Failure to Inform Customer About Returned Undelivered Dishonored Cheque is Deficiency in Service: State Consumer Commission - 2025-08-23

SBI Held Liable for Not Informing Customer About Returned Dishonored Cheque, Ordered to Pay Compensation

Bikaner, November 22, 2024 – The State Consumer Disputes Redressal Commission has ruled that a bank's failure to inform a customer that a dishonored cheque, sent via post, has been returned undelivered constitutes a "deficiency in service." Modifying a District Commission order, the bench, comprising Presiding Member Hon'ble Shri Atul Kumar Chatterjee and Member Hon'ble Shri Sanjay Tak, held the State Bank of India (SBI) liable and directed it to pay ₹25,000 in compensation to the complainant.

The Commission clarified that while the bank may not be liable for the face value of the dishonored cheque, its negligence in communication prevented the customer from taking timely legal action against the cheque issuer.

Background of the Dispute

The case originated from a complaint filed by Rakesh Khan against SBI and the Main Post Office, Bikaner. On March 2, 2020, Mr. Khan deposited a cheque for ₹3,50,000 into his SBI savings account. The cheque was subsequently dishonored due to insufficient funds in the drawer's account.

SBI contended that it had dispatched the dishonored cheque to Mr. Khan via registered post on March 6, 2020. However, the postal department returned the letter to the bank on March 16, 2020, citing an "incomplete address."

The critical issue arose because SBI failed to inform Mr. Khan about this return. Mr. Khan, after making several inquiries, filed a Right to Information (RTI) request. On May 13, 2020, the bank merely stated that the cheque had been posted on March 6, omitting the crucial fact that it had been returned to their possession over a month prior. This lack of information cost Mr. Khan the opportunity to initiate legal proceedings against the cheque issuer within the statutory limitation period.

The District Consumer Commission had initially absolved the bank of all liability, holding only the postal department responsible and ordering it to pay a compensation of ₹5,000. Aggrieved by this decision, Mr. Khan appealed to the State Commission.

Arguments Presented

• Appellant (Rakesh Khan): The appellant's counsel argued that both the bank and the post office were deficient in their services. It was contended that SBI had a duty to inform him once the undelivered cheque was returned to its custody. This failure, especially the omission of this fact in the RTI reply, was a clear act of negligence. The appellant sought compensation equivalent to the cheque amount, arguing that the bank's lapse caused him a direct financial loss.

• Respondent No. 1 (SBI): The bank's counsel argued that it had acted in good faith by dispatching the cheque in a timely manner to the address on record. It placed the blame on the postal department for the non-delivery and contended that a third party's error should not make the bank liable. The bank cited several judicial precedents to argue that its liability should be limited and that it could not be ordered to pay the cheque's value.

• Respondent No. 2 (Post Office): The postal department maintained that the address provided by the bank was incomplete as per postal guide rules, lacking details like house number or street name, which made delivery impossible in an urban area. Therefore, returning the letter to the sender was standard procedure, and there was no deficiency on their part.

Commission's Observations and Ruling

The State Commission, after reviewing the facts, overturned the District Commission's finding regarding the bank's liability. The bench observed that even if the bank had initially dispatched the cheque, its responsibility did not end there.

The Commission noted, "The bank was informed on 16-03-2020 that the mail containing the dishonored cheque was undelivered due to an incomplete address. Despite this, the bank did not inform the appellant-complainant. Even in the information provided under the RTI Act on 13-05-2020, this fact was not disclosed... Failure to provide this information to the appellant-complainant after receiving the returned mail is certainly a deficiency in service."

The Commission agreed with the legal principle that a bank cannot be held liable for the cheque amount itself in cases of a lost or undelivered dishonored cheque. However, it affirmed that compensation for the service deficiency was warranted.

Final Decision

The State Commission partially allowed the appeal and modified the original order:

• Liability of SBI: The order dismissing the complaint against SBI was set aside. The bank was directed to pay ₹25,000 as compensation to Rakesh Khan within one month. Failure to comply will attract an annual interest of 9% from the date of the decision.
• Liability of Post Office: The District Commission's order holding the post office liable for ₹5,000 was upheld and not increased.
• Legal Recourse for Complainant: The Commission clarified that Mr. Khan is entitled to claim an exclusion of the time spent litigating this consumer case under Section 14 of the Limitation Act, 1963, should he choose to file a civil suit against the cheque issuer to recover the ₹3,50,000.
• Return of Documents: The original dishonored cheque and related documents were ordered to be returned to Mr. Khan to enable him to pursue further legal remedies.