Most people assume that once a cheque is deposited with the bank, the bank will handle the rest. This assumption is legally correct — and when a bank fails to act on it, consumer law provides a remedy that is both accessible and effective.
A recent ruling by the Hon'ble Supreme Court of India has laid down clearly that a bank which allows a cheque to become stale through its own negligence is liable for deficiency in service under the Consumer Protection Act, and the customer is entitled to compensation.
What Happened in This Case
A customer deposited two cheques worth over ₹1.06 crore into her bank account. The cheques were valid until 2nd June. A bank strike fell on 30th and 31st May. When the strike ended on 1st June, the bank had two working days — June 1st and June 2nd — to re-present the instruments. It did neither.
The cheques became stale. The drawer company had by then entered insolvency. The customer lost not only the money but also her right to initiate criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 against the company's directors — a right that is time-sensitive and cannot be exercised once the cheque has expired.
The bank's defence was that the strike justified the delay. The Court rejected this outright. The strike ended. Working days were available. No re-presentation was made. No explanation was offered.
What the Law Says
A bank that receives a cheque for collection acts as an agent of the customer. This is a settled principle under the law of banking. As an agent, the bank owes a duty of due diligence. Allowing a cheque to become stale — without any reasonable explanation — is a breach of that duty.
The Hon'ble Supreme Court held that such a breach constitutes deficiency in service within the meaning of the Consumer Protection Act. The Court's words were direct: "There is no explanation at all, not to speak of any reasonable explanation, as to why the two cheques were not represented before the drawer's bank on 01.06.2018 and 02.06.2018."
On compensation, the Court modified the quantum — while the National Consumer Disputes Redressal Commission had awarded 10% of the cheque value, the Court reduced it to 6%, noting that the actual loss was indeterminate since the outcome of Section 138 proceedings would have depended on multiple factors. The finding of liability, however, was upheld in full.
The loss of the right to initiate proceedings under Section 138 NI Act is itself a form of legal injury recognized by the Court — even if the eventual recovery through those proceedings would have been uncertain. You do not need to prove the exact amount you would have recovered.
Section 138 NI Act — What You Lose When a Cheque Goes Stale
Under Section 138 of the Negotiable Instruments Act, 1881, a dishonoured cheque gives rise to a criminal complaint — but only if the cheque was presented within its validity period and returned unpaid for reasons such as insufficient funds. Once a cheque becomes stale (older than three months from its date), it cannot be presented and the Section 138 remedy is permanently lost.
This is not a minor inconvenience. Section 138 proceedings carry the threat of imprisonment of up to two years and a fine, which is often the most effective tool for recovering a dishonoured payment. When a bank's negligence extinguishes this right, the financial harm to the customer is real and legally recognized.
What You Can Do If This Has Happened to You
Practical Steps
File a complaint before the Consumer Disputes Redressal Commission at the appropriate level — District Commission for claims up to ₹50 lakh, State Commission for claims between ₹50 lakh and ₹2 crore, National Commission (NCDRC) for claims above ₹2 crore.
Gather your evidence: the deposit slip, original cheque receipt, any bank communication showing the return or non-presentation, and any correspondence with the bank regarding the delay.
The loss of Section 138 rights is itself compensable injury — you do not need to separately prove what you would have recovered in criminal proceedings.
Act promptly. Consumer complaints must be filed within two years of the cause of action arising — which in this case is the date the cheque became stale through the bank's failure to act.
The remedy exists regardless of the drawer's insolvency. Your claim is against the bank for its negligence — not against the drawer of the cheque.
This ruling is a significant reminder that banking services are consumer services, and customers have enforceable rights when those services fall below the required standard of care. A bank strike is not a blanket excuse. Once the strike ends, the obligation to act resumes — and the bank is accountable for what it fails to do on the working days that follow.