Case Summary: Canara Bank v. Kavita Chowdhary (2026)

This judgment is important as it clarifies:

• The duty of banks in cheque collection,
• The scope of “deficiency in service” under consumer law,
• The principles governing compensation for negligence.

The Court balanced liability with practical realities and modified the compensation awarded by the consumer forum.

SPONSORED

Title of the Case: Canara Bank v. Kavita Chowdhary

Citation: 2026 INSC 363

Court: Supreme Court of India

Judges: Justice Ujjal Bhuyan, Justice B.V. Nagarathna

Date of Judgment: 15th April 2026

Facts of the Case

The respondent, Kavita Chowdhary, maintained a savings bank account with Canara Bank. On 29 May 2018, she deposited two cheques issued by Assotech Limited:

• ₹11,36,868
• ₹94,73,900

Total amount: ₹1,06,10,768

These cheques were credited to her account on 1 June 2018, but on the same day, both amounts were debited with the remark “online cheque return.”

Subsequently:

• One cheque was re-presented but again returned as “stale/outdated”.
• The second cheque met the same fate after delayed re-presentation.

The bank also deducted collection charges twice, despite failure in processing.

Key grievance of the respondent:

• The bank failed to present the cheques within the validity period.
• Due to delay, cheques became stale.
• She lost the opportunity to initiate proceedings under Section 138 of the Negotiable Instruments Act, 1881.
• The issuing company was under insolvency, limiting recovery options.

She claimed compensation equal to the cheque amount along with damages.

Proceedings Before Consumer Commission

The National Consumer Disputes Redressal Commission (NCDRC) held:

• The bank was deficient in service.
• It failed to re-present cheques in time despite knowing their expiry.
• It gave inconsistent explanations (strike, technical failure, etc.).

Relief granted:

• 10% of cheque amount as compensation
• Interest @ 8% per annum
• Litigation cost of ₹50,000

The bank challenged this before the Supreme Court.

Issues Before the Supreme Court

The Court identified two central issues:

1. Whether there was deficiency in service on the part of the bank?
2. Whether the compensation awarded (10%) was reasonable?

Arguments by the Appellant (Canara Bank)

The bank contended:

1. Delay was due to uncontrollable circumstances

• A bank strike (30–31 May 2018) prevented timely processing.
• Protection available under Section 75A of the NI Act (delay excused if beyond control).

2. Reasonable time was followed

• Cheques were re-presented within “reasonable time” as per Section 105 NI Act.

3. No negligence or deficiency

• Bank acted in accordance with standard practice.
• No direct loss caused by bank.

4. Compensation excessive

• Award of 10% was arbitrary.
• Under Section 73 of Contract Act, compensation must be reasonable and linked to actual loss.

5. No real recovery possible anyway

• Drawer company (Assotech Ltd.) was already under liquidation.
• Thus, respondent suffered no actual recoverable loss.

Arguments by the Respondent

The respondent argued:

1. Clear negligence by bank

• Cheques returned on 30 May 2018, but not re-presented on:
  • 1 June (working day)
  • 2 June (last valid day)

2. RBI guidelines violated

• Cheques returned for technical reasons must be re-presented within 24 hours.

3. False and inconsistent statements

• Bank gave contradictory explanations:
  • Strike
  • Technical failure
  • Customer instructions

4. Loss of legal remedy

• Delay deprived her of Section 138 NI Act proceedings.

5. Deficiency rightly found

• Bank’s conduct directly caused financial and legal prejudice.

Legal Framework Considered

The Court examined:

1. Negotiable Instruments Act, 1881

• Section 64: Presentment mandatory
• Section 75A: Delay excused if justified
• Section 84: Delay causing damage discharges liability
• Section 138: Cheque dishonour proceedings

2. Consumer Protection Act (1986 & 2019)

• “Service” includes banking services
• “Deficiency” includes negligence and omission

3. Indian Contract Act, 1872

• Section 73: Compensation must be reasonable and not remote

Judgment and Reasoning

1. Deficiency in Service Established

The Supreme Court affirmed the finding of deficiency in service.

Key observations:

• The cheques were returned on 30 May 2018, giving:
  • 1 June and 2 June as valid working days
• The bank failed to re-present the cheques within this period

The Court held:

A bank acts as an agent of the customer and must exercise due diligence in presenting cheques within validity.

Failure to do so:

• Amounted to negligence
• Resulted in deficiency in service

Rejection of Bank’s Defences

• Strike excuse rejected: Even after strike ended, bank failed to act.
• Technical failure argument rejected: Not pleaded earlier.
• Customer instruction argument rejected: No evidence.

Thus, the Court concluded:

• The bank had no reasonable explanation
• Negligence was clearly established

2. Loss and Right to Compensation

The Court agreed that:

• The respondent lost a valuable legal remedy under Section 138 NI Act.
• This constitutes injury under consumer law.

However, it also noted:

• Outcome of Section 138 proceedings is uncertain.
• Loss is not fully quantifiable.

3. Reduction of Compensation

The Supreme Court modified the compensation:

• NCDRC awarded: 10% of cheque value
• Supreme Court reduced it to: 6%

Reasoning:

• Compensation must be:
  • Fair
  • Reasonable
  • Proportionate
• The actual loss was indeterminate
• The Commission’s award was on the higher side

Thus, the Court held:

Compensation should reflect the nature of loss, not speculative outcomes.

Final Award:

• 6% of ₹1,06,10,768
• Interest @ 6% per annum
• Litigation cost maintained

Click Here to Read the Official Judgment