitled to receive reasonable compensation from the bank.
The matter came before the Supreme Court through two civil appeals filed by Canara Bank under Section 23 of the Consumer Protection Act, 1986 / Section 67 of the Consumer Protection Act, 2019, challenging the judgment and order dated 24.09.2024 passed by the National Consumer Disputes Redressal Commission, New Delhi (hereinafter referred to as "the Commission"). Since both appeals involved identical facts and legal questions, they were heard together and disposed of through a single common judgment.
Background and Factual Matrix
The Complainant's Account and Cheque Deposits
Respondent Kavita Chowdhary maintained a savings bank account (Account No. 0349101015565) with Canara Bank at its Maharani Bagh (Ashram Chowk) Branch, New Delhi. On 29.05.2018, she deposited two CTS cheques into her account, both issued by Assotech Limited and drawn on Vijaya Bank, SSI Branch, Noida:
- Cheque No. 46382 dated 03.03.2018 for Rs. 11,36,868
- Cheque No. 46381 dated 03.03.2018 for Rs. 94,73,900
Both instruments were submitted within their validity period. A parallel complaint (Consumer Complaint No. 124 of 2019 — Priya Chowdhary Vs. Canara Bank) involved identical circumstances and was decided alongside this matter.
What Went Wrong: The Chain of Events
After the cheques were presented for clearing on 29.05.2018, the bank initially credited the amounts into the respondent's account on 01.06.2018. However, on the very same day, both amounts were debited from her account under the caption 'online cheque return'. The respondent received SMS notifications on her registered mobile number informing her of these debits. A subsequent SMS specifically stated that Cheque No. 46381 for Rs. 94,73,900 had been returned due to 'connectivity failure'.
Subsequently:
- On 05.06.2018, Cheque No. 46381 was again deposited into the respondent's account after deduction of collection charges of Rs. 177, but was debited once more under 'online cheque return'. It was then physically returned with a memo dated 05.06.2018 citing the reason 'instrument out dated/stale'.
- On 11.06.2018, Cheque No. 46382 for Rs. 11,36,868 was similarly credited, only to be debited again on the same day with the same caption and collection charges of Rs. 177 deducted, with a return memo dated 11.06.2018 again citing 'instrument out dated/stale'.
The core grievance was that the bank had allowed the cheques to cross their validity period by failing to re-present them in time, thereby rendering the instruments stale.
Impact on the Assessee's Legal Remedies
A crucial aspect of this case was that Assotech Limited — the drawer of both cheques — was undergoing a corporate insolvency resolution process. Under such circumstances, proceedings under Section 138 of the Negotiable Instruments Act, 1881 against the Directors of the company for dishonour of cheques represented the primary legally enforceable remedy available to the respondent. Due to the bank's negligence in failing to ensure the cheques were presented and dishonoured within the validity period, this remedy was effectively extinguished, causing a loss of Rs. 1,06,10,768 — representing the aggregate value of both cheques.
The respondent issued a legal notice dated 26.07.2018 to the bank demanding compensation. A corrected notice was issued on 02.08.2018 due to a typographical error in the date of deposit in the original notice. Receiving no satisfactory response, the respondent filed Consumer Complaint No. 123 of 2019 under Section 21(a)(i) of the Consumer Protection Act, 1986 before the Commission.
The Bank's Defence
Canara Bank, as the opposite party before the Commission, submitted the following positions:
- The cheques were presented for clearing on 29.05.2018 and reflected in the paying bank on 30.05.2018.
- A bank strike prevailed on 30.05.2018 and 31.05.2018, which was a circumstance beyond the bank's control.
- The payee bank returned the cheques, which were shown to the presenting bank on the evening of 01.06.2018.
- On the request of the complainant, the cheques were again submitted for clearing on 04.06.2018 and uploaded to clearing on 05.06.2018.
- Since 03.06.2018 was a Sunday, tenability of the cheques had expired by 02.06.2018.
- Assotech Limited being under liquidation, recovery of the amounts was not impossible outside the liquidation mechanism under the Insolvency and Bankruptcy Code, 2016.
- The bank relied upon
Section 75Aof the Negotiable Instruments Act, 1881, which excuses delays in presentment caused by circumstances beyond the holder's control.
Commission's Findings
The Commission, upon careful examination of the entire record including written statements and multiple affidavits filed by the bank's managers, arrived at the following critical findings: