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Canara Bank v. Kavita Chowdhary

Civil Appeal · 2026 INSC 363Decided 15 Apr 2026
C.A. No.-002587 - 2025 (with C.A. No. 2588 of 2025)
Justice B.V. Nagarathna · Justice Ujjal Bhuyan · Justice J.B. Pardiwala

Background

Kavita Chowdhary (and her co-complainant Priya Chowdhary, whose connected appeal was heard together) deposited two large cheques into their Canara Bank savings accounts in May 2018. The bank credited the cheque amounts and then reversed them the same day citing "online cheque return" and later "connectivity failure," and by the time the cheques were re-presented they had gone stale, so they were returned as "instrument out dated/stale." Because the cheques never cleared in time, the complainants also lost the chance to pursue the cheque-issuer (Assotech Limited) under Section 138 of the Negotiable Instruments Act for dishonour. The National Consumer Disputes Redressal Commission had found the bank deficient in service and awarded 10% of the cheque value as compensation plus 8% interest; Canara Bank appealed the quantum to the Supreme Court.

Decision Breakdown

The Supreme Court agreed that the bank was deficient in service by failing to present the cheques for clearing within their validity period, but held that the Commission's compensation of 10% of the face value was on the higher side given that the underlying loss was inherently uncertain (it was speculative whether a Section 138 complaint against the cheque-issuer would even have succeeded). Relying on precedents including Lucknow Development Authority, Charan Singh, Shakuntla Devi and MSR Leathers, the Court reiterated that consumer compensation must be fair, reasonable and proportionate to actual proven loss, not punitive. It modified the award, reducing the compensation to 6% of the cheque amount (Rs. 1,06,10,768) to each complainant, with interest reduced to 6% per annum from the date of filing the complaints, while leaving the rest of the Commission's order undisturbed. The appeals were disposed of with no order as to costs.

Lesson Learnt

Banks can be held liable for "deficiency in service" if they fail to present cheques for clearance within their validity period, but compensation in such cases must be tied to demonstrable loss rather than fixed as a punitive percentage. Courts will moderate awards that appear excessive relative to actual, provable harm.

Official source (sci.gov.in)View Judgment (PDF)

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