JAIPUR NATIONAL UNIVERSITY

Session 2021-22

Case Summary : M/S. Hyderabad commercial Ltd. Vs India Bank

and ors.AIR1991SC247

Submitted to : Submitted by: Mr.

Suresh Kumar Dotania Gagan Sharma
(Assistant Professor) B.B.A. LL.B.
SSLG (4th year)
Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

TABLE OF CONTENTS

Certificate ............................................................................................................. 2

Declaration ........................................................................................................... 2

Acknowledgement................................................................................................ 3

Facts ..................................................................................................................... 4

Issues .................................................................................................................... 6

Arguments of both the sides……………………………………………8-9

Judgement of Court………………………………………..……………10

Present Position of Law………..…………………………………….....11

Certificate

It is certified that the work incorporated in this project was carried out by the student under
my guidance and supervision. The material obtained from other sources has been duly
acknowledged in the project.

Mr. Suresh Kumar Dotania

Assistant professor

Declaration

I hereby declare that the work done under this project is the result of my own hard work and
conducted under the supervision of Mr. Suresh Kumar Dotania (Asst. Professor) at
Seedling School of Law and Governance, Jaipur.

Gagan Sharma

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

BBA LLB (4th year)

Acknowledgement

This report would not have been accomplished without the guidance of Jaipur National
University of which I am a student. It is the cooperation of college that I have been successful
in presenting this project

.I m grateful to my teacher Mr. Suresh Kumar Dotania for the time and guidance she has
devoted for my project and helped me.This work would not have been completed without the
blessings of my Parents.

I would also like to thank all the people who have provided me support in research work and
completion of this project.

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

At last but not the least I want to thank almighty , without whose blessings I would not be able
to complete this project.

Thanking You

Gagan Sharma

BBA LLB VIII Sem

SSLG

FACTS

• The appellant is the Sub-Distributors of M/s. Unimech Appliances, it has a Current

Account No. 525 with the Indian Bank, Barkatpura Branch, Hyderabad.
• The appellant had been depositing money through cheques in its Current Account from
time to time. During the period 15-1-87 to 13-5-87 the appellant had deposited cheques
in the Indian Bank; the amounts under those were realised by the Bank and credited to
the appellant's account but later on a sum of Rs. 12.95 lacs was transferred to the account
of the respondent- M/s. Unimech Appliances. The appellant protested the transfer of the

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

aforesaid amount on the ground that it had never authorised the Bank for transferring
the amount to respondents account.
• On the appellant's protest the Bank by its letter dated 21-12-1987 informed the appellant
that the transfer had been made in an unauthorised manner and the same will be
recruited to its account within two months. The letter runs as under:

Indian Bank Bakatpura, Hyderabad Dated: 21-12-1987 M/s. Hyderabad-Commercials,

Hyderabad. Dear Sir, We have today inform you that we have unauthorisedly debited
your account from Jan., 87 to June, 87 on various dates which will be recredited back
to your account within 60 days lime. We regret very much for the inconvenience caused
in this regard.

Yours faithfully, for INDIAN BANK Sd/x y z Accountant/Manager.

• Under the aforesaid letter the Bank admitted that the transfer of the disputed amount
had been made by the Bank in an unauthorised manner and it further admitted its
liability to pay back the amount to the appellant. By another letter dated 21-12-1987
(Annexure 'V' to the SLP) the Bank reiterated that the amounts which were transferred
from the appellant's account on various dates between January, 1987 to June, 1987 will
be credited to its account for which no consent letter had been received from the
appellant.
• In spite of its admission of liability and assurance to recredit the disputed amount to the
appellant's account the Bank failed to honour its commitment. Ultimately, the appellant
filed a Writ Petition for the issue of mandamus directing the respondent Bank, a
Nationalised Bank for the issue of a direction to the Bank to deposit the disputed amount
in its account. The Indian Bank resisted the appellant's claim on a

strange plea that the disputed amount had been transferred to the respondents account
on oral instructions of the appellant. As noted earlier the High Court dismissed the Writ
Petition on the ground that the case involved disputed questions of facts.

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

Issues
1. Whether the complainant has been put to loss as alleged due to negligence of the
opposite party bank ?

2. Whether there is fraud on part of the bank ?

Arguments

1. Whether the complainant has been put to loss as alleged due to

negligence of the opposite party bank ?
The facts as noted earlier make it amply clear that the Bank had transferred the disputed
amount of Rs. 12.95 lacs from the appellant's account to the account of respondent M/s.
Unimech Appliances. There is, further, no dispute that the Bank admitted that it had
made the transfer in an unauthorised manner without obtaining any instruction or
authority from the appellant and it accepted its liability to recredit the amount to the
appellant's account. On such admission the Bank which is an instrumentality of the
State was under a legal obligation to pay back the disputed amount to the appellant.
Initially the Bank accepted its mistake and admits its liability and assured the appellant
to credit the amount to its account but later on it resiled and raised a strange plea of oral
authority simply with a view to defeat the appellant's claim. It is difficult to believe that
a sum of Rs. 12.95 lacs could be transferred to the account of an other person on oral
instructions, without taking care to obtain authority or instruction in writing for the
same.
The respondent denied th same saying that they were having oral authority to transfer
the amount.

2. Whether there is fraud on part of the bank to look after the safe
custody of the ornaments kept by the complainant’s wife in the bank
lockers?

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

• As to the 2nd issue the counsel on behalf of The plea of oral instruction, justifying
transfer of such large amount is an afterthought which does not inspire any
credence. The Bank's conduct is reprehensible. We arc constrained to observe that
such functioning of a Nationalised Bank is detrimental to public interest and if it
follows the practice of transferring money of its customers to some other persons
account on oral authority, people will loose faith in the credibility of Bank.
• The respondent talked exactly opposite and pleaded that there was no fraud as they
were orally instructed.

Judgement

The order of the High Court was set aside and the court directed the Indian Bank to recredit
the disputed amount of Rs. 12.95 lacs to the appellant's account within three weeks from
today along with interest if any due on the aforesaid amount. As regards the dispute between
the appellant and respondents Nos. 6 and 7 is concerned, we express no opinion on the same.
The appellant is entitled to its costs from the respondents.

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

Present position of Law

According to Section 424 of IPC,1860 whoever dishonestly or fraudulently conceals or

removes any property of himself or any other person, or dishonestly or fraudulently assists in
the concealment or removal thereof, or dishonestly releases any demand or claim to which he
is entitled, shall be punished with imprisonment of either description for a term which may
extend to two years, or with fine, or with both

According to Section 447 of the ompanies Act, 2013, fraud in relation to affairs of a company
or any body corporate, includes any act, omission, concealment of any fact or abuse of position
committed by any person or anyother person with the connivance in any manner, with intent
to deceive, to gain undue advantage from, or to injure the interests of, the company or its
shareholders or its creditors or any other person, whether or not there is any wrongful gain or
wrongful loss.

Section 405 of the Indian Penal Code, 1860. This Section states that:

‘Whoever, being in any manner entrusted with property, or with any dominion over property,
dishonestly misappropriates or converts to his own use that property, or dishonestly uses or
disposes of that property in violation of any direction of law prescribing the mode in which
such trust is to be discharged, or of any legal contract, express or implied, which he has made
touching the discharge of such trust, or willfully suffers any other person so to do, commits
criminal breach of trust.’

In the present case also, the bank committed fraud and criminal breach of trust by
misappropriating the funds of accounts of its Customers and shall be punished with
imprisonment for a term which may extend to two years or with fine or with both under
section 424 for committing fraud and with imprisonment of either description for a term
which may extend to three years or with fine or with both under section 406 IPC,1860 for
criminal breach of trust.

The Reserve Bank of India (RBI) came up with draft regulations dealing with banking fraud
last year and has officially released these regulations wherein RBI has explicitly laid down the
extent to which a customer will be liable in case of an unauthorized transaction/ fraud in the

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

following 3 circumstances - due to the customer's negligence, deficiency/fault in the banking

system or due to a third party breach.

II. Negligence of Banking System

The customer will have absolutely no liability in circumstances where the bogus/ unauthorised
transaction occurs because of the carelessness of the bank. In this case the customer doesn't
even have the obligation to report the fake transaction to the bank. However, it is advisable to
keep a close check on all your e-banking accounts and report any suspicious behavior
immediately to your bank.

III. Third Party Breach

When an outsider or third party commits a fraud it eludes to those situations where the
inadequacy lies neither with the bank nor with the customer.

In such cases, the extent of liability of the customer depends on when he reports the issue from
the day of receiving communication of such transaction from the bank.

1) If the customer reports the unauthorized exchange within 3 days from the receipt of
communication from the bank, the liability of the customer will be Zero.

2) If the customer reports the unauthorized transaction in 4 to 7 days from the receipt of
communication from the bank, the customer's per transaction limit will be capped, different
accounts will have different capped limit, details of which can be taken from the bank officials.

3) If the customer reports the unauthorized transaction in 7 days from the receipt of
communication from the bank, the risk/ liability will be decided depending on the policies of
the bank.

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

The number of days should be considered as per the working calendar of the home branch
barring the date of receiving communication. Furthermore, the date of receiving
communication implies the date when you get SMS, email or the bank explanation that gives
you the knowledge about the unauthorized transaction. The earliest communication received
has to be considered, on the off chance that you get communicated by the bank in various ways

themselves and would want that the customer should share the loss be it due to the fact that the
unauthorized transaction took place due to the negligence of the customer or it was the result
of a third party breach, however in order to do so, the burden of proving the carelessness of the
customer, is on the bank.

5 Things You Must Know About Reversal of Fraudulent Transactions:

1) The RBI circular also stated that banks must refund the amount of the unapproved transaction
in the customer's bank account within 10 days from the date when the client reported the
unapproved transaction to the bank. However, this can only be possible after determining the
extent of customer liability.

2) Banks have the choice to defer any liability of customer that occurred due to the carelessness
of the client, try not to wager on it though.

3) After a proper investigation and determination of customer liability the complaint needs to
be resolved within 90 days.

4) Banks also guarantee that no loss of interest or additional loss, in case of credit card fraud is
incurred to the customer.

5) Such fraudulent/ unapproved transactions can be reported via different channels like online,
telephone, SMS, email, etc. and all of these modes usually provide a 24x7 access.

What Can Customers Do to Avoid Banking Frauds?

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

The banks have done their part and so should the customers, by doing the following:

1) Register your working mobile number with your bank so as to receive SMS/Email alerts
regarding transactions.

2) Check the emails and messages received from the bank, regularly.

3) In case you find any suspicious or unapproved transaction that you can't place, consult and
report to the bank, immediately.

4) Never share your banking User Id, Password or OTP (One Time Password) with anyone. No
bank official will ever call you for these details.

5) Never share your Debit Card/ Credit Card Number or the numbers displayed at their back
with anyone as you may end up losing money and be held responsible at the same time.

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Case summary : M/S. Hyderabad commercial Ltd. Vs India Bank and ors.AIR1991SC247

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