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Case Laws ON Banking: S - K - S S N
Case Laws ON Banking: S - K - S S N
CASE LAWS
ON
BANKING
S.K. SHARMA
SUSHILA NARANG
S.K. Sharma
Senior Advocate
Supreme Court of India
New Delhi
and
Sushila Narang
Advocate
New Delhi
logo
Series Editors :
S.S. Singh
Rakesh Gupta
Sapna Chadah
S. K. Sharma
Sushila Narang
LIST OF CASES
Pages
Preface iii
S.No. Name of Cases Case Volume Number
1. Canara Bank v. K.S. Seetharama III (2007) CPJ 68 (NC) 1
2. State Bank of India v. Anand Prakash III (2007) CPJ 95 (NC) 3
3. Kamlesh Kumar (NRI) v. Allahabad Bank II (2007) CPJ 45 (NC) 4
4. Union Bank of India & Anr. v. State Bank of II (2007) CPJ 60 (NC) 5
India & Ors.
5. Jhunjhunu Primary Land Development II (2007) CPJ 261(NC) 6
Bank & Anr. v. Ganpat Ram & Ors.
6. Allahabad Bank v. Ravindra Flour Mills Pvt. Ltd. I (2007) CPJ 60 (NC) 8
7. Bihar State Sugar Corp. Ltd. v. State Bank of I (2007) CPJ 91 (NC) 9
India & Ors.
8. Neelkantha Jute Dealers v. Central Bank of I (2007) CPJ 117 (NC) 11
India & Anr.
9. Central Bank of India v. Om Sons Wires Pvt. Ltd. I (2007) CPJ 151 (NC) 13
10. Allahabad Bank v. Shiv Swarup Srivastav I (2007) CPJ 221(NC) 15
11. Allahabad Bank v. JDS Electric Company I (2007) CPJ 270 (NC) 17
12. Canara Bank v. New India Assurance Co. Ltd. & Anr. IV (2006) CPJ 56 (NC) 18
13. Shanti Devi v. Bhojpur Rohtas Gramin Bank IV (2006) CPJ 83 (NC) 20
14. American Express Bank Ltd. v. Narender Kumar Rai IV (2006) CPJ 161 (NC) 21
15. Punjab National Bank v. Lt. Col. D.R. Aggarwal IV (2006) CPJ 165 (NC) 23
16. Mahender Singh Siwaeh & Anr. v. Punjab & IV (2006) CPJ 231 (NC) 24
Sind Bank & Anr.
17. P.S. Sawhney v. Canara Bank & Anr. IV (2006) CPJ 278 (NC) 26
18. Jason Links (India) Ltd. v. State Bank of India & Anr. IV (2006) CPJ 328 (NC) 28
19. Standard Chartered Bank v. Dr. B.N. Raman III (2006) CPJ 1 (SC) 30
20. Bank of India & Ors. v. Chinmay Barik & Ors. III (2006) CPJ 29 (NC) 32
21. Ashok Kumar Kalra v. Allahabad Bank III (2006) CPJ 34 (NC) 33
22. Tirupati Agencies v. HSBC Bank & Ors. III (2006) CPJ 37 (NC) 34
23. HDFC Bank Ltd. v. Kishore R. Worah III (2006) CPJ 40 (NC) 36
24. Om Prakash v. Allahabad Bank, Daliganj Branch, III (2006) CPJ 418 (NC) 38
Lucknow
25. Debabrata Mukherjee v. Allahabad Bank & Ors. III (2006) CPJ 423 (NC) 39
vi
CanaraB
Canara ank vs. K
Bank .S
.S.. SSeee t har
K.S am
haram
amaa
III (200 7) CP
(2007) CPJJ 668
8 (NC)
(NC)
Fac
actts
Complainant, owner of Coffee estate, secured a loan from the Petitioner Bank,
Suntikoppa Branch under Kisan Credit Card Scheme. The complainant also
borrowed Plantation Development Loan from the Petitioner Bank. The total
amount due with interest in the account of complainant was Rs.1,79,698/- on
28.10.2002 in KCCS and Rs.4,96,113/- in PDL account. Petitioner Bank deposited
Rs.6,75,811/- to the loan account of the complainant with an intention to avail the
benefit of the special coffee Term Loan Scheme announced by the Government
notification. As per this notification the parties who would pay interest on or
before June 2005 are entitled to rebate of 2/3 portion of the interest. The
complainant paid Rs.2,65,642/- towards interest which accrued for the period from
1.4.2000 to 31.3.2005 in order to avail the package of relief. The Petitioner Bank
denied rebate to the complainant and stated that complainant is not entitled to
such a rebate. Therefore, complainant filed complaint before the District forum
claiming Rs.88,547/- from the bank and the Coffee Board. Before the District forum
petitioner bank contended that the scheme by the government is applicable to
special Coffee Term Loan account and since the complainant repaid his entire loan
on 3.4.2005 prior to the announcement of the scheme he is not entitled for the
same. The District forum allowed the complaint. On appeal, the State Commission
dismissed the appeal, confirming the order passed by the District forum. Against
the order of the State Commission, Petitioner bank filed Revision Petition before
the National Commission.
Issues
Whether Bank is liable to refund the excess amount of interest paid by the
complainant in view of the scheme announced by the Government of India for the
benefit of coffee growers?
Held
The National Commission rejected the submission advanced by the Counsel
for the Revision Petitioner that as per the scheme the borrowers were to pay 1/3rd of
the interest due to the creditor bank, remaining 2/3rd interest burden was to be
shared equally by the revision petitioner bank and the Government of India. Further,
that the government scheme was with prospective effect from the date of
2 Case Laws on Banking
Union B
nio ank of In
Bank Inddia & Anr
Anr.. vs. SStt ate B ank of In
Bank Inddia & Ors
Ors..
II (2007) CP
(2007) CPJJ 60 (NC)
(NC)
Fac
actts
Late Mr. Rajnish Awasthi with a view to help Respondent No.3 made a draft of
Rs.25,000/- from SBI, Dharamshala payable at SBI, New Delhi. This draft was sent by
registered post by Late Mr. Rajnish Awasthi to Mr. Naresh Sharma but it was never
delivered. On approaching Postal authorities Late Mr. Ranjnish was asked to make
an application for grant of compensation. Late Mr. Rajnish made on application
but of no avail. Thus, a complaint was filed before the District forum. The District
forum passed the order of compensation against both the respondents namely,
bank and postal department. Both Postal department and Bank filed appeals. The
State Commission dismissed both the appeals. Against dismissal order postal
department filed present Revision Petition before the National Commission.
Issue
Whether Postal department, in view of Sec.6 of Indian Post Office Act, 1898, can
be held liable for deficiency in service?
Held
The National Commission accepted argument of petitioner that under Section
6 of the Indian Post Office Act, 1898, they cannot be held liable unless a willful
negligence is alleged by the complainants. Since there was no allegation of willful
negligence in the complaint therefore Petitioner cannot be held liable for any loss/
non-delivery.
Revision Petition allowed.
6 Case Laws on Banking
being funded by them are delivered to the beneficiary. When the complainants
belong to a special community and not known to be knowledgeable in this regard.
In view of above, there is no merit in the revision Petition.
However, the National Commission reduced the liability of the Petitioner Bank.
The National Commission held that the liability of the Petitioner bank would be
limited to an amount of Rs.49,005/- only and not Rs.61,655/- as Rs.12,650/- was the
share money given by the complainants to become members of the bank which
they continue to be till today and are getting the return as a share holder.
Order of tthe
Ord he SStt ate Commi
Co mmisssion mo
sio mod ifiied, R
dif Reev isi
sioon PPeet it
itiion d
diisp
spoosed of
of..
8 Case Laws on Banking
Al
Alllahab ad B
ahabad ank vs. R
Bank Raav in
indd ra FFllour M il
Mil ls PPvv t . Ltd.
ills
I (2007) CP
(2007) CPJJ 60 (NC)
(NC)
Fac
actts
Complainant obtained cash credit limit of Rs.60 lacs in 1999 from Petitioner
Bank. Complainant repaid due amount in the account on 9.3.2000 and asked the
Petitioner to issue ‘No Dues Certificate’. The Petitioner Bank charged Rs.19,713/-
towards Penal interest @ two per cent from the complainant. Complainant filed
complaint seeking refund of penal interest charged. The District forum allowed
the complaint. Appeal of the Petitioner Bank was dismissed by the State
Commission. Against this dismissal order Petitioner Bank filed Revision Petition
before the National Commission.
Issues
Whether Bank is liable for deficiency in service for charging penal interest @2
per cent on the basis of instructions contained in circular No.3229 dated 9.12.1999?
Held
The National Commission rejected the contention of the petitioner bank
whereby it contended that the penal interest was charged on the basis of instruction
contained in circular No.3229 dated 9.12.1999 and hold that no copy of said circular
was supplied to the respondent neither any notice was sent to the respondents
drawing their attention to the circular. In absence of supplying copy of said circular
or drawing attention of respondents through notice/letter thereto the Petitioner
Bank was not legally entitled to charge Penal interest at the said rate from the
respondent.
Revision Petition dismissed.
Case Laws on Banking 9
arrive at the conclusion that complainant is entitled to recover the damages suffered
by it from the Bank which has negligently dishonoured the cheque despite sufficient
funds in the account of the complainant. Even if the Insurance policy covers the
damage to molasses and if the cheque for premium is dishonoured the Insurance
Company would not be liable to reimburse the complainant. That means a wrongful
dishonour of the cheque would result in loss to Petitioners for more than Rs.25 lacs.
It is, therefore, just and reasonable to award punitive damages for a sum of Rs. five
lacs, so that the banks in general would keep in mind the statutory norms of verifying
properly, before dishonouring the cheque particularly cheque of reputed bodies,
including the Government and semi-government bodies. In present case, it was
known to the officers of the State bank the cheque was issued by the corporation
owned by the State Government. Before dishonouring the same, minimum care
ought to have been taken not only by the concerned clerk but also by higher officers.
Compensation granted.
mpllaint d
Comp diisp
spo acccording
osed of ac ingly
ly..
ly
Case Laws on Banking 11
to which the letter dated 21.10.1992 was addressed. There was definitely deficiency
in the aforesaid circumstances. The bank could not be allowed to take advantage
of its own wrong that had not followed the terms of UCPDC particularly clause (d)
Regulation 16 as per which a Bank is supposed to act on the documents which
appear on their face to be in accordance with the terms and conditions of a credit.
The Central Bank of India was surely deficient in rendering service for not following
Section 16(d) of UCPDC and delaying the matter unnecessarily by rejecting the claim,
not on account of fraud, but on unreasonable and irrelevant grounds, not germane
to Section 16(d) of UCPDC. Further, seeing the nature of the transaction coupled
with extensions of time twice and clearance of one of the eight bills, it becomes
evident that for all practical purposes the time was not taken to be essence of the
contract. Supposing, the Central Bank Manager had any doubt, it is not its case that
the Bank contacted the Ganges Mfg. Co. Ltd. or the complainant on phone or by
sending fax, etc., as was expected from the Bank. Thus, there was deficiency in
rendering banking service by showing utter lack of promptness in this regard, leading
to subsequent problems.
Appeal allowed.
Case Laws on Banking 13
Cent
entrral B ank of In
Bank Inddia vs. Om SSo
ons W ir
iree s PPvv t . Ltd.
I (200 7) CP
(2007) CPJJ 11551 (NC)
(NC)
Fac
actts
Respondent No.2, Modi Bandhu purchased ferrous and non-ferrous metal and
opened inland letter of credit with Central Bank of India in favour of complainant
M/s Om Sons Wire Industries Pvt. Ltd. to supply the said metal. Complainant supplied
the aforesaid goods which were received by Modi Bandhu and an endorsement to
that effect was made by it on the Challan as well as on the Invoice. Complainant
handed over the documents alongwith letter of credit to its banker, namely Oriental
Bank of Commerce for negotiation and encashment of the letter of credit on
20.10.1993. On 23.10.1993, the appellant Bank refused to honour letter of credit on the
ground that complainant did not have complied with any of the instruction of the
said inland letter of credit. In order to avoid unnecessary litigation, the complainant-
respondent instructed its Bank to represent the document again. Accordingly,
negotiating bank again presented the documents alongwith its letter dated 1.12.1993
but the appellant Bank again refused to honour the letter of credit and returned
the documents with letter dated 21.12.1993 on the ground that the documents
contain many discrepancies and informed the complainant that they can handle
bill of the complainant on collection basis. Complainant filed complaint before the
State Commission. The State Commission directed the appellant Bank to pay
Rs.4,92,208/- with interest 18 per cent p.a. Against this order, appellant bank filed
appeal before the National Commission.
Issues
Whether complainant is a ‘consumer’ within the meaning of Sec.2 (i) (d) of
Consumer Protection Act, 1986;
Whether the Act of Bank in not honouring L/C without any justified reason
amounts to deficiency in service?
Held
Appellant Bank assailed the order of the State Commission on the ground that
the documents were not submitted as per terms of credit and also that complainant
was neither a ‘Consumer’ nor there was any privity of contract between the parties.
The National Commission rejecting the contention of the appellant Bank held
that insofar as exclusion on the ground of availing banking services for commercial
14 Case Laws on Banking
purpose is concerned, since the consumer would include beneficiary of such services
other than the person, who hired or availed of the services for a consideration paid
or promised and thus he was consumer and was entitled to file the complaint.
Further, explanation to sub-clause (ii) of Clause (d) of Sec.2 (i) of the Act clarified
that exclusion on the ground of commercial purpose, would be applicable only to
goods and not to Services. After amendment-dated 15.03.2003 the position is changed
whereby it does not include a person who availed to such services for any commercial
purpose, but the same could not be applied with retrospective effect. Present matter
was filed before amendment and therefore could not be rejected by the Consumer
Fora on this ground.
It was held further that in cases of Letter of credit, Bank could not refuse
payment by taking vague pleas. The payment could be refused only if it would be
established case of fraud. Contentions raised in response to letter are insufficient to
refuse to make payment in terms of letter of credit.
Documents, plea taken by the bank and letter exchanged between the parties
indicate that official of Central Bank of India declined to honour the L/C unless
payment was received from Modi Bandhu and this would amount to deficiency in
service. Since the bank failed to pay amount and retained the amount of
Rs.4,92,428/- the Central Bank was liable to pay interest @12 per cent p.a.
Appeeal al
App alllowed ppar
arttly
ar ly..
Case Laws on Banking 15
with said Ram Gopal Srivastava and the respondent not being a co-accused in the
criminal case 4609/94, the Petitioner Bank must be held to have failed to prove the
said assertion of collusion. Admission by Petitioner bank that Ram Gopal Srivastava
was working as a clerk on 16.5.1991 and 10.2.1992 and the period during which enteries
were made in the Pass book and ledger book maintained by the bank. He was also
working on the date when the FDR of Rs.35,000/- was issued. Receipt of amount of
Rs.30,000/- from respondent was admitted by Ram Gopal Srivastava as may be seen
from the judgment dated 12.7.1995. Thus, loss of Rs.30,000/- to the bank was caused
by Ram Gopal Srivastava by misappropriating that amount within the scope of
course of employment. After applying the ratio of Shyama Devi’s case which rather
supports the respondent, the Petitioner Bank is vicariously liable to pay the amount
of the fixed deposit in question together with interest.
Revision Petition dismissed.
Case Laws on Banking 17
CanaraB
Canara ank vs. N
Bank Neew In
Inddia A ssuran
ancce C
suran o. Ltd. & Anr
Co Anr..
IV (2006) CP
CPJJ 556
6 (NC)
(NC)
Fac
actts
Complainant was having a saving account with cheque facility with Sindri
Branch of the Petitioner Bank. Complainant issued a cheque of Rs.4916/- in favour
of Insurance Company towards premium for renewal of the policy for car on
29.4.2002. On 1.5.2002 Car of the complainant met with an accident. Complainant
lodged his claim with Insurance Company which was repudiated on the ground of
non-payment of premium. Complainant filed complaint before the District forum
alleging Deficiency in service against bank. Before District forum Petitioner Bank
contested the matter. The Bank submitted that on 29.4.2002 only a balance of Rs.
2/- was lying in the account of the complainant. Complainant deposited an amount
of Rs.4,916/- with the said branch of Bank on 2.5.2002. Cheque was presented to the
branch for payment/through clearance on 7.5.2002. After debiting an amount of
Rs.10/- towards service charges for violation of non-maintenance of minimum
balance, the balance in the saving account of the complainant was Rs.4,908/- and
therefore the said cheque was returned unpaid for insufficient fund. The District
forum while allowing the complaint directed the Petitioner Bank to pay
Rs.1,08,896/- to meet the repair cost of the damaged car and Rs. 60,000/- to meet the
medical treatment. On appeal, the State Commission Partly allowed the appeal.
Against that order Petitioner bank filed Revision Petition before the National
Commission.
Issues
Whether the act of bank in dishonouring the cheque issued by the customer
for not having maintaining minimum balance in his account amounts to deficiency
in service?
Held
The National Commission held that since the minimum balance was not
maintained in the account, amounts of Rs.10/- were debited on 31.01.2002, and again
Rs.10/- on 28.2.2002 and again Rs.10/- on 30.2.2002 thereby leaving the credit balance
of Rs.2/-. Further, an amount of Rs.4,916/- was deposited in cash on 2.5.2002 and after
debiting Rs.10/- towards service charges for not maintaining the minimum balance
on 2.5.2002 the balance lying in account was Rs. 4908/- obviously debiting the said
amounts as service charges by the bank was in conformity with instruction at
Case Laws on Banking 19
Sl.No.12.5.5 of the Manual. Thus, the stand taken by the bank that the balance on
7.5.2002 was Rs.4908/- has to be accepted. Therefore, bank cannot be held deficient
in service in not honouring the cheque dated 29.4.2002.
Revision Petition allowed.
20 Case Laws on Banking
cheques has been encashed by him. The bag was lost at Patna. No investigation
report has been filed to doubt that there was some clout about the version of the
complainant.
It is not the case of the appellant that these cheques were presented for
encashment and they have paid after comparing the signatures of the complainant
on those cheques. When the cheques were not utlised and were lost consumer/
complainant/purchaser is entitled to get back the money. Otherwise, the person
who issued these traveller cheques would make an unjust enrichment and the
purchaser would be unnecessarily made to suffer the loss. The appellant could
have verified these facts with the help of all the facilities of computerization and
modern techniques.
Appeal dismissed.
Case Laws on Banking 23
P un jab N
unjab Naat ional B ank vs. Lt
Bank Lt.. C
Cool. D.R
.R.. Ag gar
D.R arwwal
IV (2006) CP
CPJJ 116
65 (NC)
(NC)
Fac
actts
Complainant raised two loans from the New Bank of India which was later
merged into Petitioner Bank. One loan was for Rs.24,300/- for one acre on 10.11.1986
and another for Rs.18,225/- for 3/4th acre on 15.5.1987. The complainant intended to
set up a holiday tourist resort on his farm land. A tripartite agreement was executed
between the Petitioner Bank and Respondent No.2 M/s D.R. Sondhi Farms who owned
about 200-300 acres of farm land. As per this agreement the bank undertook an
obligation of not only granting loan for purchasing land for the purpose of plantation
but also the maintenance of Eucalyptus tree per acre in 6 years and as per this
agreement the entire plantation of trees was hypothecated with the New Bank of
India. The plants were got insured by the Complainant at its own cost. Complainant
filed complaint before the District forum against the Petitioner Bank alleging
deficiency in service for breaching the terms/obligations created under the
agreement. Dissatisfied with the order of the District forum, complainant filed
appeal before the State Commission. The State Commission allowed appeal directing
the Petitioner Bank to pay compensation for the non-observance of the terms of
the agreement. Aggrieved by the order of State Commission, complainant filed
Revision Petition before the National Commission.
Issues
Whether the Bank is liable for deficiency in service for not observing the
obligations created under the agreement and is also liable to pay compensation?
Held
The National Commission upheld the order of the State Commission and held
that in view of the tripartite agreement it could not be said that the Bank was under
no obligation to inspect and to ensure that the sale proceeds are recovered to clear
the loan for in terms of the tripartite agreement that amount was to be adjusted
towards the account of the complainant. Since on account of failure of the Bank to
ensure the sale of the Eucalyptus trees in term of Clauses 11 & 12 and failure to discharge
other obligations under other Clauses of the agreement about the adjustment of the
amount in accounts books, loss suffered by the complainant/respondent due to breach
of obligation arising out of the agreement, are required to be compensated.
Revision Petition dismissed.
24 Case Laws on Banking
Mahender Sing
Mahend Singhh Siwaeh & Anr
Siwa Anr.. vs. PPun
un jab & Sin
unjab Sinddh B ank & Anr
Bank Anr..
IV (2006) CP
CPJJ 2231
31 (NC)
(NC)
Fac
actts
Complainant were allotted locker no.131 and allocated key no. 143 in the
Respondent Bank, Begumpul Branch, Meerut. Complainants were paying rental
charges regularly since 1979. The complainants last operated their locker, wherein
all valuables of the complainant were kept, in April, 1997. On 10th March 1998,
Complainants visited the Bank and tried to open the locker with their key but it did
not open. The manager of the Bank called a locksmith to open the locker and on
the revelation of the locksmith, it came to light that the said locker had already
been opened earlier by breaking its lock at the instance of previous allottee of the
locker. The bank officials confirmed that the previous allottee had removed all the
contents of the locker. Complainant immediately made a complaint to the police
on coming to know about removal of the jewellery from the locker and disclosed all
the items of jewellery. Complainants issued a legal notice to the Manager of the
Respondent Bank alleging fraud, default and misconduct on the part of branch
manager. In reply to the legal notice it was stated that it was a case of mistake/
negligence on the part of their staff and further stated in the notice that as no list
of inventory is being made by the Bank when a customer of locker placed his articles
in it, so when claim of your client will be vetted by any legal authority/competent
court of law, my client will compensate your client. Police arrested the previous
allottee of the locker who admitted fraud/theft and also surrendered to the bank a
sum of Rs.1,01,800/- in cash and melted gold and coins weighing 289.980 gms. The
bank, in turn, handed over the said amount and the gold to the complainants.
Complainants filed complaint against respondent Bank before the National
Commission.
Issue
Whether Bank is liable for deficiency in service for allowing previous allottee
to operate the locker who had already surrendered the locker 18 yrs before and
permitting him to take away gold jewellery as if he has kept the articles in the
locker.
Held
The National Commission held that the procedure laid down by RBI guidelines
has been completely flouted by the opposite party by not maintaining the locker
Case Laws on Banking 25
register, locker key register, non-payment of rent dues and lastly, the procedure that
should be adopted for breaking open a locker, etc. and also in view of the statements
by the complainants, admission of theft by previous allottee, admission of the bank
officials that it was an inadvertent mistake, there is clear deficiency in service and
gross negligence on the part of the bank. When the complainants are paying rent
for the locker and entrusting their valuable articles in the safe locker and show
their trust in the bank, it is the duty of the bank to protect the valuables of the
clients and maintain proper records of opening/closing of lockers, entry ledgers, etc.
Bank should have taken necessary action on their own against its employees instead
of accusing and disregarding the report and affidavits of the complainants as to
the value of the contents kept in the locker. The assurance of the Bank that they
will provide complete security becomes a myth when the Bank takes a consistent
stand of finding fault with the consumer.
Complaint allowed.
26 Case Laws on Banking
P.S
.S.. SSa
awhne
whneyy vs. CanaraB
Canara ank & Anr
Bank Anr..
IV (2006) CP
CPJJ 22774 (NC)
(NC)
Fac
actts
Complainant being an artist of Chandigarh visited Delhi with his arte-facts for
display in IITF. Complainant issued cheque of Rs.1,000/- to M/s Ram Kumar Glass
Suppliers for supplying the glass plate and the etching of art work on it. As the
complainant had to present his art work to some VVIP he contacted to the engaged
glass supplier, the complainant came personally to Delhi for collecting the same.
On reaching there he found the job to be incomplete. The Glass supplier returned
the cheque of Rs.1,000/- issued by complainant informing him that the cheque was
dishonoured by the respondent Bank and hence, refused to carry out the work. On
enquiry, it come out on surface that the respondent Bank sent the cheque for
collection to Punjab National Bank, New Delhi, instead of Punjab National Bank,
Chandigarh. Aggrieved by the action of Canara Bank/respondent Bank, complainant
filed a complaint before the District forum. The District forum dismissed the
complaint on ground that complainant is not a consumer as the complainant had
not hired the services of the respondent Bank. However, of the District forum
granted compensation to the supplier. Dissatisfied with the order of the District
forum complainant filed appeal before the State Commission which confirmed
the order of the District forum and therefore, complainant filed Revision Petition
before the National Commission.
Issues
Whether complainant can institute proceedings against the bank for
deficiency in service despite the fact that it did not hire the services of the bank?
Held
Before the National Commission, Petitioner submitted that the cheque in
question was presented by respondent Bank to a wrong branch of the Punjab
National Bank, and this per se is deficiency in service whereas the respondent Bank
submitted that as the concerned cheque was inadvertently sent to the New Delhi
Branch of the Punjab National Bank and thus there is no deficiency in service and
further submitted that the Glass supplier should have sent it to the Punjab National
Bank, Chandigarh and got the money. Further, it was submitted that since the
Petitioner was not having any account with the respondent Bank and therefore, he
cannot be said to be a consumer.
Case Laws on Banking 27
The National Commission held that the Petitioner would be the beneficiary of
the services, which were required to be rendered by the Canara Bank. Because of
wrong handling of cheque by the opposite party No.1 by presenting the cheque for
encashment at Punjab National Bank, Delhi, Petitioner suffered a loss. Petitioner
was the beneficiary of the services, which were required to be rendered by the Canara
Bank to the opposite party No.2. Hence, the complaint, in our view, was maintainable.
Further, the order passed by the State Commission directing the O.P. No.2 to pay
Rs.10,000/- as compensation cannot be justified. Because, there was no fault on his
part in presenting the cheque to the Canara Bank. However, Canara Bank was
directed to pay compensation to the Petitioner.
Revision Petition partly allowed.
28 Case Laws on Banking
Jason Link
Linkss (In
(Inddia) Ltd. vs. SSttate Bank of In
Bank Inddia & Anr
Anr..
IV (2006) CP
CPJJ 32
3288
Fac
actts
Complainant a NRI, started his projects in India and baggaged a number of
good contracts. For executing the contracts, the appellant/complainant availed of
credit facilities in terms of mutual agreement with the respondent Bank. In the
year 1986 respondent Bank sanctioned small credit facility of Rs.3 lacs which was
later in 1993 enhanced to the sum of Rs.38 lacs. The appellant/complainant, on
5.12.1992 requested the respondent Bank for issuance of earnest money Bank
gurantee in favour of MTNL which was refused by the Bank and on 7.1.1993 the
respondent Bank confirmed continuation of the credit facilities for a further period
of 6 months. On 17.2.1993 the complainant requested for extension of bank gurantee
for Rs.22,53,255/- in favour of silver oak co-operative Group Housing Society Ltd. for a
further period of 6 months w.e.f. 23.3.1993 to 22.9.1993. The existing Bank gurantee
in favour of M/s Silver oak co-operative Group Housing Society Ltd. was to expire on
23.3.1993. Despite request for renewal of the Bank gurantee respondent Bank failed
to do so which inflicted serious blow to the financial health of appellant company
as the silver oak society withheld the payments due and also the payments which
would have become due to the appellant company. Complainant filed complaint
before the State Commission. Dissatisfied with the order of the State Commission,
complainant filed appeal before the National Commission.
Issues
Whether deduction in credit limit and the act of not renewing the existing
Bank gurantee despite request amounts to deficiency in service?
Held
The National Commission held that Respondent Bank vide its letter dated
30.3.1993 renewed the credit facilities subject to certain conditions and requested
the complainant to make arrangements to file fresh charge as whenever any term
and condition of loan, etc. is modified fresh documentation is necessary but the
appellant till 20.11.1993 did not comply with the condition. Thus, whenever any
Bank or financial institution does not feel it safe on account of the questionable
conduct of a borrower, it could, rather should, reduce the credit limit. Credit limit
depends on flow of money in the Bank account. It depends also on the conduct of
the borrower not to take money surreptitiously. If in these circumstances specific
Case Laws on Banking 29
charge is asked to be created by executing a mortgage and it is delayed for nearly six
months then the Bank cannot be said to be deficient in rendering service, in case of
reduction of the credit limit and non-issuance of the Bank gurantees sought for.
Nor it could be said that the respondent was deficient in rendering appropriate
banking services.
Appeal dismissed.
30 Case Laws on Banking
St an
andd ardC
ard har
Char ter
tereed B
harter ank vs. Dr
Bank Dr.. B.N
.N.. R
B.N am
Ram an
aman
III (2006) CP
CPJJ 1 (S C)
(SC)
Fac
actts
Complainant, a NRI employed as a Prof. of Medical Physiology in the University
of Libya, placed with the appellant bank US$5000/- in the FCNR account for 63 months
@9% per annum. The deposit was made by the draft drawn on New York Bank. The
deposit was to be matured on 17.11.1984. In 1984, RBI allowed the banks to keep FCNR
for six years and interest was increased from nine per cent to 13 per cent.
Complainant in June 1984, intimated the appellant bank to re-invest the entire
amount in FCNR account on maturity for a further period of six years @13 per cent
per annum. While visiting India, the branch office of bank assured the complainant
that US$ 7939.56 were lying in the FCNR account which has been re-invested at 13
per cent p.a. for six years maturing on 7.11.1990. In September 1990, complainant
requested the appellant bank to re-invest the entire amount in his FCNR account
for a further period of three years after maturity. In January 1992, after coming
back to India, complainant enquired about the status of his deposit for which he did
not get any response. He made a complaint in writing on 5.1.1992, 14.1.1992.
Complainant received a letter from the appellant bank dated 15.10.1992 stating that
the said deposit was pre-maturely drawn on 22.11.1979. Complainant made
complaint to the RBI and also before the State Commission. The complaint before
the State Commission was resisted by appellant bank on the ground of limitation.
The State Commission allowed the complaint. Against the order of the State
Commission, appellant bank filed an appeal before the National Commission. The
National Commission confirmed the order of the State Commission and dismissed
the appeal. The appellant bank filed Civil Appeal before the Supreme Court.
Issues
Whether the activities relating to non-sovereign powers of statutory bodies
are within the purview of the Act?
Held
The Supreme Court held that National Commission, State Commission and
District forum are remedial agencies. Their functions are quasi-judicial. The purpose
of these agencies is to decide Consumer disputes. Activities relating to non-sovereign
powers of statutory bodies are within the purview of the Act. The functions of such
statutory bodies come under the term ‘service’ under section 2(1) (o) of the Act.
Case Laws on Banking 31
In the case of Forasol v. Oil & Natural Gas Commission, AIR 1984 SC 241, Supreme
court observed that in an action to recover an amount payable in a foreign currency
the court has to select a date which puts the plaintiff in the same position in which
he would have been, had the defendant discharged his obligation when he ought to
have done, bearing in mind that the rate of exchange is a fluctuating factor. To
select the date when the amount became due, the court has to act in a just, fair and
equitable manner because in a case where the rate of exchange has gone the
opponent escapes by paying a lesser sum than what he was bound to and thus he
gains by default while in the converse case where the rate of exchange has gone
against the opponent, the opponent would be subjected to a greater burden than
what it should be. The agencies under the Consumer Protection Act, 1986 should
also keep in mind the economic situation of the country. Encashment of dollar
denominated deposits have certain economic implications. In cases of this type, the
burden is on the complainant to show the rate of exchange prevalent on the
aforesaid dates in order to assist the court to arrive at the indicative prices. This has
not been done in the present case. Neither the State Commission nor the National
Commission has examined this question regarding selection of the appropriate
date, the appropriate rate of exchange on that particular date as also the rate of
interest, which the appellant was required to pay. The claim of the respondent for
money decree with interest at the rate of 18 per cent p.a. till realization appears to
be on the higher side and inflative. The rate of exchange, which is indicative of price
and which constantly varies from time to time, has not been examined.
Result: Appeal partly allowed; matter remanded to the State Commission for
fresh consideration.
Appeal partly allowed.
32 Case Laws on Banking
HD
HDFFC B ank Ltd. vs. K
Bank Kiisho
horre R
R.. Worah
III (2006) CP
CPJJ 440
0 (NC)
(NC)
Fac
actts
Complainant obtained loan of Rs.5,00,000/- against shares from Petitioner Bank,
Chembur Branch. The drawing power granted to the extent of 65 per cent of the
value of shares. On 21.9.2001 complainant was asked to pay Rs.38,325.17 within two
days and in case of failure to make payment complainant was threatened to sell
the pledged shares. The complainant paid Rs.5,000/- on the very next day, leaving
the balance of Rs.3,315.17 and inspite of payment of said amount the Petitioner
bank sold the shares worth Rs.1,40,481/- on 26.9.2001 which were deposited with the
Bank as security. The complainant filed complaint before the District forum alleging
deficiency in service on account that Petitioner bank arbitrarily reduced the drawing
power from 65 per cent to 60 per cent without obtaining approval from the
complainant and the said sale of shares is in excess of their demand made by the
Petitioner bank on 23.9.2001 and is in breach of agreement/contract entered into
between the parties. The District forum allowed the complaint directing the
Petitioner bank to purchase 300 shares of Colgate Ltd. and 562 shares of ACC in the
name of the complainant at their own cost within a period of one month and
retain the same as security for the over drawing facilities granted to the complainant
if he is availing the facility and in case not availing the facilities then to hand over
the said shares to the complainant. On appeal, the State Commission dismissed the
appeal filed by Petitioner bank holding that the bank without waiting for expiry of
7 days from the date of intimation sold the shares and thus, acted in contravention
of the terms and conditions of the agreement which amounts to deficiency in
service. Aggrieved by the order of the State Commission Petitioner bank filed Revision
Petition before the National Commission.
Issues
Whether the action of the Bank in selling a part of the pledged shares to make
good the deficit in borrowing power and the margin when the borrower had
overdrawn in excess of the eligible limits, amounts to deficiency in service?
Held
Before the National Commission, Revision Petitioner submitted that the
Complainant / respondent had to maintain 40 per cent margin at all times for
having taken over draft facility against the shares and the amount required to
Case Laws on Banking 37
make good the deficit 21/2 times the overdrawn amount. Repeated letters by bank
asking complainant to make good the deficit did not yield any positive response
from the complainant despite having more than seven days notice. On the other
hand complainant submitted that telegram issued by Petitioner bank was dated
21.9.01 calling upon the complainant to make good the deficit in overdraft account
and they sold the shares on 26.9.2001 without waiting for the expiration of seven
days notice which amounts to deficiency in service.
The National Commission rejected submission of the complainant and held
that the telegram dated 21.9.2001 was the last reminder. Letters were sent earlier to
him by giving more than seven days time to make good the loss in deficit. The first
notice dated 28.4.2001 mentions about the details of excess overdrawal and the
statement of value of shares pledged. Vide another letter dated 14.5.2001 complainant
was requested to regularize the account by funding or pledging additional shares
within 10 days. The next notice dated 26.5.2000 also mentions the same thing. In
response to the deficit to the tune of Rs.27,252/-, Rs.2,252/-, Rs.19,252/-, Rs.20,252/-,
Rs.31,290/- and Rs.18,290/- the respondent had deposited only Rs.10,000/-, Rs.5,000/-,
Rs.5,000/-, Rs.5,000/-, Rs.5000/- and Rs.5,000/-, on 9.5.2001, 4.6.2001, 11.6.2001, 13.7.2001
and 26.7.2001, respectively as per the bank statement submitted by the respondent
which is clearly indicative of the fact that the respondent did not make good the
deficit and hence, the notices were issued to him in the form of letters. Through
these letters the bank had given more than seven days notice. As a final reminder
the telegram was sent. This generous act cannot be termed as deficiency of service.
The bank had given him adequate notice before they sold his shares.
The bank has exercised with due caution and circumspection and has acted
within the ambit of powers occurring to bank as a result of the contract i.e. loan
agreement-cum-guarantee signed by the borrower.
Revision Petition allowed.
38 Case Laws on Banking
interest and its adjustment against the over draft outstanding amount and without
doing so, went on to raise the demands which were later found to be not in orders
and finally, refund order of Rs.302 show that the Bank was partially deficient in
rendering service.
Appeals dismissed.
Case Laws on Banking 41
not been properly locked, then it had to be believed that the locker Manager either
did not check that all the lockers have been properly locked on that very day or he
was negligent and deficient in performing his duty to act in good faith by taking
due care and caution. The fact that information of the locker was allegedly found
open much later on 8.8.1987 could make it evident in such circumstances that
deficiency was writ large and the bank could not be absolved from its liability to
compensate the respondent.
Appeal partly allowed.
Case Laws on Banking 43
ING Voyag
ING agee B ank Ltd. vs. V.Y
Bank .G. SSrreeR
.Y.G. am SSee t t y
eRam
I (2006) CP
CPJJ 118
82 (NC)
(NC)
Fac
actts
Complainant was a guarantor for an advance of Rs.80,000/- made by the
Respondent Bank of Jayanagar Branch to one M/s Gautam Enterprises, Bangalore,
during the year 1983-84. Complainant also deposited Rs.20,000/- on 3.12.1986 and
Rs.30,000/- on 6.12.1986 under the Akshaya Deposit Certificate Scheme of the same
Bank of Fraser Town Branch. Under the scheme, on maturity the Bank was liable to
pay a sum of Rs.40,490/- and Rs.60,735/- to the complainant. On maturity the
Petitioner bank returned both the receipts as there was no amount lying in the
deposits to the credit of the complainant. The Bank also did not reply to the legal
notice dated 2.11.1993 of the complainant. Therefore, the complainant approached
the District forum by filing complaint. The District forum relying upon Sec.171 of
the contract Act, dismissed the complaint with cost. Complainant preferred appeal
before the State Commission. The State Commission allowed appeal by holding
that the FDRs held by the Bank were not pledged with the Bank. The complainant
had fixed deposits in Fraser Town Branch, whereas M/s Gutam Enterprises had
obtained loan from the Jayanagar Branch of the Bank and further held that one
branch of the Bank has no jurisdiction to exercise its powers on the other branch of
the same bank under the provisions of Sec.171 of the contract Act to have general
lien. Against this order, Petitioner bank preferred present Revision Petition before
the National Commission.
Issues
Whether a banker in exercise of its lien under Sec.171 of the contract Act, straight
away appropriate the money deposited by a guarantor in FDR, without any bailment
and without informing the guarantor?
Held
Counsel for Petitioner bank submitted before the National Commission that
‘general lien of the banker’ is to the effect that the Bank can retain as security for
general balance of accounts on any goods bailed to them. Section 171 specifically
provides in the absence of a contract to the contrary, the Bank can retain as a
security for general balance of accounts any goods bailed to them. The National
Commission held that the complainant has not bailed any goods’ to the Bank. The
FDRs were also not pledged with the Bank against the loan taken by M/s Gautam
46 Case Laws on Banking
Enterprises. The amount was deposited with the Bank after more than one year of
the loan given to M/s Gautam Enterprises. The wording of the section are to the
effect that the bankers would have general lien only on any goods bailed to them. If
goods are not bailed, Bank cannot go and take away any goods, wherever they are
lying into their custody and contend that they have lien over the same.
Revision Petition dismissed.
Case Laws on Banking 47
Al
Alllahab ad B
ahabad ank v. C
Bank han
Chan
handd igarh C
Coonst
nstrr uct ion C
Coo. PPvv t . Ltd.
IV (2005) CP
CPJJ 1126(N
26(NC)
26(NC)
Fac
actts
Complainant got a bank guarantee issued from the Petitioner Bank for a sum
of Rs.1,52,000/- against security in the shape of FDRs worth Rs.1,50,000/-. The validity
period of the bank guarantee was upto 28.09.1990. Since the Bank did not release
the FDRs to the complainant even after the expiry of the bank guarantee, the
complainant approached the District forum for a direction to Petitioner Bank to
release the FDRs. District forum allowed the complaint. On Appeal the State
Commission confirmed the order passed by the District forum whereby Bank was
directed to pay the value of FDRs with interest @18 per cent p.a. from 1.10.1990 till
payment. Against this order Petitioner Bank filed the Present Revision Petition
before the National Commission.
Issues
Whether the bank was justified in withholding the FDRs even though the
bank guarantee invocation letter was not received and also that the District forum
passed the order to release the same?
Held
The National Commission held that there was no justifiable reason for the
Bank to retain the FDR after the District forum passed order dated 16.11.1993 for
releasing the same. Even thereafter the FDRs were not returned but were returned
only when this Commission passed the order on 8.5.2003. Further apart from the
bank guarantee invocation letter dated 25.9.1990 which was received by the Petitioner
bank on 1.10.1990, after the expiry of bank guarantee, the relevant terms of the bank
guarantee leave no doubt that the bank guarantee was required to be invoked on
or before 28th September 1990 and that stood cancelled automatically. Despite all
these facts, the officers of the Bank remained adament and refused to release the
FDRs. There was no justifiable reason for the Bank to withhold the same after May,
1991. In this view of the matter, the order passed by the State Commission confirming
the order of the District forum cannot be said to be in any way illegal or erroneous.
The order holding that there is deficiency on the part of the officers of the Petitioner
stands confirmed.
Revision Petition partly allowed.
48 Case Laws on Banking
Held
Before the National Commission complainant contended that non-availability
or loss of original title deed of the free hold property had resulted in reduced market
price of the property due to the deficiency in service by the Bank. Whereas the Bank
resisted the complaint on the ground that complaint is time barred and the
complainant, in collusion with advocate, Sh. R.M. Gupta took back the original title
deeds in fraudulent manner. Since the return of original title deed is beyond the
control of the Bank and therefore do not constitute deficiency in service.
The National Commission after hearing the parties arrived at conclusion that
at no point of time the bank had denied its liability to return the title deeds delivered
by the complainant. Therefore, it would be difficult to arrive at a conclusion that
the complaint is time barred. The Bank never informed the complainant that as
the title deed was lost, therefore, they would not deliver it to the complainant.
Further, it is clear that upto 1989 complainant was in financial crisis. He was
compelled to handover title deed property No.11, Abdul Fazal Rd, New Delhi, even
though he had handed over title deed of property No.52A, Okhla Industrial Area, New
Delhi. Because the title deed of property No.11 Abdul Fazal Rd, New Delhi was delivered
to the bank it would not mean that the complainant had waived off his right to get
back the title deed of his factory premises at 52-A, Okhla Industrial Area, New Delhi.
In this view of the matter, it is apparent that there is clear deficiency on the part of
the Bank in not returning the title deeds. The title deeds were given to the Bank in
good faith and considering the Bank would be the safest place for keeping such
deeds.
Complaint allowed.
50 Case Laws on Banking
Cent
entrral B ank of In
Bank Inddia & Anr
Anr.. vs. H
Heeera SSo
era oni & Ors
Ors..
III (2005) CP
CPJJ 225(N
5(NC)
5(NC)
Fac
actts
Central Bank of India introduced a Group Insurance Master Policy No.GSLI/
601073 for its employees on 20.11.1990. On the death of one of the employee of the
Petitioner Bank, his legal heirs pressed the claim for Rs.1,20,000/- from LIC. The
claim was not settled despite notice to the LIC as well as to the Central bank of India.
The legal heir of the deceased filed a complaint before the District forum. LIC before
the District forum contended that since the Central Bank of India did not pay the
premium, the policy lapsed and therefore LIC is not liable to pay the amount of
claim whereas the Petitioner Bank contended that since the bank did not charge
any fee from its employees and the claim regarding payment payable after the
death of an employee was not maintainable. District forum rejecting the
contentions allowed the complaint. On appeal by LIC, the State Commission held
that since the policy lapsed LIC was not liable to pay any amount and the bank is
liable for deficiency in service and thus, directed to pay Rs.1,20,000/- alongwith
interest. Against this order of the State Commission Petitioner Bank, filed Revision
Petition before the National Commission.
Issues
Whether Policy could have been said to have been lapsed, to hold that the LIC is
not liable?
Held
The National Commission held that if contributions are paid by the employees
themselves in full and the employer just acts only as a co-ordinator and monthly
contributions from the salaries of the employees and are required to be remitted to
LIC every month, failure of the co-ordinator would not and ought not absolve the
Life Insurance Corporation of its responsibility. It is not policy of an individual and
affect hundreds of employees for none of their faults.
Accordingly, National Commission held that the Central Bank of India was
acting as an agent having implied authority of the LIC for collecting the Insurance
premium from employees. The moment the amount was deducted from the salary
of the employees by the Central Bank, it would be deemed to have been paid to the
Life Insurance Corporation. Failure on the part of the agent having an implied
Case Laws on Banking 51
authority to receive premium on receipt by deduction from the salary coupled with
failure to deposit the same with LIC could not lead to lapse of the policy by any
stretch of imagination.
Revision Petition disposed of accordingly.
52 Case Laws on Banking
Col. D.S
.S.. SSac
D.S ac har (R
achar (Reetd.) vs. PPun
un jab & Sin
unjab dB
Sind ank
Bank
II (2005) CP
CPJJ 130(NC)
130(NC)
Fac
actts
Complainant/Petitioner was having current account with respondent Bank
at Phase V, SAS Nagar, Mohali on 6.4.1999, Complainant along with his wife visited
the said branch to deposit Rs.45,000/- in the said current account. At about 1.45 p.m.
when the complainant was at the counter, someone snatched the money from his
hand and despite raising loud alarm and chasing, the snatcher fled away on a scooter
standing outside the premises of Bank with engine on. Complainant filed complaint
before the District forum alleging deficiency in service on the part of Respondent
Bank as at the time of incident, there was no security guard/gunman present at the
entry/exit gate of the Bank. Collapsible doors of the main gate were not chained
and the bank was under duty to sound the siren alarm. The District forum dismissed
the complaint. On appeal, the State Commission also dismissed the appeal. Against
dismissal order of the State Commission, Complainant filed Revision Petition before
the National Commission.
Issues
Whether liability for payment of money can be legally fastened on respondent
Bank on ground of it being deficient in service under section 2(i) (o) of Consumer
Protection Act, 1986?
Held
The National Commission held that in our view, ensuring safety of the money
to be deposited and/or withdrawn inside the Bank premises is impliedly part of
service rendered by a Bank to its consumer. The respondent Bank being deficient in
service cannot escape liability for payment of said money by way of compensation
to the petitioner, a consumer with interest.
Revision allowed.
54 Case Laws on Banking
Zil
ilaa SSahk
ahk ar
arii B
ahkar ank Ltd. vs. U
Bank .P
.P.. PPo
U.P oli
licce Avas N
Niigam Ltd.
I (2005) CP
CPJJ 89(NC)
89(NC)
Fac
actts
Complainant, U.P. Police Awas Nigam Ltd. in response to an advertisement
deposited a sum of Rs.2,01,38,800/- in the year 1988 with the appellant Bank. On
maturity of the call deposits, the appellant Bank did not pay the maturity amount
on the ground that as per instructions of NABARD, the rate of interest of only 4.5 per
cent and 3.5 per cent p.a. was payable on the call deposits of 61 days and 16 days. With
a view to get the blocked money released from the appellant Bank, the complainant
accepted the offer made by the Bank for converting the balance call deposits into
fixed deposits. The Bank violated all contractual norms and did not pay even the
revised lower rate of interest. While on one deposit interest was paid @3.5 per cent
instead of 9.5 and in respect of another deposit the interest was paid @3.5 per cent.
When the appellant Bank did not respond to many of the letters of the complainant,
he filed complaint before the State Commission. Appellant Bank contested the
matter on the ground that inadvertently in advertisement the rate of interest on
call deposits with 61 and 16 days notice were shown at 12 per cent and 10.5 per cent
without incorporating clause “Applicable to Non-borrowing Co-operative
Institutions”. As per RBI’s directions on rate of interest dated 16.8.1974 and 3.4.1983,
these rates should have been at 4.5 per cent and 3.5 per cent respectively. NABARD
raised an objection on the rate of interest allowed by the appellant Bank @12 per
cent and 10.5 per cent on the all call deposits and the appellant Bank informed the
complainant vide their letter dated 22.7.1989. The matter was reconciled with the
complainant and on agreement all the outstanding call deposits were converted
into FDRs. On maturity two FDR Nos.3375 and 3377 were paid by the Bank alongwith
interest applicable. The appellant Bank prior to making the final payment of FDR
No.3376 withheld the same as the appellant Bank sought advice of NABARD and
payment of interest @3.5 per cent was made. Thus, mistake in respect of issuance of
call deposit at higher rates and also conversion thereof into FDR’s from retrospective
effect was done inadvertently and any contract made in contravention of Statute
Rules and directives cannot be enforced. The State Commission directed the
appellant Bank to make the payment of interest @9.5 per cent in view of concluded
contract in respect of call deposit of 16 days and 10.5 per cent in respect of call
deposit of 61 days and thereafter conversion into FDR @9.5 per cent. Against this
order of the State Commission appellant Bank filed present appeal before the
National Commission.
Case Laws on Banking 55
Issues
Whether Bank is liable for compensating the other party for deficiency in
service for violating the norms of the contract?
Held
The National Commission was in agreement with the contention of the
appellant Bank that the contract was prohibited by a Statute Rule, etc. and contract
of commission of illegal act would not be enforceable. Further it held that the
depositing amount in fixed deposit was not a gratuitous act on the part of the
opposite party/Bank. Bank has enjoyed the benefit of the deposit and in some cases
such deposits had been regularized subsequently. Even if the Branch Manager has
exceeded to his authority, then also, the Bank is supposed to adequately compensate
the opposite party for an obligation resembling those created by contract.
Consequently, the respondent Bank was under an obligation in terms of second
part of section 73 of the contract Act which has not been discharged. Any person
injured by the failure to discharge such an obligation is entitled to receive some
compensation from the party in default, as if such person had contracted.
Further, in view of the representation made by way of advertisement inviting
call deposits for 61 days and 16 days and thereafter converting it into FDR @9.5 per
cent without having any authority in terms of instructions of the RBI and NABARD,
etc. the officials of the Bank are certainly deficient in rendering service and led the
complainant on a garden path.
Appeal dismissed.
56 Case Laws on Banking
did not bear the thumb impression of the complainant and the only thumb
impression appearing thereon was of complainant’s husband. It further held that
since the FDR was not mortgaged as guarantee for the loan taken by M/s Verma
Agro Industries or Khem Chand, the dispute regarding the FDR was not in issue in
the suit filed by the Bank therefore, the trial court did not pass any order regarding
the right of the Bank to adjust the amount of the fixed deposit towards the recovery
of the loan alleged to have taken by M/s Verma Agro Industries and Khem Chand.
Complainant then filed a complaint before the District forum contending deficiency
in service against the respondent Bank. Before District forum respondent Bank
contended that both trial court as well as Revisional court had held that the fixed
deposit receipt had been mortgaged by complainant’s husband as security for the
loan granted by the respondent Bank to M/s Verma Agro Industries and the
complainant’s husband was entitled to do so because the FDR had specified that it
was payable to “either or survivor”. The District forum held that complainant was
entitled to recover half of the amount of the FDR i.e. Rs.19,965/- together with interest
from 1.6.1995 because complainant never mortgaged her share of the FDR in favour
of any party. It further held that since the receipt was in joint name of complainant
and her husband, the respondent bank should not have accepted any pledge of the
account without ifnforming the complainant and getting her consent. Since the
Bank accepted the same without consent of the complainant, Bank is deficient in
rendering services. Against the order of the District forum respondent Bank filed
appeal before the State Commission. The State Commission held that since the FDR
was payable to “either or survivor” it showed that the Bank could have got discharge
by making payment to either of the account holders. The State Commission allowed
the appeal holding that when payment could have been made to a single individual
in terms of the directions of the depositors then the Bank was at Liberty to accept
mortgage of the FDR on behalf of one of the depositors and the consent of the other
depositor was not necessary. Complainant, against the order of the State
Commission, filed Revision Petition before the National Commission. The National
Commission confirmed the order of the State Commission and also held that
financial institutions had every right to protect their interest by taking “conscious
decision”. Since the Bank had taken “conscious decision” in this case, it could not be
faulted and there was no deficiency in service. Against the order of the National
Commission complainant approached Supreme Court by way of civil appeal.
Issues
Whether the Bank has any right to adjust the amount of the FDR when there
was no claim with regard thereto and when the liability of the defendants in the
58 Case Laws on Banking
P rem B ab
Bab
abooo vs. Bran
ancch Manag
Bran er
er,,
Manager
Far ak
arak hab
akhab ad G
habad Grramin B ank & Ors
Bank Ors..
III (200 4) CP
(2004) CPJJ 118(N
8(NC)
8(NC)
Fac
actts
Complainant obtained a loan of Rs.2,000/- from the respondent Gramin bank
Farkhabad and when this amount was not getting repaid, the first respondent
initiated recovery of the amount with interest by way of revenue recovery. The
Revenue Authorities in pursuit of this case made efforts to recover amount from
the complainant. Complainant paid Rs.1100/- on two separate dates in the year 1987
and 1988 to the Ameen, Surender Singh, receipt of which was given to the
complainant. He also paid Rs.2000/- to the said Ameen for which no receipt was
available on record. Complainant filed complaint before the District forum alleging
deficiency in service on the part of respondent bank for not issuing a ‘No Dues
Certificate’ as he paid due amount to the Ameen. District forum after hearing
parties directed the respondent bank to recover the paid out amount from the
Revenue Authorities and only the remaining amount, if any, to be recovered from
the complainant. Respondent Bank filed appeal before the State Commission which
set aside the order passed by the District forum and allowed the appeal. Against this
order of the State Commission complainant filed Revision Petition before the
National Commission.
Issue
Whether Bank can recover an amount twice once under process of law and
other by initiating the authority?
Held
The National Commission held that once the recovery proceedings under the
Revenue code of the State had been initiated by the Bank and unrebutted averments
of the complainant that the money was paid to the Ameen who is the collecting/
Enforcement Agency of the Tehsildar, the complainant cannot be faulted for non-
payment. Ameen is the functionary in the functional hierarchy of the Revenue
Administration in State which was acting under law as provided in the Revenue
code. Hence, whatever payments were made and if they were not deposited by the
Ameen is favour of the bank, the Petitioner/complainant cannot be faulted for this.
Matter is now between the Bank and the Revenue Hierarchy and since in this case
Case Laws on Banking 61
the amounts are reported to have been paid and the contention to this effect remain
unrebutted, the conclusion is that these amounts were paid by the petitioner to the
Ameen under a process of law to be paid back to the Bank. Any agency cannot
expect to recover twice from the poor farmer – one under process of law and the
other by initiating authority in this case the Bank. It is for the Bank to get the
details from the Revenue Authorities as to what has been done as a follow up to the
recovery / proceedings initiated on behest of the Bank. Having failed to do so and
having been brought on record that amounts have been paid by the complainant
to the Bank through Ameen, the Bank is not entitled to double recovery of this
amount from the Petitioner/complainant.
Revision Petition allowed, order passed by the State Commission set aside.
62 Case Laws on Banking
H eld
Before the National Commission it was contended by the counsel for the bank
that some cutting was required to be authenticated by the complainant and as
authentication was not done by the complainant during the currency of letter of
credit despite being pointed out, the bank was well within its right not to honour
the letter of credit. The National Commission rejecting the contention of the bank
held that the said cutting was not required to be authenticated and even if it was so,
it was not such a discrepancy on the basis whereof, bank could have refused to
honour the letter of credit thereby denying payment to the complainant who acting
on the LC had made delivery of Jailene PSF of the value of more then Rs.64,00,000/-
to the opposite Party No.4. There was gross deficiency in service on part of bank in
withholding payment of the value of the consignments for which said letter of
credit was issued by it.
Complaint party allowed.
64 Case Laws on Banking
T hir
hiruuchirap
hirap al
apal li M
alli ult
Mult ipur
ultipur
ipurppose SSo
o cial SSer
er
ervv ice SSo
oci
cieet y vs.
Canara Bank
II (200 4) CP
(2004) CPJJ 62(NC)
62(NC)
Fac
actts
Thiruchirapalli Multipurpose Social Service Society, registered under societies
Registration Act deposited various funds in FDR with the respondent Bank and in
all deposited Rs.62,08,745.05 for a term of 5 yeas which were due for maturity in the
year 2000. Complainant received a letter dated 5.2.1996 from the respondent bank
that the bank was marking a general lien on fixed deposits to cover the DIR loans
sanctioned by them from 1986 to individuals on the recommendations of the
complainant. Complainant filed complaint before the National Commission against
respondent bank alleging deficiency in service as bank acted arbitrarily in illegally
marking general lien on said deposits because the DIR scheme never provided for
any gurantee by the complainant.
Issue
Whether it is a fit case to be decided under the Consumer Protection Act, 1986
and to invoke the jurisdiction of this commission?
Held
The National Commission after hearing both the parties decided against the
complainant. It is submitted by the complainant that there was no gurantee given
by the complainant for repayment of the loan by the loaners to whom the benefit
was given under the Differential Interest Scheme framed by the Central Government
and therefore, bank was not entitled to have any lien on the fixed deposits of the
complainant, whereas it was submitted on behalf of respondent bank that the
amount deposited by the complainant was ‘seed money’ on the basis of which bank
gave loan to the persons recommended by the complainant. Furthermore,
transaction between the complainant and the respondent bank is commercial in
nature being a joint venture and the voluminous evidence is required to be
considered and therefore is not a fit case for exercise of jurisdiction under the
Consumer Protection Act, 1986.
It is further submitted that a project was started in collaboration with the
complainant in lending financial assistance for the upliftment of the down trodden
and the complainant provided seed money capital for the same. Respondent Bank
Case Laws on Banking 67
and the District forum rightly proceeded the Petitioner Bank ex-parte as no body
put in appearance on its behalf.
On the issue of refund of margin money, the National Commission held that
amount of Rs.65,223/- was contributed by the complainant towards margin money
for purchase of the car which was re-possessed and sold by the Petitioner Bank.
Order for refund of margin money was passed by the District forum considering the
averments made in complaint and unrebutted affidavit filed in support there to by
the complainant and is therefore, devoid of merit.
Revision Petition dismissed.
70 Case Laws on Banking
St an
andd ardC
ard har
Char ter
tereed G
harter Grr in
indd l ays B ank Ltd. vs. H.B
Bank H.B.. Imp
Impee x PPvv t .Ltd.
I (200 4) CP
(2004) CPJJ 13(NC)
13(NC)
Fac
actts
Complainant, a merchant exporter, was having an account with the appellant
Bank. One company M/s B. Motiram placed two orders on the complainant on 4.5.1995
and 3.6.1995 valuing respectively US$17000.00 and US$1,27,160.00 which were to be
completed by the complainant by 15.9.1995 and the time for the shipment was the
essence of the contract. In order to execute the order complainant in turn placed
order with M/s Peetex/Phundipalle Textile Mills, Solapur for the manufacture of
those goods. It was settled between the complainant and the manufacturer that
the manufactured goods were to be dispatched to the complainant by 25.8.1995
and the complainant agreed to pay a sum of Rs.1,40,000/-. Accordingly, complainant
instructed its banker to issue a bank draft for Rs.1,40,000/- in favour of manufacturer
on charging usual commission. The appellant Bank charged its usual commission
for issuing the draft and also prepared the draft for Rs.1,40,000/- but it prepared
invalid draft in favour of the manufacturer with the result that when the
manufacturer deposited the bank draft with its bankers it was returned to the
manufacturer with the remarks ‘authorised signatory’s signatures’ required and
the Bank draft was not honoured by the Indian Bank, Solapur. The manufacturer
returned the invalid draft to the complainant blaming the complainant for such a
bogus/defective draft. Due to issue of defective Bank draft delay was caused in the
supply of the goods by the manufacturer to the complainant which resulted in the
shipment being delayed and cancellation of order for supply. Complainant claimed
compensation before the State Commission alleging deficiency in service against
the appellant Bank. State Commission allowed the complaint holding appellant
Bank liable for deficiency in service. Aggrieved by order passed by the State
Commission appellant Bank filed appeal before the National Commission.
Issue
Whether cancellation of order was the direct result of delayed shipment of
earlier orders and was on account of the negligence of the Bank who prepared the
invalid Bank draft which amounted to deficiency in service?
Held
The National Commission held that where a consumer sues for damages, the
loss he suffered as a result of breach of contract, must not be too remote.
Case Laws on Banking 71
Complainant is in the export business and is having account with the bank for the
last many years. It could be said that if there was any cancellation of the order of
4.5.1995 and 3.6.1995 this would be within the contemplation of the bank at the
time it prepared Bank draft. It is difficult to accept the proposition that cancellation
of the subsequent order of US$96000.00 was ever in the contemplation of the parties.
Any loss arising out of cancellation of the subsequent order would be too remote to
attract compensation. There is no circumstance to hold from where it could be
said that the alleged loss arising out of cancellation of subsequent order could be
considered to arise in the usual course of dealings between the parties and therefore
bank cannot be held liable for cancellation of the order of US$96000.00 placed by
M/s B. Motiram on the complainant because of defective Bank draft for Rs.1,40,000/
-.
Appeal partly allowed.
72 Case Laws on Banking
Smt
mt.. Man
Manooram
amaa v s. C hair
Chair
hairmman, PPun
un jab N
unjab Naat ional B ank
Bank
I (200 4) CP
(2004) CPJJ 556(N
6(NC)
6(NC)
Fac
actts
Complainant made a term deposit of Rs.14,718.39 for the period of 4 months at
interest rate of 3.75 per cent p.a. After its maturity on 9.6.1959, next time complainant
approaches the Bank is only in the year 1987 and only on 25.11.1988 asked in writing
for payment of FDR amount with interest. Complainant did not receive any response
from the respondent Bank and therefore, filed complaint before the District forum.
The District forum held that the FDR could not be renewed on account of lapse on
the part of the complainant itself therefore, he is not entitled to get any interest till
25.11.1988. However, complainant is entitled for interest at the rate of savings interest
w.e.f.25.11.1988 till the filing of the complaint and thereafter of prevalent rate
regarding FDR 10 per cent p.a. Complainant, against the order of the District Forum,
filed appeal before the State Commission. The State Commission dismissed the
appeal. Therefore, complainant filed Revision Petition before the National
Commission.
Issue
Whether the complainant/consumer is entitled to get interest for the period
9.6.1959 to 25.11.1988 i.e. interest between date of maturity and date of application
for payment?
Held
The National Commission held that it is not in dispute that the money was
available with the Bank which he would have utilized for its purpose. After maturity,
at best it became a ‘deposit account’. Bank has enjoyed this money ever since its
maturity and complainant is thus, entitled to interest for the period that money
was with the Bank. The complainant is entitled to the interest at the prevailing
rates on a savings account from time to time worked on simple interest basis from
10.6.1959 till the date of payment.
Revision Petition allowed.
Case Laws on Banking 73
deficiency in service was connected with commercial activities which has been
excluded from the purview of the Act by amending the definition of ‘Consumer’
w.e.f. 15.3.2002. Ratio in ‘Cheema Engineering Services’ case supports the conclusion.
The complaint was rightly dismissed by the State Commission without calling upon
the respondent Bank to file their written version.
Appeal dismissed.
Case Laws on Banking 75
Petitioner Bank could not have been made to pay Rs.75000/- being the entire amount
of the cheque with interest by the District forum and the State Commission. But
the Petitioner Bank cannot escape liability for payment of reasonable compensation
to the complainant which was assessed by the National Commission to be Rs.15,000/
-.
Revision Petition allowed.
Case Laws on Banking 77
CCI C hamb
Chamb ers C
hambers o-o
Co-o p. H
o-op ousing SSo
Housing oci
cieet y Ltd. vs. De
Devve lopment
Credit Bank
III (2003) CP
(2003) CPJJ 9 (S C)
(SC)
Fac
actts
Complainant was maintaining a saving account with the respondent bank.
The respondent bank honoured 72 cheques amounting to Rs.75,70,352/- and debited
the same in the account of the complainant. Complainant filed complaint before
the National Commission alleging deficiency in service against the respondent Bank
in honouring 72 cheques amounting to Rs.75,70,352/- as all of them bore forged
signatures of the complainant and in some of the cheques the figures had been
altered. The National Commission held that numerous documents would be
required to be proved including about 150 cheques. Service of the expert will have to
be requisitioned for proof of the signatures and writings wherein the figures in
cheques have been altered. Under the Consumer Protection Act, 1986 this commission
is expected to decide the matter within a set frame of time. Relying on the decision
of Supreme Court is Bharthi Knitting Co. v. DHL Worldwide held that present case
involves an acute dispute of facts and therefore, the complaint is being returned to
the complainant for knocking the door of civil court. Against this order of the
National Commission, Complainant filed civil appeal before the Supreme Court.
Issue
Whether the approach of National Commission, shutting the case on the
ground that the question of fact and law arises which need to be investigated and
determined, is within its jurisdiction as conferred on it by Consumer Protection
Act?
Held
The Supreme Court held that it cannot be denied that Fora at the National
level, the State level and at the District level have been constituted under the Act
with the vowed object of providing summary and speedy remedy in conformity
with the principles of natural justice, taking care of such grievances as are amendable
to the jurisdiction of Fora established under the Act. The principal object sought to
be achieved by establishing such Fora is to relieve the conventional courts of their
burden which is ever increasing with the mounting arrears and whereas the disposal
is delayed because of the complicated and detailed procedure which at times is
78 Case Laws on Banking
Abdul R az
Raz ak & Anr
azak Anr.. vs. SSout
out
outhh In
Inddian B ank
Bank
III (2003) CP
(2003) CPJJ 20(NC)
20(NC)
Fac
actts
Some imposter requisitioned new cheque books for the accounts of the
complainants and obtained them from the respondent bank. This imposter
fraudulently withdrew the large amount from complainants account. Upon coming
to know of negligible balance on presentation of cheques by the complainants they
came to know of the fact of withdrawal(s) based on cheque books which they never
obtained nor did they sign the cheques withdrawing the amounts. Complainants
complained the matter to the respondent Bank and upon not getting any proper
response/relief they filed two separate complaints before the District forum. The
District forum allowed the complaints and directed the respondent Bank to pay
back fraudulently withdrawn amount with interest. Respondent Bank against the
order of the District forum filed appeal before the State Commission. The State
Commission allowed the appeal and set aside the order passed by the District forum
and dismissed the complaint. Aggrieved by the order of the State Commission
complainants filed Revision Petitions before the National Commission.
Issues
Whether there has been any deficiency on the part of the Bank in issuing
cheque books to imposters and honouring the cheque of large amounts without
verifying the signatures?
Held
The National Commission held the respondent Bank is liable for deficiency in
service for not verifying and comparing the signatures and encashing the cheques
of large amount twice. The National Commission rejected the contention of the
respondent Bank that they performed their duties in good faith when they issued
the cheque books and encashed the cheques. The National Commission held that
the State Commission did not go into the question that it is the duty of the Bank to
compare the signatures of the account holder before issuing of an instrument or
encashing the cheques. When the National Commission saw the signatures on the
Account opening form of both the complainants and compared them with the
signatures on the cheque requisition application and the cheques, then even without
aid from any handwriting expert it became clear that the respondent bank failed
not once but twice to correctly verify/compare the signatures on these instruments
80 Case Laws on Banking
and the specimen signatures with them on record. One at the time of issue of
cheque book and again at the time of encashing cheques. The National Commission
held it to be the case of double default on the part of respondent Bank. Bank’s
cashiers are professionals and trained to read the difference between the signatures.
Deficiency in service is writ large on the face of it by the respondent bank by not
comparing the signatures on the documents/instruments presented to them.
Revision Petition allowed and the orders passed by District forum are restored
and set aside the orders of the State Commission.
Case Laws on Banking 81
Popp
ppeeys Val
allley H
Hoote
tell PPvv t . Ltd. vs. C it
itii B
Cit ank
Bank
III (200 3) CP
(2003) CPJJ 133(NC)
133(NC)
Fac
actts
Complainant, a private limited company owning a hotel in Tirupur and became
a member of the respondent establishment Citibank card centre and was given
code No.44151960. In the usual course of business, complainant forwarded the charge
slip signed by one Mr. Sayed Doha, Visa Card No.4121741329556679 for Rs.39,690/- on
December 2, 1995 to Respondent Bank. The respondent Bank instead of giving credit
in the account of the complainant returned the charge slip on the ground that the
said card is in the warning bulletin which was issued on 29.11.1995 to all the
merchants and that the card holder’s account was closed as the customer was a
defaulter. The complainant intimated the respondent Bank that they were not
justified in returning the charge slip because the said warning bulletin dated
29.11.1995 was received only after 10-15 days from the date of issue, i.e. 10 to 15 days
after the charge slip of defaulter customer was collected by him. Complainant
issued legal notice dated 8.4.1996 calling upon respondent bank to pay a sum of
Rs.39,990/- with interest but of no avail. Thereafter, complainant filed complaint
before the District forum alleging deficiency in service on the part of respondent
bank. The District forum dismissed the complaint without giving notice to the
opposite party holding that the complainant cannot be construed as a consumer
and does not fall within the purview of the Consumer Protection Act, 1986. On
appeal the State Commission also expressed the similar view and dismissed appeal
after giving notice to the Respondent Bank. Against this dismissal order passed by
the State Commission complainant filed Revision Petition before the National
Commission.
Issue
Whether complainant can be construed as a consumer falling within the
purview of the Consumer Protection Act, 1986?
Whether there has been any deficiency in service on the part of Bank in not
giving credit to the complainant for the charge slip of a defaulter customer?
Held
The National Commission on the point that whether complainant is a
consumer held that since the relationship between the bank and the complainant
82 Case Laws on Banking
entail rendition of service and reimbursing the members establishment and the
bill, the bank is directing the charges which constitute the consideration of such
services and therefore, it cannot be said that the Member establishment is not a
consumer.
Further, the National Commission, on merits of the case, held that there has
not been any deficiency on the part of respondent bank as the complainant/Member
Establishment exceeded their limit without prior authorization by the bank.
Complainant was not very careful in accepting without obtaining prior
authorization of respondent bank when the amount exceeded lower limit. The
bank has a right to refuse the payment or grant or refuse authorization which
shall be binding and final on the merchant establishment and cannot be faulted
for their conduct. No case of deficiency in service is made out against the respondent
Bank.
Revision Petition dismissed, complaint dismissed.
Case Laws on Banking 83
Ar
Arcchana M
M.. K am
Kam
amaath vs. CanaraB
Canara ank & Anr
Bank Anr..
II (200 3) CP
(2003) CPJJ 7(NC)
7(NC)
Fac
actts
Complainant was having a current account with respondent Bank.
Respondent Bank charged Rs.50/- for issuance of 50 leaves of MICR cheques which
were not being charged from the complainant previously but this time charged
unilaterally without any information and consent of the complainant. Aggrieved
with this unilateral action of the respondent Bank complainant filed complaint
against respondent Bank on the ground that this amount had not been charged
earlier for issuance of cheque book and same has been introduced unilaterally
without any prior information and consent. The District Forum allowed the
complaint holding that Bank was not justified in recovering the charges for supply
of leaf of cheque as it could not be done unilaterally without the consent of the
customer. Further District Forum held that Respondent Bank also did not provide
any data indicating cost it incur in obtaining such cheque books. Respondent Bank
against the order of the District Forum approached the State Commission. The
State Commission upheld the order of the District Forum observing that there was
a direction of the Reserve Bank of India to the Banks providing that the Banks
would not be charging for clearing of the cheques. Being aggrieved by the order of
the State Commission, Respondent Bank approached the National Commission.
The National Commission held that the charges which the Bank chose to levy, for
providing their services by supply of MICR cheques, fell in the realm of pricing and it
is on account of consideration for providing banking services. Hence, it was not
within the jurisdiction of the forums to go into that question relating to pricing to
such services. Thereby the National Commission allowed the Revision Petition filed
by Respondent Bank. Against the order of the National Commission complainant
filed present civil appeal before the Supreme Court.
Issue
Whether the National Commission was right in holding that the amount
charged by the Bank relates to pricing of services rendered by the Bank?
Held
The Supreme Court rejecting the submissions of complainant that the charge
has been unilateral, without consent and against the directives of the Reserve Bank
of India held that introduction of MICR facilitates the clearance of the cheques and
84 Case Laws on Banking
avoids unduly long time consuming process in cheque clearance. Such small charges
necessitated due to general modernization of its functioning and services, the
question of it being unilateral, does not arise nor the question of consent of each
customer. Further Banks charging any amount for issuing MICR cheques to their
customers or for the better services rendered for clearance of cheques by introducing
any modern and new methods, are not against the directives of the RBI. The Supreme
Court held that the order passed by the National Commission setting aside the
orders passed by the District Forum and the State Commission calls for no
interference.
Appeal dismissed.
Case Laws on Banking 85
K. R am
Ram
amaa Iyer & Ors
Iyer Ors.. vs. In
Inddian O
Ovvers
erseeas B ank
Bank
II (2003) CP
(2003) CPJJ 114
43(NC)
3(NC)
Fac
actts
Complainants for the improvement of their hotel business approached and
availed a term loan of Rs.10 lacs in the month of March 1986 from the Bank of Tamil
Nadu, which later on merged with the respondent Bank, Indian Overseas Bank.
Again in August 1986 they further availed a loan of Rs.2,75,000/-. Complainants were
going to repay the loan amount. On ‘daily payment system’. For further improvement
of their business complainants again approached the Bank of Tamil Nadu for the
sanctioning of Rs.15 lacs under the IDBI Scheme which was sanctioned by the Bank
but before the disbursement of the loan, the Govt. of India imposed moratorium in
August 1989 and formulated the Scheme for the merger of the bank of Tamil Nadu
with the Indian Overseas Bank. After the moratorium lifted by Government of
India complainant contacted the Respondent Bank for the release of the sanctioned
loan amount of Rs.15 lacs. The complainants were asked to submit a fresh
application as a matter of formality which complainant did on 16.3.1990 but the
Respondent Bank even then did not release the loan amount which was already
sanctioned. Respondent Bank, in the meantime, called on the complainants on
23.3.1992 to repay the earlier sanctioned loan amount on the representation of the
complainants the respondent Bank granted a concession to write off Rs.52,381/-
and called upon the complainant to pay the balance amount of Rs.56,360/- with
interest. Complainant protested against the recovery of interest as claimed by the
Respondent Bank being over and above the guidelines issued by the Reserve Bank of
India as they have already paid Rs.6,68,904/- in full and final settlement.
Complainants filed complaint before the State Commission against the respondent
Bank alleging deficiency in service in failure to close the loan account and returning
the documents. Respondent Bank contested the complaint before the State
Commission on the ground that complaint is not maintainable matter being sub-
judice before civil court and that after the amalgamation of the erstwhile Bank of
Tamil Nadu with the Indian Overseas Bank the amount in this non-operative account
was credited towards the loan account and hence, there was no deficiency on the
part of the Bank. The State Commission rejecting the contentions of the Respondent
Bank held that in view of the provisions of section 3 of Consumer Protection Act,
matter being sub-judice in civil court, is no bar to remedy and hence complaint is
maintainable. Further, it held that after taking over all the assets and lialilites of
Bank of Tamil Nadu by the respondent Bank they cannot turn around and say that
Case Laws on Banking 87
they are not bound by the order of Bank of Tamil Nadu and are not liable to disburse
the loan amount and therefore, there has been gross deficiency in service on the
part of the respondent Bank in not releasing the sanctioned loan amount (sanctioned
by Bank of Tamil Nadu) and allowed the complaint partly. Against this order both
parties filed appeal before the National Commission.
Issues
Whether the Bank is liable for deficiency in service in not releasing already
sanctioned loan amount which was sanctioned by Bank of Tamil Nadu before its
merger with Respondent Bank?
Held
The National Commission during the course of argument specifically asked
the complainant to show any document sanctioning the loan amount of Rs.15 lacs
by the Bank of Tamil Nadu which he failed to do so. Neither the loan document nor
any correspondence emanating from the said Bank of Tamil Nadu have been
produced on record. In absence of any document or examination of the said loan/
additional loan, it cannot be accepted that any loan/additional loan had been
sanctioned. Oral information by the chairman of the Bank of Tamil Nadu is nothing
more than a hear say and cannot be accepted as evidence.
Complaint dismissed.
88 Case Laws on Banking
Principal, Guru Nanak Girls College vs. Punjab & Sind Bank
I (2003) CP
(2003) CPJJ 1177 1(NC)
1(NC)
Fac
actts
Complainant was the Principal of Guru Nanak Girls College, Ludhiana which
was being run by a trust and under different resolutions of the Trust there were
seven separate accounts opened in the Respondent Bank which were operated only
by the Principal. Respondent Bank stopped the operation of all the accounts on a
complaint received from some rival body of the Trust managing the college. This
caused great loss to the principal and therefore she filed complaint before the State
Commission and sought compensation. The State Commission dismissed the
complaint. Against dismissal order complainant filed appeal before the National
Commission.
Issues
Whether Bank is deficient in service for stopping the operation of accounts
opened in the name of the principal by just receiving a communication from rival
group?
Held
The National Commission while agreeing the reasoning of the State
Commission that the Bank acted on the advice of one group of the trustees held
that prima facie, Bank was wrong in stopping the operation of the accounts operated
by the principal. It was certainly a mistake on the part of the Bank and must have
caused a great deal of anguish and harassment to the principal but then Bank was
under a bona fide belief that it could stop the operation of the Bank accounts but
then every mistake cannot be necessary stated to be deficiency in service.
Appeal dismissed.
Case Laws on Banking 89
DOSONC
SON hemi
hemiccal PPvv t . Ltd. vs. U
Chemi nite
Unite dB
nited ank of In
Bank dia & Ors
Ind Ors..
I (2003) CP
(2003) CPJJ 214(N
214(N C)
4(NC)
Fac
actts
Complainants were having a cash credit facility to the tune of Rs.10 lacs from
the respondent Bank. Title documents relating to immovable property were
deposited with respondent Bank by way of security. In the course of time,
complainants approached the respondent Bank for release of the title deeds of the
immovable property and offered other securities in lieu of immovable property as
the Federal Bank offered to provide loan over Rs.20 lacs for completing the building
on that immovable property. Since the complainants were in urgent need to get
the loan from the Federal Bank, once again requested the Respondent Bank to close
its account and for this gave a cheque on 22.9.1998 for Rs.9,63,895/- towards the
balance in the account and also offered to make payment of balance amount of
interest in cash and requested the bank to return all the documents of title within
30 days but the bank did not return the title deeds etc. relating to immovable property
even after several reminders and therefore, complainant filed complaint before the
State Commission against the respondent bank for not handing over the documents
of title. After filing of the complaint Petitioner bank returned the documents of
title in March 1999 Bank did not file written version despite two adjournments and
the State Commission dismissed the complaint treating it as infructuous and
holding the bank to be liable for deficiency in service and did not grant any
compensation observing that since complainant had not suffered any loss on
account of delay in returning the document he is not entitled. Against this dismissal
order complainant filed appeal before the National Commission.
Issue
Whether the State Commission was proper in exercising its jurisdiction vested
by law when it held that Bank was deficient in service but did not grant any
compensation to the complainant?
Held
The National Commission held that the State Commission failed to exercise
jurisdiction vested in it by law. It further held that once having held that there was
deficiency in service on the part of respondent Bank, complainant should have been
compensated even though complainants did not suffer any loss. There being no
written version from the Bank it could not be assumed that the complainant did
90 Case Laws on Banking
not suffer any loss. The State Commission should have examined the matter in
more pragmatic manner after holding Bank to be deficient in service than rush to
dismiss the complaint. Complainants were trying hard the get their documents of
title back for availing loan from the Federal bank to Complete their building complex.
They even refunded whole of the amount to the Bank standing in their cash credit
account. Delay in construction escalated the cost.
On the face, there was gross deficiency in service on the part of the Bank after
having received the whole amount from the complainants there was no reason for
the Bank to hold on to the title deeds for such a long period. Bank failed in its duty
to return the documents within reasonable time.
Order of State Commission, set aside, complaint allowed
allowed. Compensation of Rs.
50,000/- alongwith 12 per cent from the order of State Commission granted.
Case Laws on Banking 91
Memo
MemonnC o-o
Co-o
o-opp. B ank Ltd. vs. An
Bank Anwwar D
D.. Ahme
Ahmedd ab adii
abad
ad
I (2003) CP
(2003) CPJJ 2285(N
85(NC)
85(NC)
Fac
actts
Consumer/Complainant was having a saving account with appellant No.2.
Complainant issued a cheque dated 28.3.1994 in favour of appellant No.2 for Rs.3 lacs
to be invested in a fixed deposit. Appellant No.2 received a notice from CBI on 29.3.1994
under section 102 Cr.P.C. requiring it to stop operation of accounts/lockers, etc. as
detailed therein standing in the names of Mohd. Dawood Ahmedabadi and his
relatives. Acting on said notice appellant No.2 returned the cheque dated 28.3.1994
to the complainant alongwith a covering letter dated 29.3.94 referring to said notice
from CBI as complainant was the brother of Mohd. Dawood Ahmedabadi.
Subsequently, on instructions from CBI, appellant No.2 sent a letter dated 22.7.1995
to the complainant informing him that he may operate his saving account.
Complainant sent a legal notice to the appellant No.2 to which appellant No.2 replied
back on 22.7.1997. Thereafter, complainant filed complaint against appellant No.2
and its head office alleging deficiency in service in not making fixed deposit before
the State Commission. The State Commission directed appellant No.2, Bank to pay
interest @12 per cent p.a. on the amount of Rs. three lacs from 1.4.94 to 14.5.1996.
Against this order appellant No.1 & 2, Banks filed appeal before the National
Commission. Another complaint was filed by Smt. Sufia M. Ahmedabadi on identical
allegations. She was intimated regarding operation of her account on receipt of
communication from CBI vide letter dated 15.5.1996. Whereas complaint was filed
on 13.10.1997. The State Commission in this matter also granted the same relief.
Appellant No.2 Bank filed appeal against this order also.
Issue
Whether Bank is deficient in not making the fixed deposit despite having
received the cheque for the same?
Whether complaint is barred by limitation?
Held
Before the National Commission appellants made twofold submissions i.e.
complaints barred by limitation and secondly that there is no deficiency in service
in view of notice u/s102, Cr.P.C. dated 29.3.1994 Sent By CBI. The National Commission
on the point of limitation held that cause of action to file complaints against the
92 Case Laws on Banking
appellants had accrued to the respondents on 29.3.1994 when appellant no.2. Bank
did not convert the amount of 2 cheques for Rs.3 lacs each in view of notice u/s 102,
Cr.P.C. received from CBI on 29.3.1994. Taking that date as starting point of limitation,
the complaints filed beyond the period of two years on 25.9.1997 and 13.10.1997 and
were barred by time. Even if date of 22.7.1995, the date of intimation regarding
permission to operate saving account, is taken for computation of limitation then
also the complaint filed by complainant Anwar D. Ahmedabadi was time barred
and in case of Smt. Sufia M. Ahmedabadi since the intimation was sent on 15.5.1996
same is within limitation. But date of 15.5.1996 cannot be taken as starting point
for limitation in both complaints. In complaint filed by Anwara Ahmedabadi
15.5.1996 could not have been taken for computation of limitation for filing
complaint as the cause of action had accrued on 29.3.1994.
Further, on the point of deficiency in service, the National Commission held
that Bank stamps appearing on both the cheques in question as also covering letters
conclusively point out that the cheques were delivered to appellant no.2 Bank on
29.3.1994 instead of 28.3.1994.
Further, National Commission held that in view of aforesaid notice under
section 102, Cr.P.C. dated 29.3.1994, the appellant No.2 was well within its rights not to
convert the amounts of 2 cheques into fixed deposits and return them to
respondents. Appellant Bank followed the decision of Supereme Court in State Bank
of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685 wherein it was held by Supreme
Court that bank account of an accused or any of his relative is ‘property’ within the
meaning of section 102, Cr.P.C. and a police officer in the course of investigation can
seize or prohibit the operation of the bank account if such assets have direct links
with the commission of offence which the police officer is investigating into.
Appeals accepted; order passed by State Commission set aside.
Case Laws on Banking 93
CanaraB
Canara ank vs. N
Bank ar
areesh K
Nar um
Kum ar Jain & Anr
umar Anr..
III (2002) CP
(2002) CPJJ 13(NC)
13(NC)
Fac
actts
Complainant obtained cash credit limit of Rs.30,000/- against goods stored in
the shop and godown. Petitioner Bank took insurance policy in respect of shop of
the complainant at the cost of complainant. Complainant also took insurance policy
for his shop and godown but same was surrendered on 6.7.1994. Loss on account of
heavy rain was reported on 7.7.1994. Complainant filed claim with insurance
company which was rejected by the insurance company because the loss occurred
was not covered by insurance policy. Complainant filed complaint before the District
Forum alleging Deficiency in service on the part of Bank & Insurance Company. The
District Forum exonerated the insurance company and held Bank liable for
deficiency in service for not taking policy for goods in the godowns. Petitioner Bank
against the order of the District Forum filed Appeal which was dismissed by the
State Commission. Petitioner Bank filed Revision Petition before the National
Commission taking plea that it is the primary duty of the complainant to take
insurance policy for the hypothecated goods.
Issues
Whether the Bank is liable for deficiency in service for not taking insurance
policy in respect of hypothecated goods lying in godown?
Held
The National Commission considering the plea of the Petitioner Bank held
that the Petitioner Bank was under no obligation to take an insurance policy after
recall of loan by the petitioner and after having filed a suit against the complainant/
respondent. Onus lays clearly on the respondent to have a valid policy cover all the
time which he did obtain and surrendered only to claim loss the next day. It is the
duty of the complainant to ensure that his goods are covered by insurance policy all
the time and it is complainant who failed to do so, therefore Petitioner Bank cannot
be held liable for lapses on his part.
Revision Petition allowed, order of the State Commission and the District Forum
set aside.
94 Case Laws on Banking
have exhausted its remedies against the principal debtor before invoking Bank
gurantee is without any merit. The liability of the surety/guarantor arise
immediately on the contingency mentioned in the Bank gurantee occurring i.e. the
dishonour of bills of exchange. The failure of appellant Bank in not honouring the
letter of gurantee issued by its branch manager amounted to grave deficiency in
service.
Appeal dismissed and the order of the State Commission affirmed.
96 Case Laws on Banking
M.P
.P.. M iner
Miner als Ltd. vs. B
inerals ank of In
Bank Inddia & Ors
Ors..
III (2002) CP
(2002) CPJJ 225(N
5(NC)
5(NC)
Fac
actts
Present complaint is against the respondent bank alleging deficiency in service on
their part in not paying the amount of the Bank gurantee on demand being obligation
on the part of Bank requiring it to pay under the Bank guarantee. The respondent bank
executed a bank gurantee on behalf of its customer, M/s Searsole Chemical Ltd. in favour
of the complainant. In the bank gurantee dated 6.7.1993 the respondent bank undertook
to pay to the complainant an amount not exceeding Rs.20 lacs by reason of any breach
made by the said customer M/s Searsole Chemical Ltd. of any of the condition contained
in the agreement dated 7.6.1993 being executed between the complainant and M/s
Searsole Chemical Ltd.. The said bank gurantee was extended by the respondent bank
vide its letter dated 5th September 1999 for one year i.e. from 20.5.1994 to 19th May 1995.
The complainant called upon the respondent bank invoking the gurantee dated 6.7.1993.
When the respondent bank did not pay the said bank gurantee complainant filed the
present complaint before the National Commission.
Issues
Whether Bank is liable for deficiency in service for not paying the amount of
bank gurantee on demand especially, when the demand was not made in accordance
with the terms of the gurantee?
Held
The National Commission while accepting the plea of the respondent bank that
the demand in the manner it has been made is not in accordance with the terms of
the gurantee and as such it is not obliged to pay, held that it is a condition of the Bank
gurantee that demand certifying that breach of terms of agreement has occurred
supported by proof of supply of material and acceptance of the same by the company
and non-payment, therefore, no payment could be made. Complainant did not sent
requisite documents proving the delivery of the consignments in respect whereof the
money is being claimed. There are certain conditions that are provided in the gurantee
itself which have to be fulfilled before the Bank can make payment under the gurantee
and the complainant failed to fulfill those conditions. As the documents which were
required to accompany the demand were not sent. Therefore, the Bank was within
its right not to honour such demand under the gurantee.
Complaint dismissed.
Case Laws on Banking 97
Ar
Aryyan Agro SSpi
pi
picce (P) Ltd. vs. SSar
ara s wa t C
ara o-o
Co-o
o-opp. B ank
ank.. Ltd. & Anr
Bank Anr..
III (200 2) CP
(2002) CPJJ 41(NC)
41(NC)
Fac
actts
Complainant exported fruits, chilly, pickles and other items to Dubai and
instructed Respondent Bank to realize the export proceeds. Respondent Bank failed
to realize export proceeds and thus the complainant filed complaint before the
National Commission.
Issue
Whether the National Commission under its summary jurisdiction can
entertain a complaint wherein complicated questions/issues of facts and law is
involved?
Held
The National Commission considering the submission of the Bank that though
packing credit limit was sanctioned to the complainant it was not utilized by the
complainant for exporting goods to Dubai complainant exported goods to M/s Das
Foodstuffs Trading, Dubai though it took packing limit for M/s Mipco Ltd. And used
the letter of credit for exporting goods to M/s Das Foodstuff without any intimation
to the respondent Bank and ultimately held that the complaint cannot be decided
in the summary jurisdiction of a Consumer Forum. Such type of cases should not be
dealt with by the forum under the CP Act, in a summary fashion.
Complaint dismissed.
98 Case Laws on Banking
the customer’s key was always with the complainant, then how could a duplicate
key be made which is one of its kind and specific to that lock. It will be further
difficult to believe that duplicate key holders connived with Bank to open the locker
and left the locker open.
Further, there is no question of any probe especially when police went into the
matter and found nothing wrong and filed FIR. Enteries in a locker register are not
disputed. In such circumstances, complainant failed to prove his case that locker
was already open when he went to operate it on 5.01.1990 and the State Commission’s
deduction is not based on any evidence or proof.
Appeal of Petitioner Bank allowed and Appeal of Complainant dismissed.
104 Case Laws on Banking
Unite
niteddC
Coommer cial B
mmercial ank vs. SSmt
Bank mt
mt.. Anit
Anitaa Airan
Airan
III (2002) CP
(2002) CPJJ 37 1(N
371(N C)
1(NC)
Fac
actts
Present case is about deficiency in service rendered by Bank and the Insurance
Company. The complaint is filed by the wife of the deceased insured. Deceased took
Janta Personal Accident Insurance Policy from the National Insurance Company for
Rs.50 lacs. Deceased gave a cheque of Rs.1800/- bearing No. 0882491 dated 25.3.1996
drawn on Bank of Baroda towards Premium at the time of Proposal. The Insurance
company issued the insurance policy on the following day. Insurance Company sent
the cheque to its Banker, UCO Bank for collection on 26.3.1996, which was sent by UCO
Bank vide its letter dated 4.4.1996 to the Bank of Rajasthan which was acting as a
clearing house and received the cheque only on 9.4.1996. Bank of Rajasthan sent the
cheque to the Bank of Baroda on same day which was returned by the bank despite
having money in his account on the ground that the account holder had since expired.
Since, the deceased insured died on 2.4.1996 in a car accident. His wife made a claim
before Insurance Company which was repudiated on the ground that the premium
on the policy of her deceased husband remained unpaid and thus there was no policy.
Wife of the deceased offered to pay the amount of premium in cash but it was declined.
Therefore, wife of deceased filed complaint before the District forum alleging
deficiency in service against the Insurance company and the UCO Bank. The District
forum allowed the complaint and held both insurance company and the UCO Bank
deficient in service and also liable to make payment of Insurance claim. Both Insurance
company and the UCO Bank filed separate appeals before the State Commission. The
State Commission dismissed, both the appeals with cost. Being aggrieved by dismissal
order passed by the State Commission both Insurance company and the UCO Bank
filed Revision Petitions before the National Commission. The National Commission
while considering whether Insurance company or the Bank is liable for deficiency in
service by interim order directed the Insurance company to pay 50 per cent of the
insurance amount. Insurance company against this interim order filed a special
leave Petition before the Supreme Court. The Supreme Court though stayed the interim
order of the National Commission, however, subsequently, directed both the Insurance
company and the bank to pay Rs.1.00 lac each to the wife of the deceased insured, but
did not deal with the controversy involved in the matter and dispose of the Petition
with a direction that the deposits so made would abide by the order of the commission.
Issues
Whether Insurance Company or the Bank is liable for the deficiency in service?
108 Case Laws on Banking
Held
Insurance company took a plea before the National Commission that Section
60VB of the Insurance Act provides that no risk be assumed unless premium is
received in advance whereas Bank took stand that it could not be accused of any
deficiency in service as at best it was the agent of the Insurance company. Neither
the insured nor his widow was consumer of the Bank. National Commission while
rejecting the pleas of both Insurance company and the bank held that the bank is
extremely negligent and could be accused of extreme deficiency in service in relation
to the Insurance company. The Bank sent the cheque for collection on 4.4.1996 but
appeared to have sent later than this date as it was received by the Bank of Rajasthan
on 9.4.1996. If the Bank had been prompt in sending the cheque for collecting
payment could have received prior to 4.4.1996 when the deceased insured met with
his unfortunate death in car accident on 2.4.1996 Bank was certainly deficient in
service in not sending the cheque for collection in reasonable time as has been so
rightly held by the Forums below.
Further, it is usual for the Insurance company to accept the amount of premium
by cheque. Payment by cheque is as good as payment in cash provided it is honoured.
Payment by cheque in fact relates back to the date of cheque or to the time when it
was given and it is not material when cheque was encashed. If the cheque had been
presented for payment in time, it could have been encashed. The cheque was received
on 25.3.1996 and sent for collection on 9.4.1996. It may be on account of the fault of
the UCO Bank and that Bank acted as an agent of the Insurance company and
deficiency in service by the agent, as far as complainant is concerned, is attributable
to the Insurance company itself. For the complainant it is the Insurance company
which sent the cheque for collection when it was presented on 9.4.1996 after receiving
the same on 25.3.1996. No explanation could be acceptable as to why the cheque
could not be presented immediately for collection at least within a reasonable period.
In these circumstances of the case, provisions of sec.64VB are not of any help to the
Insurance company. It is the Insurance company which has been deficient in service
and has to bear consequences. Both the District forum and the State Commission
have correctly arrived at the conclusion that there has been deficiency in service on
the part of the Insurance company but at the same time holding deficiency in
service on the part of UCO Bank as well. However, UCO Bank as an agent of the
Insurance Company cannot be held liable so far complainant is concerned.
Revision Petition filed by UCO Bank allowed, Revision Petition filed by Insurance
Company dismissed with cost.
Case Laws on Banking 109
Topline SSho
ho
hoee s Ltd. vs. C
Coo r p o ra t i o n B ank
Bank
II (2002) CP
(2002) CPJJ 7 (S C)
(SC)
Fac
actts
The controversy involved in the present case is whether or not the State
Commission could grant time to the respondent to file reply, beyond a total period
of 45 days in view of sec.13(2)(a) of the Consumer Protection Act. The complainant
filed complaint before the State Commission, Gujarat claiming compensation
against the respondent Bank as the respondent Bank failed to advance loan timely
despite furnishing of security for the same. Though the Respondent Bank received
the notice on 22.2.2000 for the date of hearing as 4.4.2000 failed to file reply on date
of hearing and sought adjournment on date fixed i.e. on 4.4.2000 and also sought
time to file reply. The State Commission, Gujarat granted time to the respondent
Bank for filing reply and adjourned the matter for 4.5.2000. The complainant on
24.7.2000 filed an application before the State Commission contending that the
reply filed by the respondent Bank should not be taken on record as the same has
been filed after the expiry of 30 days initially admissible for filing reply and also
beyond a further period of 15 days as could be extended for the purpose and thus
prayed that the reply of the respondent Bank may not be taken on record and
rejoinder filed by the appellant may be returned to it. The State Commission, Gujarat
dismissed the application of the complainant and also imposed a cost of Rs.500/-
upon the respondent Bank for late filing of the reply. The complainants preferred
Revision before the National Commission which was also dismissed on the ground
that no ground was made out to interfere in exercise of its Revisional Jurisdiction.
The complainants filed civil appeal before the Supreme Court.
Issue
Whether the State Commission, could grant time to the respondent to file his
reply, beyond a total period of 45 days, in view of section 13(2) of the Consumer
Protection Act, 1986.
Held
The Supreme Court held that the provisions as contained under clause (a) of
sub-sec (2) of section 13 is procedural in nature. It is also clear that with a view to
achieve the object of the enactment, that there may be speedy disposal of such
cases, that it has been provided that reply is to be filed within 30 days and the
extension of time may not exceed 15 days. No penal consequences have, however,
110 Case Laws on Banking
been provided in case extension of time exceeds 15 days. Therefore, it could not be
said that any substantive right accrued in favour of the appellant or there was any
kind of bar of limitation in filing of reply within extended time though beyond 45
days in all. The reply is not necessarily to be rejected. All facts and circumstances of
the case must be taken into account. The statement of objects and reasons of the
Act also provide that principles of natural justice have also to be kept in mind.
Further, the provision says that the extended time may not exceed 15 days is
directory in nature. It does not mean that orders extending the time to file reply
may be passed repeatedly unmindful of and totally ignoring the provision that the
extension may not exceed 15 days.
So far, the facts of the present case are concerned we find that at the first
instance the commission itself had fixed the date beyond 30 days and the respondent
Bank sought further time which prayer was accepted and 4.5.2000 was fixed. The
respondent Bank filed his reply on the date fixed. In such circumstances there was
no occasion to contend that the reply of the respondent should be rejected.
Appeal dismissed.
Case Laws on Banking 111
CanaraB
Canara ank vs. C
Bank .D
.D.. PPa
C.D ate
tell
II (2001) CP
CPJJ 1199 (NC)
(NC)
Fac
actts
Complainant who was a Non-Resident Indian deposited 15000 pounds as
security for the loan of Rs. two lacs for the period of two years. This amount was to
be kept in a FCNR Fixed Deposit Account for the same period. On the strength of
security of two lacs Bank provided overdraft facility to the company M/s Suncrush
Fruits Pvt. Ltd. While availing overdraft facility no relation of complainant and
M/s Suncrush Fruits Pvt. Ltd. was disclosed. On the maturity of the Fixed Deposit
Complainant further get it renewed alongwith the accrued interest. The Fixed
Deposit was allowed to continue beyond two years without the knowledge and
consent of the complainant. The complainant demanded the return of the entire
amount with accrued interest standing to his credit in the FCNR fixed deposit
account which was seized by the appellant Bank against the Loan/overdraft facility
availed by the company M/s Suncrush Fruits Pvt. Ltd.. Complainant filed complaint
against the Petitioner Bank alleging deficiency in service.
Issue
Whether a substantial shareholder is liable for the debts of the company?
Whether a Bank can exercise its power of general lien?
Held
The National Commission held that it is trite law that a shareholder is not
liable for the debts of the company. The company is clothed with a juristic
personality, which is quite different and separate from its shareholders. The
shareholders cannot be made liable for the debts of the company.
There are however situations where for the sake equity, corporate veil is pierced,
particularly, once winding up proceedings start, the company’s corporate veil can
be lifted to find out the reality. In the instant case, we are not aware of the status of
the company except that it is financial straits. Its assets have been seized by financial
institution. Patel who had opened a fixed deposit account and given its security for
two years but had allowed it to continue for nearly eight years for the benefit of the
company and has now come up with a complaint that the fixed deposit which was
due to mature on 28.10.1994 should not be extended any further and must be
returned with accrued interest.
112 Case Laws on Banking
The particulars of the nature and the degree of involvement of Patel in the
affairs of the company have not been disclosed and we shall not presume any
equitable consideration in favour of the complainant while deciding the case strictly
in accordance with law.
Further, we are of the view, having regard to facts and circumstances of this
case that a general lien in favour of the Bank was created. The security was available
against “the said overdraft/loan guarantee limit or other liability from time-to-
time…” There is another clause in the deed of pledge by which Patel made the
security available for all credit facilities given to the company.
“which & renewals whereof please hold as a continuing security for all loans,
advances, overdrafts and Bank guarantees issued/to be issued and all other credit
facilities of whatsoever kind made/to be made to the borrower on whatsoever
account from time to time.”
The Bank is entitled to adjust the disputed fixed deposit account against dues
from the various loans/oversrafts taken by M/s Suncrush Fruits Pvt. Ltd.
Appeal allowed, complaint alongwith cross appeal of the complainant
dismissed.
Case Laws on Banking 113
D.K
.K.. LLalw
alwani vs. T he PPrre si
alwani siddent
ent,,
Indian Bank Mutual Fund & Another
II (2002) CP
(2002) CPJJ 20 (NC)
(NC)
Fac
actts
Present case is against the Bank for its deficiency in not splitting the units for
sale in marketable lots timely. Complainant bought certain IND Ratna units (Shares)
in their joint names and were in the custody of the respondent Bank as the same
were pledged against the loan advanced to the complainants. Complainants filed
complaint before the District Forum as the Respondent Bank failed to split the
units timely for sale in marketable lots. The District forum dismissed the complaint.
The State Commission also dismissed the appeal of complainants. Against the
dismissal order complainants filed the Revision Petition before the National
Commission.
Issue
Whether there is any ground to interfere in the matter under revisional power
of this Commission when the subject matter did not fall within the provisions of
Consumer Protection Act?
Held
The National Commission in present case held that while the units were in the
custody of the Bank as the same were pledged against the loan advanced to the
complainants, no attempt was made by the complainants to repay the amount.
Assuming that there was delay in not splitting units in time for sale in marketable
lots, complainants were not entitled to the return of the units as these were pledged
as securities with the Respondent Bank and the Bank was not bound to return the
same to the Complainants. It is rightly held by the State Commission that there
was relationship of creditor and debtor between the complainant and the
respondent bank.
Revision Petition dismissed.
114 Case Laws on Banking
Mihir K um
Kum ar M
umar uk
Muk her
herjj e e vs. Br
ukher an
ancch Manag
Bran er
er,,
Manager
United Bank of India
II (2002) CP
(2002) CPJJ 338
8 (NC)
(NC)
Fac
actts
The Present case is complaint against the Respondent Bank alleging deficiency
in service which hiked the price of locker rent and were being deducted from the
saving account of the complainant without his information/consent. Complainant
rented a locker as a licensee from the Respondent Bank, New Alipore Branch, Calcutta
in the year 1995. It was agreed that the complainant would pay the rent of the
locker annually. Respondent Bank increased the rent of the locker gradually and
periodically and was communicated to all the branches vide their circular dated
30.4.1999. The Respondent Bank deducted hiked locker rent annually from the saving
account of the complainant. The complainant protested against the price hike
and asked for refund of excess amount and filed a complaint before the District
forum Bank alleging deficiencies in service. The District forum partly allowed the
complaint directing Respondent Bank to issue the receipt for the locker rental
amount of Rs.450/- deducted from the saving account of the complainant.
Complainant filed appeal before the State Commission, west Bengal against the
order of the District forum. The State Commission dismissed the appeal.
Complainant filed Revision Petition before the National Commission.
Issue
Whether the Respondent Bank is deficient in service and is liable for unfair
Trade Practices for not explaining cause of increase in locker rent without increasing
any of its services?
Held
The National Commission held that Bank has not entered into any such
agreement with hirer of lockers that they can enjoy the locker indefinitely without
any increase in rent. Admittedly, the Petitioner accepted earlier rent hike in the
years 1985, 1993 and 1996 without any protest. The Petitioner is at liberty to continue
the locker facility or to withdraw the same when there was an increase in the
locker rent on 7.1.1995. Under the Rule 18 attached to the memorandum “It is hereby
agreed that the relation of the hirer (s) and the Bank in this connection is that of
licensor or Licensee and not that of Banker and customer and/or of Bailor and
Case Laws on Banking 115
Bailee” clearly indicates it is on hire basis the locker was granted to the Petitioner.
We do not see any deficiency in service or unfair Trade Practice in the conduct
of the Respondent in increasing rent as it is necessitated due to increase in cost of
maintenance, salary of the staff and other incidental expenses like rent of the
accommodation etc and it is not increased only for the Petitioner but to one and all.
Further more, the petitioner also authorized vide letter dated 15.101998 to the
Bank to deduct Rs.300/- from his saving account No.1244 on 20th day of November of
every year as locker rent so long he occupy the locker till further notice from the
petitioner. This letter by petitioner enables the Bank to adjust and do not attribute
any negligence by the Bank.
Revision Petition dismissed, affirming the order of the State Commission.
116 Case Laws on Banking
Issue
Whether the order passed by the State Commission condoning the delay is
sustainable, if not, whether the Bank is deficient in not honouring the original FDRs
presented for enchashment?
Held
The National Commission set aside the order passed by the State Commission
and held that when no grievance was made by the respondent for a period of over
six years of such payment and in 1993 when the FDRs were presented for encashment
there was no question of those being encashed because the Bank had already paid
the proceeds of the FDRs to the Reserve Bank of India in compliance with the orders
of the Income Tax Authorities and in law such a payment afforded the Bank a valid
discharge. No grievance of such payment is made by the original depositor, nor was
any grievance made by the respondent in whose favour the endorsement at the
back of the FDRs existed for more than six years and now the complaint before the
District forum was filed after a lapse of over seven years. With the lapse of such time
both the fora below should have considered the question of condonation of delay
more seriously.
Further, the National Commission held that even if the complaint had been
entertained or appeal had been entertained the question which fells for
determination is whether there was any deficiency in not honouring the original
FDRs which were presented for encashment in October, 1993. The answer to this
cannot be but in the negative, because, there was no money lying with the Bank
which was covered by the said FDRs as the Bank had already paid it into the account
of income tax authorities. An FDR is not a negotiable instrument, particularly when
its being not transferable, is printed on the face of it and a special mode of transfer
is printed on the reverse of it which is not followed. No challenge has been made to
the validity of the payment by the Bank to the Income Tax Authorities. Claim covered
by the complaint in the present case was stale and barred by limitation and there is
no explanation forthcoming for condonation of delay.
The National Commission set aside the order passed by the State Commission
and upheld the order passed by the District forum.
118 Case Laws on Banking
of the Act being without any ‘consideration’ of the complainant. Supreme Court
allowed the appeal holding that overdraft limit prescribed by the Bank was not
without consideration. Bank is rendering service by providing overdraft facilities to
a consumer, which is not without consideration. Bank is charging interest and
other charges as well in providing the service. Provision for overdraft facility is
certainly a part of the Banking and its service within the meaning of Clause (o) of
section 2 of the Act. Request for sale of part of the pledged shares for getting overdraft
facilities and which is agreed to by the Bank is certainly part of the service connected
with the grant of overdraft facilities. Appellant as a consumer was hiring services
of the Bank for consideration by way of payment of interest for the overdraft
facilities received by him by pledging the shares of different companies.
Further, Supreme Court held that the Bank has a right under the law to retain
the pledged goods is not in dispute. But once the Bank having agreed to sell part of
the pledged goods, it could not fall back on those very provisions to raise a plea of its
right under the law to retain the pledged goods.
Further, in these days of revolution in information technology Bank is merrily
going on corresponding with its customer, the appellant, and also with its own
Head office. It was not difficult for the Bank to find out on receipt of the letter
dated 23.4.1992 of the appellant where the pledged shares were lying. It took 12 days
to transmit the request of the appellant to its Head office. When the Nagpur Branch
received letter dated June 19, 1992 from the Head office that the shares were not
lying, it took another 40 days to inform the appellant of this fact by its letter of July
29, 1992. Then the Nagpur Branch find, that the shares are lying with it and then it
is too late. Once the Bank agreed to sell the part of the shares on request by the
appellant and without any pre-conditions, it cannot fall back on other alleged
defaults of the appellant in his dealing with the Bank. The plea of the Bank that it
would dispose of the shares only through its own broker is without substance as it
never apprised the appellant of this fact.
The Supreme Court rejected the view taken by the National Commission that
there was no negligence on the part of the Bank or that the Bank was not bound to
dispose of the shares.
Appeal allowed
Case Laws on Banking 121
Amer
Ameriican EExxpr
pree ss B ank Ltd. T.R
Bank .S
.S.. vs. R
.R.S Raa j e sh G up
uptt a & Ors
Gup Ors..
I (2000) CP
CPJJ 1 (NC)
(NC)
Fac
actts
Present case is about the claim of complainant in respect of loss of travellers
cheques which was repudiated by the Petitioner Bank. It is only after such
repudiation of claim petitioner filed complaint against the Petitioner Bank alleging
deficiency in service. Complainant who had a very urgent business trip for 35 days
at a stretch to Germany and to that effect, he was in need of foreign exchange. He
contacted his Bankers where he was advised to contact the American Express Bank,
Netaji Subhah Road, Calcutta for the arrangement of foreign currency by way of
travelers cheques, which in turn advised the Complainant to collect the travelers
cheques as per his requirement from their New Delhi Branch. Complainant went to
New Delhi Branch of the Petitioner Bank and collected travelers cheques
amounting to Us$12,500/- equivalent to Rs.4,00,000/- from there. After reaching
Airport, the complainant found that travelers cheques as well as the passport and
other relevant documents were missing and after long search reported the matter
to the Police Station, Cannaught Circus and also to the Petitioner Bank, New Delhi
Branch. Thereafter, on several occasions complainant approached the New Delhi
Branch for refund of the travelers cheques but with no results. Complainant also
approached the head office, USA of the Petitioner Bank but of no avail and ultimately
the Petitioner Bank repudiated the claim of the complainant. After repudiation
complainant filed complaint before the District Forum, Calcutta against the
Petitioner Bank for deficiency in service. The District forum Calcutta allowed the
complaint rejecting the contention of the Petitioner Bank that the District forum,
Calcutta has no jurisdiction to entertain the present complaint. Petitioner Bank
filed an appeal before the State Commission, West Bengal. The State Commission,
West Bengal by majority judgment, differing from the view of President, dismissed
the appeal. The Petitioner Bank against the dismissal order filed the Revision Petition
before the National Commission.
Issue
Whether the District forum, Calcutta had territorial jurisdiction to entertain
a complaint when no part of cause of action arisen at Calcutta?
Whether Petitioner Bank can held to be deficient in service when the claim of
the complainant was repudiated only after detailed enquiry?
Case Laws on Banking 123
Held
The National Commission held that in the light of statement of law enunciated
by the Supreme Court in Union Bank of India’s case the District forum, Calcutta had
no territorial jurisdiction to entertain and try the complaint as no part of cause of
action had arisen at Calcutta. The travellers cheques were purchased at Delhi,
those were lost in Delhi; matter was reported to the Police at Delhi; claim for refund
of the amount was lodged with the Delhi Branch of Bank; the matter was
investigated by the Delhi Branch of Bank and the claim was rejected by the Delhi
Branch and communicated to the complainant at his business address at A-94,
Sec.-5, Noida, U.P. The President of the State Commission, Calcutta rightly held that
the District forum, Calcutta had no territorial jurisdiction to entertain the
complaint.
Further, regarding deficiency in service, the National Commission held that
the refund of claim was rejected by the Bank after holding detailed enquiry and
proper investigation. Repudiation of claim by the Bank was in good faith after due
application of mind to relevant facts and circumstances and not in arbitrary or in
unreasonable manner. Such being the position Petitioner Bank cannot be made
liable for any deficiency on the part of the Bank so as to give rise to a cause of action
for a complaint under the provisions of the Consumer Protection Act, 1986.
Revision Petition accepted; set aside the majority view of State Commission as
well as the order of the District forum, Calcutta and dismissed the complaint.
124 Case Laws on Banking
C o r p o ra t i o n B ank vs. N
Bank Naav in J. SShah
hah
I 2000 CP
CPJJ 13(SC)
13(SC)
Fac
actts
Present case is about the compensation claimed by the complainant from its
Bank on account of deficiency in service as the Bank delayed the matter of
repatriation of export proceed. Complainant who was a tea exporter, had the credit
facilities with the appellant Bank, entrusted documents relating to the export of
tea for the propose of realizing the proceeds from the consignee. The appellant
Bank issued advice of purchase of Bills to the complainant in respect of goods covered
by several invoices. Complainant while entrusting documents relating to the export
of tea instructed the appellant Bank to handover the documents only after ensuring
that the export proceeds could be repatriated to India in U.S. Dollars. The appellant
Bank negotiated the documents relating to the exports through foreign Bank of
Sudan. The appellant Bank without informing complainant of any difficulties
experienced by them in the matter of negotiations, realized the export proceeds in
local currency i.e. other than in U.S. Dollars. It is only later, after realization of export
proceeds, appellant Bank informed the complainant that repatriation of export
proceeds in terms of U.S. Dollors could not be made due to certain restrictions
imposed by the government of Sudan and requested the complainant to approach
the Export Credit Guarantee Corporation of India Limited to cover the risks involved
in the export Business and to settle the claim using the insurance policy taken by
the complainant in respect of the goods covered by the entrusted documents.
Complainant immediately got his claim settled before the corporation but also
filed the complaint before the National Commission for deficiency in service against
the appellant Bank after a decade.*
Issue
Whether there is any deficiency in service on the part of appellant Bank which
could not realize the export proceeds timely as instructed?
Whether the National Commission can entertain a claim after lapse of a decade
though Consumer Protection Act, 1986 does not prescribe any time limitation for
filing claim?
-----------------
*The National Commission allowed the complaint holding the bank deficiency in rendering the
service. Hence appeal was filed by the bank before the Supreme Court.
Case Laws on Banking 125
Held
The Supreme court held that the appellant Bank negotiated the documents
as provided under the agreement, so did the foreign Bank of Sudan but the
conversion of the Local currency in U.S. Dollors became difficult on account of policy
of government of Sudan when the realization of money in US Dollors was frustrated
by reason of the governmental action, no responsibility for deficiency in service
could be fastened on appellant Bank. Both Banks did whatever was required to be
done under the contract and therefore, commission was not justified in holding
appellant Bank to be deficient in service so as to attract the provisions of the
Consumer Protection Act.
Further, the transaction in question took place in the years 1979 & 1981. The
difficulties in realization of the amount due from the consignee became clear to
the complainant at the time when the claim was made before the corporation
against Insurance and the claim had been made as early as on December 19, 1982
but petitions alleging deficiency in service against the appellant Bank was filed on
September 25, 1992 that is clearly a decade after a claim had been made before the
corporation. Indeed at the relevant time there was no period of limitation under
the Consumer Protection Act to prefer a claim before the commission but that does
not mean that the claim could be made even after unreasonably long delay. In the
legislative wisdom three years period had been prescribed as the reasonable time
under the limitation Act to lay a claim for money. We think that period should be
the appropriate Standard adopted for computing reasonable time to raise a claim
in a matter of this nature.
Appeal allowed, set aside the order of the National Commission and dismissed
the complaint.
126 Case Laws on Banking
(Annexure)
I have reported the above matter to you several times (give reference of earlier
letters, if any) but despite all my pleadings you have not made good the defect in
the goods (ordeficiency in services) which is indeed regrettable and highly
unbusiness like. On account of your aforesaid dereliction of duty and failure and
neglect to rectify the same I have suffered losses/incurred expenses
...........................................................................................................................................................................................................
............................................................................................................................................................................................................
...........................................................................................................................................................................................................
...........................................................................................................................................................................................................
...........................................................................................................................................................................................................
(give details)
and/or
(iii) return the price/ charges paid
Place……………………..
Dated............................... Sd/-
.………. . .
128 Case Laws on Banking
............... Complainant
VERSUS
(FULL NAME) (DESCRIPTION) (COMPLETE ADDRESS)
................................. Opposite Party/ Parties
COMPL AIN
MPLAIN
AINT T UNDER SSE
UNDE ECTION I2/ SSE
ECTION 1177/
SECTION 21 O
OFF THE CONSUME
CO UMER R PR
PROOTECTION ACT, 11986986
986..
RES PE
RESPE C T FUL
PEC ULLLY SSH
HO W E T H
INTRODUCTION
(In this opening paragraph the complainant should give his introduction as
well as that of the opposite party/parties.
T R AN
ANSSAC T ION
(In this paragraph complainant should describe the transaction complained of,
i.e., particulars and details of goods/ services availed; items of goods/kind and nature
of service; date of purchase of goods/availing of service; amount paid as price/
consideration, full or in part towards the goods/service; Photocopies of the bill/cash
memo/voucher or receipt should be attached and properly marked as
Annexure – A,B,C and so forth or 1,2,3 and so forth.)
DEFECT DEFICIENCY
(In this paragraph complainant should explain the grievance, i.e., whether the loss
or damage has been caused by some unfair trade practice or restrictive trade practice
Case Laws on Banking 129
adopted by any trader or there is some defect in the goods or there has been deficiency
in service or the trader has charged excessive price for the goods. One should elucidate
the nature of unfair trade practice adopted by the trader, i.e., relating to the quality of
goods/services; sponsorship; warranty or guarantee for such period promised. The
nature and extent of defects in goods should be explained and so should the deficiency
in service. In case of excessive price one should specify the details of actual price fixed
by or under any law for the time being in force or as set out on goods and their packing
vis-a-vis the price charged by the trader. Complaint can also be filed against offer for
sale of goods hazardous to life and safety when used. You should narrate your grievance
and rest assured it is being read /heard by compassionate and pragmatic judges.
Photocopies of relevant documents must be attached.)
RE
RECC T IF
IFIIC AT ION
(In this paragraph complainant should highlight what attempts were made by him to
set things right, i.e., personal visits or negotiations; communication in writing if any;
whether any legal notice was got served and / or whether he has approached any other
agency for redressal like, Civil or Criminal Court of competent jurisdiction; the stage of
its proceedings, its outcome, if any, alongwith copies (certified preferably) of such
proceedings. The nature of response got from the trader when irregularities were
brought to his notice, should also be disclosed here).
OTHER PROVISIONS
(In this paragraph reference may be made to any other law or rules or regulations of
particular procedure which is applicable to the case and/or which has been violated by
the trader and consumer’s rights under the same. There are incidental statutory
obligations, which traders must fulfil and in case of their failure to do so the case in
prima facie made out and Forum would take cognizance).
EVIDENCE
(In this paragraph complainant should give details of documents and/or witnesses he
will rely upon to substantiate his case. The documents attached as Annexures as stated
above may be incorporated in a proper list and a list of witnesses (if any) may be filed
similarly).The annexures should be attested as “True Copy”.
JURISDICTION
(In this paragraph complainant should liquidate the claim in the complaint, i.e., upto 20
lakh; 20 lakh to one crore; or above and set out the pecuniary jurisdiction of the Forum/
State Commission/National Commission, as the case may be. The territorial Jurisdiction
should be highlighted to obviate any formal objection).
130 Case Laws on Banking
LIMITAT ION
IMITA
That the present complaint is being filed within the period prescribed under section
24A of the Act.
RELIEF CLAIMED
(In this paragraph complainant should describe the nature of relief he wants to claim.
i.e., for removal of defects in goods or deficiency in service; replacement with new
goods; return of the price or charges, etc., paid and/or compensation on account of
financial loss or injury or detriment to his interest occasioned by negligence of the
opposite party and elucidate how you have calculated the amount of compensation
claimed).
PR
PRAAYER CL
CLAAUS
USEE
It is, therefore, most respectfully prayed that this Hon’ble Forum/Commission may
kindly be pleased to ....................................................................... (Details of reliefs which complainant wants
the Court to grant)
Ver if
ifiicat ion.
erif
I, ............................. the complainant above named, do hereby solemnly verify that the contents
of my above complaint are true and correct to my knowledge, no part of it is false and
nothing material has been concealed therein. Verified this .............................. day of
............................ 20 ...... at .......... Complainant.
Mo
Moddel FFo
or m –3- Af
Afff idav it in supp
suppoor t of tthe
he cco
omp
mpllaint
AF
AFFFID IDA AVIT
Affidavit of
Shri…………………………………………….S/o. Shri .......................................................
aged………………………………years, resident of .........................................................
......................................................................................................................................................................................
(1) That I am complainant in the above case, thoroughly conversant with the
facts and circumstances of the present case and am competent to swear this
affidavit.
(2) That the facts contained in my accompanying complaint, the contents of which
have not been repeated herein for the sake of brevity may be read as an integral
part of this affidavit and are true and correct to my knowledge.
Deponent
Ver if
ifiic a t ion:
erif
I, the above named deponent do hereby solemnly verify that the contents of my
above affidavit are true and correct to my knowledge, no part of it is false and nothing
material has been concealed therein.
Verified this…………………………day of………………….. 20…………. at……….
Deponent
132 Case Laws on Banking
...........................................................................................................................................................................Complainant
VERSUS
........................................................................................................................................................................Opposite Party
DATE OF HEARING……………………
Case Laws on Banking 133
WRIT
RITTTEN SST
TATEME
MENNT ONB
ON EHAL
BEHALFF O
OFF RESPOND
RESP ENTS TO THE
NDE
COMPLAINT OF THE COMPLAINANT
RESPECTFULLY SHOWETH:
Preliminary Objections
On Merits:
In these paragraphs respondent must reply each and every allegation made and
contention raised by the complainant, factual and legal as well. In case one has already
made good the defect or deficiency, elucidate steps taken. One may have, inter alia,
following goods defences as well.
1. That the transaction entered between the parties to the above dispute is a
commercial one and the complainant cannot claim any relief from this authority in
as much as .........................................................................................................
(give details)
2. That the complainant had purchased the goods as a seller/retailer/distributor, etc.,
for consideration of resale and as such is barred from moving this Hon’ble Forum/
Commission for the alleged defect/deficiency etc. in as much as
...........................................................................................
(give details)
3. That the complainant has already availed the warranty period during which the
answering respondent has repaired/replaced the goods in question. The complainant
is thus legally stopped from enforcing this complaint or to take benefit of his own
wrong.
4. That the present complaint is an exaggeration beyond proportion despite the fact
that the complainant is himself responsible for delay and laches in as much as he
has on several occasions changed his option for class of goods/type of allotment
scheme of flats/model of vehicle, etc ........................................................................................................................................
(give details)
5. That the answering respondent is well within his rights to charge extra price for
the subject-matter of the above dispute in as much as time was not the essence of
delivery thereof. The complainant is liable to pay the increased price w.e.f ............ on
account of escalation due to excise duty/budgetary provisions etc. in as much as…..
(give details)
6. That the complainant has accepted the goods and/or service towards repair/
replacement etc. without protest and the present complaint is merely an after
thought.
7. That without prejudice the answering respondent as a gesture of goodwill is
prepared to.............................................................................................................................................. (give details of
rectification, if any, which can be done in case of minor or tolerable problems to
avoid harassment to consumer and litigation problems)
Prayer clause with all the submissions made therein is absolutely wrong and is
emphatically denied. Complainant is not entitled to any relief whatsoever and is
not entitled Model Form costs.
Sd/-
(Opposite Party)
Place: ......................
Dated: ...................... through
(Advocate)
Ver if
ifiicat ion
erif
I, .................... the above named respondent do hereby verify that the contents of paras ................
to .................... of the written statement on merits are true and correct to my knowledge.
While paras .............................. to ............ of preliminary objections and ................ to ......... of reply
on merits are true to my information, belief and legal advice received by me and
believed to be true while the last para is prayer to this Hon’ble Court. Verified at
........................ this .......................day of................. 20 .............
Sd/-
(Opposite party)