Bank Liable For Employee Oversight

The Commission concluded that bank officials had evidently been negligent in failing to compare the signature prior to making payment, notes Jehangir B Gai.

Bharpur Singh had an account with Axis Bank in which he had a balance of Rs 1,193,304.

When Singh attempted to withdraw some money on May 24, 2008, the bank refused payment on the ground that there were insufficient funds in the account.

Singh learnt that one Gurwinder had used cheque number 063989 to withdraw Rs 11.83 lakh from his account.

The bank lodged a first information report (FIR) with the police.

It also reported the fraud to the Reserve Bank of India as required under the directives issued by the central bank in its master circular for banks. However, the RBI failed to respond.

Singh then had a legal notice issued to Axis Bank in which he demanded that his account be recredited with Rs 11.83 lakh which he had lost due to the fraud.

He also claimed interest on the amount and compensation for harassment. After the bank ignored his notice and failed to take any action to address his grievance, Singh decided to file a consumer complaint before the Chandigarh District Forum.

The Chandigarh District Forum ordered the bank to pay Rs 11.83 lakh along with Rs 2 lakh for mental harassment and Rs 5,000 towards litigation costs. Axis Bank appealed against this order.

The Chandigarh State Commission observed that the fraud had occurred within one month of opening the account.

It also noted that the cheque used to withdraw money from Singh's account fraudulently did not belong to the series of cheque leaves issued to him.

The Commission further observed that even a layperson could have detected with the naked eye the variation in signature between the one on the forged cheque and the one on the account opening form.

The Commission also observed that Gurwinder had used an identical modus operandi to illegally withdraw money from other accounts belonging to Pal Singh, Harinder Pal Singh, Jasvir Singh and Prem Singh, some of whom had also filed separate consumer complaints.

Further, the police investigation report filed before the chief judicial magistrate, Chandigarh, stated that Gurwinder was untraceable.

The Commission concluded that the bank executives had evidently been negligent in failing to compare the signature prior to making payment.

It held the bank liable for this negligence on its employees' part. It further held that Singh should not suffer due to the fraud, and it would be up to the bank to take whatever action it deemed fit to trace and recover the amount from Gurwinder Singh.

After the State Commission dismissed the appeal and upheld the order in Singh's favour, the bank questioned the correctness of these orders by filing a revision petition.

The National Commission stated that the State Commission had given a detailed and well-reasoned order.

It also relied on a Supreme Court ruling in Rubi Chandra Dutta versus United India Insurance, where it had been held that a revision petition was not maintainable against a concurrent finding on fact by both the District Forum and the State Commission.

Accordingly, by its order of December 11, 2023, delivered by Dr Inder Jit Singh, the National Commission dismissed the bank's revision and confirmed the order passed in Singh's favour.

Feature Presentation: Rajesh Alva/Rediff.com