NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
1. Chairman-cum-Managing Director
Punjab & Sind Bank
2. Executive Director
Punjab & Sind Bank
3. Zonal Manager
Punjab & Sind Bank
4. The Manager
Punjab & Sind Bank
New Tangra Branch
HON’BLE MR. JUSTICE M.B. SHAH, PRESIDENT
MRS. RAJYALAKSHMI RAO, MEMBER
MR. ANUPAM DASGUPTA, MEMBER
For the Complainant : Mr.Sudhir Pandey, Advocate
(instructed by M/s.S.Jalan &
For the Opp. Parties : Mr.Pallav Saxena, Advocate
The only question which requires consideration in this complaint is – Whether a bank is liable to reimburse its account holder if the officers of the bank, i.e. the manager or the cashier, commits fraud and transfers the amount lying in the account of the account holder to a third party’s account, without proper check or authorization?
In our view, if officers of the bank commit such a fraud and if the bank is held not liable to reimburse the depsitor/investor, then a large number of depositors or investors would never be safe. In such a case, the bank has to reimburse the consumer.
A senior citizen, aged 71 years at the relevant time, suffering from various ailments, has filed this complaint against the Opposite Party, namely, Punjab & Sind Bank, alleging gross deficiency in service and gross negligence committed by its officers. It is contended that the complainant’s life savings were deposited with the Bank which were unauthorisedly transferred from his current account to the account of a stranger, namely, M/s.Bajrang General Traders, without any cheque being issued by the complainant and without any instructions having been received from the complainant by the Bank. It is the say of the complainant that between 15.5.1997 and 30.5.1997, in all, Rs.15 lakh were deposited by the complainant with the Opposite Party Bank in three instalments. On 13.6.1997, the officers of the bank unauthorisedly transferred the said amount in favour of M/s.Bajrang General Traders, with whom the complainant did not have any relationship prior to the transfer or any time thereafter. The Complainant came to know this fact on 27.10.1997 when he went to withdraw the amount. Thereafter, on 31.10.1997, the complainant wrote to the Bank Manager of the Opposite Party Bank asking for grounds on which the aforesaid money was transferred from his account without his instructions.
On the same day,
the bank replied that the amount was transferred on the basis of an
authorization letter. As the complainant
had not given any letter of authorization, he approached the Police and lodged
an FIR on 5.11.1997 at Tangra Police Station,
Thereafter, on 11.11.1997, he served a Notice to the Opposite Party (Bank) through his Lawyer seeking immediate refund of Rs.15 lakh. To that, vide letter dated 3.12.1997, the Bank denied its negligence and refused to refund the amount.
Because of the aforesaid conduct and realizing that his entire saving was lost, the complainant suffered severe shock, depression, mental agony, anguish, severe illness and pain. He also suffered heart problem and his health deteriorated, which impaired his power of reasoning and incapacitated him. Thereafter, his representatives made several visits to the Bank and prayed for refund of the amount. Further, his daughter approached and wrote to various authorities to see that fraudulently transferred money was refunded to the complainant. Finally, the complainant wrote to the Opposite Party Bank on 26.6.2001 praying for refund of the amount. In that letter, he specifically stated that he was an aged person and such harassment from a Nationalised Bank for the last few years had not only damaged his health but also enhanced his mental agony. He, therefore, requested/prayed for crediting his account with Rs.15 lakh along with the accrued interest thereon. A copy of the said letter was sent to the Chairman and Managing Director of the Bank as well as to other authorities.
The Bank, vide its letter dated 2.7.2001,replied to that letter, stating that the matter had been reported to higher authorities and they would revert to the complainant soon. Thereafter, on 16.7.2001, the Bank wrote a letter to the complainant stating that the amount could not be refunded. Hence, this complaint was filed on 14.3.2002 praying that the Opposite Party Bank be directed to refund the amount of Rs.15 lakh to the complainant with interest at the rate of 18% per annum.
It is also undisputed that, on the basis of the FIR lodged by the complainant, a charge sheet was submitted against (i) Sashi Kediya, Financial Broker ; (ii) K.S.Kang, Manager of Punjab & Sind Bank, New Tangra Branch and (iii) the Proprietor of M/s.Bajrang General Traders (A/c 780), under Sections 120B, 420, 468, 471 and 420 of the Indian Penal Code on 13.12.1999 in the Court of ACJM, Sealdah for criminal conspiracy and forging the signature of the complainant on a transfer letter. The complainant also produced on record the Legal Notice sent by the advocate on his behalf narrating the entire facts, and the reply given by the bank to the said Legal Notice as well as the record pertaining to his medical treatment.
Submissions by the Opposite Party
On behalf of the Opposite Party, it has been contended that –
.(i). the complaint is barred by limitation because the cause of action arose in October 1997 whereas the complaint was filed in March 2002 and no application for condonation of delay has been filed;
.(ii). in the Account Opening Form of the complainant, one Naresh Kumar Jain, has signed who was arrested by the Police in connection with the present case and six other cases of fraud and that the complainant has failed to state his relationship with the said Naresh kumar Jain. It is pointed out that the proceedings are pending before the Criminal Court and the CBI is seized of the matter. In any case, as there is allegation of fraud, it is for the complainant to establish the same; and,
.(iii). the Bank has acted in good faith and the amount was transferred on the basis of a written mandate dated 12.6.1997 given by the complainant. However, it is admitted that the complainant did not issue any cheque but gave a mandate by issuing a letter duly signed by him.
By way of evidence, the complainant has filed an affidavit in support of his contentions. He has also denied any relationship with M/s.Bajrang General Traders and with Mr.Naresh Kumar Jain, who had introduced him for opening the account. With regard to the deposit of the amount, he produced on record a photocopy of his bank account.
As against this, similar evidence is produced by way
of affidavit of the Manager of Punjab & Sind
In the written submissions, it has been further pointed out that one Mr.K.S. Kang was the Branch Manager of the Opposite Party Bank at the relevant time. For opening the account, he arranged one Mr.Naresh Kumar Jain who was known to the Manager, in support of the application for opening the account. Later on, the complainant came to know that Mr.Naresh Kumar Jain and Mr.Kang were acting in collusion and were arrested during the investigation but the other accused were at large.
Thereafter, Mr.Kang was dismissed as stated by Mr.D.C. Kaushal, Sr.Manager (Law & Recovery Department) after the aforesaid incident. The report of the enquiry conducted against Mr.Kang is produced on record wherein it has been narrated as to how Mr.Kang was hampering the enquiry. It is also mentioned that Mr.Kang did not cooperate with the CBI Authorities in the matter of Tangra fraud which allegedly occurred during his tenure as the Branch Manager and that he had left office unauthorisedly. It is also alleged that he failed to discharge his duty with utmost honesty, integrity and devotion. Finally, it is stated that the charges alleged against Mr.Kang stand proved and that he did not cooperate with the CBI in regard to the fraud of a huge amount and, therefore, he might be dismissed from service.
Further, on the basis of the direction issued by
this Commission, a copy of the FIR lodged with CBI, ACP Calcutta, is produced
on record. The said FIR was lodged by Shri R.P. Mohanty, Branch
Manager, Punjab & Sind Bank, New Tangra Road Branch,
“u/s 120B/420/467/468/471/477A IPC & Sec.13(2) r/w Sec.13(1)(d) of PC Act, 1988.
(1) Shri Kashmir
Singh Kang, the then Branch Incharge of New Tangra Road Branch, Punjab & Sind
(2) Sri Asim Dey, the
then Clerk-cum-Cashier, New Tangra Road,
(3) Sri G.C. Gupta, Prop. of M/s.Bajrang General Traders, 6, Sikdar Para Lane, Calcutta-7.
(4) Sri Chain Rup Sampatram,
Prop. of M/s.Chain Rup Sampatram, 19,
(5) Sri Naresh Kr.Jain,
G-28, 156A, Lenin Sarani, Calcutta-13, residing at
Regular case registered and investigation taken up.
Sri B.N. Sharma, Dy. SP/CBI(6) ACB/Calcutta.
Enclosed original letter of complaint of Shri R.P. Mohanty, Branch Manager, New Tangra Branch, Punjab & Sind Bank, Calcutta – 46 dt.12.2.98 regarding fraud of Rs.42 lakhs at branch office New Tangra Road Branch, Punjab & Sind Bank, Calcutta is treated as FIR of this case.
The letter of complaint of said Sri Mohanty discloses commission of congnizable offences u/s 120B/420/467/468/471/477A IPC & Section 13(2) r/w Sec.13(1)(d) of PC Act, 1988.
As per orders of the SP/CBI/ACB/Calcutta, the Regular Case is registered against the aforesaid persons and investigation taken up.”
Along with the said report, a chargesheet is also produced which reveals that Mr.Naresh Kumar Jain and Mr.Kang, in collusion with other persons, have committed a large fraud. For this, information was sought from the parties. The complainant’s advocate tried his best to collect the information but he could not get further information. As against this, it was the duty of the Bank to produce the relevant orders passed by the Criminal Court hearing the matter. However, the same is not produced on record for reasons best known to the Opposite Parties.
From the record it is apparent that Mr.Kang, in collusion with Mr.N.K. Jain and others, committed fraud and misappropriated large amounts by transferring unauthorisedly the said amounts from the accounts of various depositors/investors, including that of the Complainant.
In the present case, it is stated by the Bank that the amount of Rs.15 lakh was transferred from the account of the complainant on the basis of one letter alleged to have been written by the complainant. It is contended that the original letter is seized by the CBI and copy thereof is also not produced on record. In this set of circumstances, it would be difficult to arrive at the conclusion that the complainant had issued any letter authorizing the Bank to transfer the amount in favour of M/s.Bajrang General Traders, the proprietor of which is absconding, as stated in the Police Investigation. Further, there was no necessity of transferring the amount without there being any cheque issued by the complainant. If a Bank officer commits such fraud, the depositors/investors, who have invested their money with the Bank, would never be safe. In any set of circumstances, for such fraud, the Bank would be liable to reimburse the complainant/consumer sufferer.
Law on the subject is well-settled. In the case of Canara
Bank Vs. Canara Sales Corporation & others
(1987) 2 SCC 666, (para 24) the
“The relationship between the customer of a bank and the bank is that of a creditor and debtor. When a cheque which is presented for encashment contains a forged signature the bank has no authority to make payment against such a cheque. The bank would be acting against law in debiting the customer with the amounts covered by such cheques. When a customer demands payment for the amount covered by such cheques, the bank would be liable to pay the amount to the customer. The bank can succeed in denying payment only when it establishes that the customer is disentitled to make a claim either on account of adoption, estoppel or ratification. The principle of law regarding this aspect is as follows : When a cheque duly signed by a customer is presented before a bank with whom he has an account there is a mandate on the bank to pay the amount covered by the cheque. However, if the signature on the cheque is not genuine, there is no mandate on the bank to pay. The bank, when it makes payment on such a cheque, cannot resist the claim of the customer with the defence of negligence on his part such as leaving the cheque book carelessly so that third parties would easily get hold of it. This is because a document in cheque form, on which the customer’s name as drawer is forged, is a mere nullity. The bank can succeed only when it establishes adoption or estoppel.”
The Court further held (para 42) :
“Unless the bank is able to satisfy the court of either an express condition in the contract with its customers or an unequivocal ratification, it would not be possible to save the bank from its liability” ……. “The bank can escape liability only if it can establish knowledge to the customer of the forgery in the cheques. Inaction for continuously long period cannot by itself afford a satisfactory ground for the bank to escape the liability”.
In the case of Kerala
State Cooperative Marketing Federation Vs. State Bank of
“(1) As a general rule the collecting banker shall be exposed to his usual liability under common law for conversion or for money had and received, as against the ‘true owner’ of a cheque or a draft, in the event the customer from whom he collects the cheque or draft has no title or a defective title.
(2) The standard of care to be exercised by the collecting banker to escape the charge of negligence depends upon the general practice of bankers which may go on changing from time to time with the enormous spread of banking activities and cases decided a few decades ago may not probably offer an unfailing guidance in determining the question about negligence today.
From the aforesaid law, in our view, apparently there is negligence on the part of the Bank in not repaying the amount to the complainant. Once it is known to the Bank that its Branch Manager, Mr.Kang, committed the fraud, the complainant ought not to have been harassed for years together by not repaying the said amount. It is the say of the complainant that his life savings were deposited with the Bank so that he could start a business. That dream has been shattered. He suffered heart trouble and other ailments because of the shock.
However, learned counsel appearing on behalf of the Bank vehemently contended that the complaint before this Commission is barred by limitation. In our view, prima facie, the complaint is not barred by limitation, since October 1997, i.e. the day when he found that the amount was fraudulently transferred to a stranger’s account, the complainant was all-through requesting the Bank to refund the amount and, finally, his letter dated 26.6.2001 was forwarded to higher officers of the Bank for consideration which was rejected only on 2.7.2001. Apart from this, Criminal Complaint was lodged and a criminal case is also pending against the Branch Manager and other clerks of the Bank as well as other persons. In such circumstances, a helpless man was not required to rush to the court for which he has to spend both time and money. In the peculiar facts and circumstances of this case, and also in the interest of justice, this is a fit case for condoning the delay in filing this complaint. We, therefore, condone the delay, if there is any.
Learned Counsel for the Bank further submitted that this Commission has no pecuniary jurisdiction because the total amount deposited with the bank was only Rs.15 lakh. In our view, this submission is without any substance, because Complainant has sought to recover, in all, Rs.26,02,500/- with interest, and, therefore, at the relevant time when the complaint was entertained, this Commission was having pecuniary jurisdiction to deal with the matter. This Commission has also taken a consistent view that the Amendment pertaining to pecuniary jurisdiction would have no retrospective effect and it would have prospective effect [Re: Original Petition No.379/2002 – Smt. Babita Aggarwal & Ors. Vs. D.K. Goel, decided on 26.3.2003]. Therefore, pending complaints are required to be decided on merits. Further, this belated submission with regard to pecuniary jurisdiction does not require any further consideration.
Learned counsel for the Bank also contended that it was the duty of the complainant to establish that the letter dated 12.6.1997 for transferring the amount was a forged one. In our view, this submission is totally misconceived because (i) when a cheque book was issued, it was the duty of the Bank to insist on a cheque for transfer of the amount ; (ii) it is for the Bank to establish that the signature on the said letter was that of the complainant ; (iii) even that letter is not produced on record on the alleged ground that the record is seized by the CBI and (iv) even the CBI has arrived at the conclusion that a large amount was withdrawn by the Branch Manager, Mr.Kang, by committing forgery in conspiracy with one, Mr.Naresh Kumar Jain and others.
When the so-called letter was received by the Manager for transferring the amount on the alleged signature of the Company, the Bank ought to have suspected as to why the entire amount which was deposited with the bank is transferred in the account of third party. A Manager or cashier of a bank are expected to have a reasonable degree of intelligence and knowledge ordinarily required of a person in his position to befit to discharge their duties. If that is not done, and the amount is disbursed to the third party, without verification of the signature of the depositor, or doubting/suspecting as to why no cheque was used as an instrument of transfer, when the whole of the amount lying in the account was being transferred in one go, the fault lies with the bank. Further, if the officers of the bank were not party to the fraud they would have immediately inquired as to what was the necessity of transferring the entire bank balance by a simple letter.
In the present case, apart from the established negligence of the officers of the bank, there is also evidence of the fraud being committed. The facts as stated above do not require any further rebuttal by the Complainant. Hence, the contention of the learned Counsel for the Bank that it is a matter of banking practice that funds can be transferred from one account to another on the basis of the authority given by the account holder, would have no substance in the present case.
In this set of circumstances, there is no alternative but to pass an order directing the Bank to refund the amount of Rs.15 lakh to the complainant with interest at the rate of 12% per annum. For the harassment and torture suffered by the complainant, at the hands of the bank, the Bank shall pay a sum of Rs.50,000/- as compensation to the complainant. This order is required to be passed because knowing fully well that its Branch Manager has committed forgery, the Bank refused to pay the amount to a senior citizen, who had deposited his entire savings with the Bank.
In the result, this complaint is allowed. The Opposite Party (Bank) is directed to refund the sum of Rs.15 lakh to the Complainant with interest at the rate of 12% p.a. and also pay Rs.50,000/- as compensation including cost of litigation. The complaint stands disposed of accordingly.
( M.B. SHAH)