Caselaw Banking

Consumer Case Laws Series-4CASE LAWS ON BANKING S.K. SHARMA SUSHILA NARANG Department of Consumer Affairs, Government of India in association with Indian Institute of Public Administration, New Delhi Case Laws on Banking S.K. Sharma Senior Advocate Supreme Court of India New Delhi and Sushila Narang Advocate New Delhi logo Indian Institute of Public Administration New Delhi ii Consumer Case Laws Series-4 Series Editors : S.S. Singh Rakesh Gupta Sapna Chadah © Indian Institute of Public Administration, New Delhi 2008 Price Rs. 100 Published under aegis of consultancy assignment. Promoting Involvement of Research Institutions/Universities/Colleges, etc., in Consumer Protection and Consumer Welfare Sponsored by : The Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, Government of India. Published by Indian Institute of Public Administration, New Delhi and Printed at New United Process, A-26, Naraina Industrial Area, Ph-II, New Delhi, Ph. 25709125  PRE PREFFACE Banking is the backbone of economy—trade, commerce and business cannot survive without extensive banking facilities. In a world driven by the market forces and governed by the vicissitudes of trade and commerce, banking as an institution, has assured unprecedented importance. In the era of liberalisation, privatisation and globalisation, the banking sector has started gearing up to face new challenges. Several measures have been taken and new and latest services have been started in the Indian Banking industry to meet the new challenges which include e-banking, phone banking, plastic money, entry of banks into mutual funds and insurance sector and many new kind of services. Banking is no longer confined to the metropolitan cities and larger towns but has spread into the remotest corners of the country. The switchover from the class banking to the mass banking has on the other side created several problems—there is a steady increase in the frauds and deterioration in banking services and efficiency. Consumer Protection Act is one of the beneficial legislations enacted by the Parliament with a view to provide better protection to the consumers. Section 2 (1)(g) of the Act defines deficiency in the service and the concept of service is defined under Section 2(1 )(o) of the Act. Banking Service is one of the services covered under the Consumer Protection Act. It may include receiving deposits in various accounts and schemes, lending money, providing agency services e.g. payment of premium against insurance policy, locker services, debit and credit cards, bank guarantees, bank drafts etc. Deficiency in respect of any service provided by the Bank may be brought before the Consumer Forums / Commissions. Grievances of consumers from banking services are piling up in District Consumer Forums, State Consumer Disputes Redressal Commissions and National Consumer Disputes Redressal Commission. Redressal of these grievances has also brought to fore several original and innovative perspectives on benchmarks and standards for banking services. The cases included in this compilation are those adjudicated by the Supreme Court of India and National Consumer Disputes Redressal Commission between 2000-2007. This brings a summary of almost all the leading consumer cases of this important banking service and reflects the expectations of courts as well as consumers from the banking sector and is meant for the benefit of the consumer and information of others concerned, including service providers, consumer activists and legal practitioners. iv We are indeed grateful to the Department of Consumer Affairs (Government of India) particularly Shri Yashwant Bhave, Secretary for his abiding trust and confidence in IIPA. We are also thankful to Shri Rakesh Kacker, Additional Secretary and Shri Sanjay Singh, Joint Secretary for their valuable suggestions and encouragement. We are indeed grateful to Shri G.N. Sreekumaran, Director (CWF) for his active support, help and advice. We also express our sincere thanks to other officers of the Department and other members of the Evaluation Committee and Monitoring Committee under the project respectively. We express heartfelt thanks to the management of IIPA especially Shri T.N. Chaturvedi, former Governor of Karnataka and Chairman, Executive Council, Dr. Yogendra Narain, Chairman Standing Committee for their keen interest, encouragement and constructive suggestions. Shri B.S. Baswan, Director IIPA has always been supportive and helping. We are indeed thankful to him. We are also thankful to Shri Sunil Dutt, Publication Officer for his keen interest in the publication of the series. Before concluding, a word of sincere gratitude towards the Project Director Prof. S.S. Singh whose profound passion for the consumer movement is a source of inspiration for the whole team. Shri Rakesh Gupta, Associate Project Director and Ms Sapna Chadah, Assistant Professor were actively associated and involved with this compilation and rendered valuable suggestions for making the work comprehensive. 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 26. Canara Bank v. Agnes D’mello I (2006) CPJ 8 (NC) 41 27. Mahad Co-operative Urban Bank v. United India I (2006) CPJ 44 (NC) 43 Insurance 28. Allahabad Bank, Bhopal v. Ranbir Sing Shadoriya I (2006) CPJ 94 (NC) 44 29. ING Voyage Bank Ltd. v. V. Y.G. SreeRam Setty I (2006) CPJ 182 (NC) 45 30. Allahabad Bank v. Chandigarh Construction IV (2005) CPJ 126(NC) 47 Co. Pvt. Ltd. 31. C.L. Khanna v. Dena Bank IV (2005) CPJ 139(NC) 48 32. Central Bank of India & Anr. v. Heera Soni & Ors. III (2005) CPJ 25(NC) 50 33. Deep Chand Jain v. Bank of Baroda & Ors. III (2005) CPJ 51(NC) 52 34. Col. D.S. Sachar (Retd.) v. Punjab & Sind Bank II (2005) CPJ 130(NC) 53 35. Zila Sahkari Bank Ltd. v. U.P. Police Avas Nigam Ltd. I (2005) CPJ 89(NC) 54 36. Anumati v. Punjab National Bank IV (2004) CPJ 21(SC) 56 37. Punjab & Sind Bank v. SukhRaj Bajwa & Anr. III (2004) CPJ 1(NC) 59 38. Prem Baboo v. Branch Manager, Farakhabad III (2004) CPJ 18(NC) 60 Gramin Bank & Ors. 39. Swadeshi Polytex Ltd. v. Central Bank of III (2004) CPJ 47(NC) 62 India & Ors. 40. Ratnachand Morakar v. Bank of Maharashtra, II (2004) CPJ 25(NC) 64 Bombay 41. Thiruchirapalli Multipurpose Social Service II (2004) CPJ 62(NC) 66 Society v. Canara Bank 42. ABN Amro Bank v. Sangeet Srivastava II (2004) CPJ 289(NC) 68 43. Standard Chartered Grindlays Bank Ltd. v. I (2004) CPJ 13(NC) 70 H.B. Impex Pvt. Ltd. 44. Smt. Manorama v. Chairman, Punjab National Bank I (2004) CPJ 56(NC) 72 45. India Export Corporation & Ors. v. Chairman-cum IV (2003) CPJ 45(NC) 73 Managing Director, Syndicate Bank & Ors. 46. State Bank of Patiala v. Rajender Lal & Anr. IV (2003) CPJ 53(NC) 75 47. CCI Chambers Co-op. Housing Society Ltd. v. III (2003) CPJ 9 (SC) 77 Development Credit Bank 48. Abdul Razak & Anr. v. South Indian Bank III (2003) CPJ 20(NC) 79 49. Poppeys Valley Hotel Pvt. Ltd. v. Citi Bank III (2003) CPJ 133(NC) 81 50. Archana M. Kamath v. Canara Bank & Anr. II (2003) CPJ 7(NC) 83 51. Om Prakash Sahni v. State Bank of India & Ors. II (2003) CPJ 100(NC) 85 52. K. RamaIyer & Ors. v. Indian Overseas Bank II (2003) CPJ 143(NC) 86  vii 53. Principal, Guru Nanak Girls College I (2003) CPJ 171(NC) 88 v. Punjab & Sindh Bank 54. DOSON Chemical Pvt. Ltd. I (2003) CPJ 214(NC) 89 v. United Bank of India & Ors 55. Memon Co-op. Bank Ltd. v. Anwar D. Ahmedabadi I (2003) CPJ 285(NC) 91 56. Canara Bank v. Naresh Kumar Jain & Anr. III (2002) CPJ 13(NC) 93 57. Andhra Bank v. Vishwapriya Financial Service & III (2002) CPJ 21(NC) 94 Securities Ltd. 58. M.P. Minerals Ltd. v. Bank of India & Ors. III (2002) CPJ 25(NC) 96 59. Aryan Agro Spice (P) Ltd. v. III (2002) CPJ 41(NC) 97 Saraswat Co-op. Bank. Ltd. & Anr. 60. Indian Overseas Bank v. Klebert Pierre III (2002) CPJ 77(NC) 98 61. Indo Steels v. Central Bank of India III (2002) CPJ 152(NC) 99 62. Commander Rakesh Sharma III (2002) CPJ 165(NC) 100 v. Punjab National Bank 63. Hanuman Hosiery v. Canara Bank III (2002) CPJ 253(NC) 101 64. State Bank of India v. Ugam Singh III (2002) CPJ 267(NC) 102 65. State Bank of India v. Mohinder Sing & Ors. III (2002) CPJ 275(NC) 104 66. Virender Narang v. M/s Syndicate Banks Ors III (2002) CPJ 279(NC) 105 67. Mrs. Anumati v. Punjab National Bank III (2002) CPJ 280(NC) 106 68. United Commercial Bank v. Smt. Anita Airan III (2002) CPJ 371(NC) 107 69. Topline Shoes Ltd. v. Corporation Bank II (2002) CPJ 7 (SC) 109 70. Canara Bank v. C.D. Patel II (2001) CPJ 19 (NC) 111 71. D.K. Lalwani v. The President, Indian Bank II (2002) CPJ 20 (NC) 113 Mutual Fund & Another 72. Mihir Kumar Mukherjee II (2002) CPJ 38 (NC) 114 v. Branch Manager, United Bank of India 73. Patna Co-operative Bank Ltd. v III (2002) CPJ 23(NC) 116 Hasmukh B. Shah 74. Arvind Sahni v. Punjab & Sind Bank III (2000) CPJ 8(SC) 118 75. Vimal Chandra Grover v. Bank of India II (2000) CPJ 11 (SC) 119 76. Bade Krishnaveni v. Canara Bank III (2000) CPJ 35(NC) 121 77. American Express Bank Ltd. T.R.S. I (2000) CPJ 1 (NC) 122 v. Rajesh Gupta & Ors. 78. Corporation Bank v. Navin J. Shah 1(2000) CPJ 13(SC) 124 Annexure 126 Case Laws on Banking 1 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 announcement and is applicable only to loanee farmers/planters whereas respondent had already repaid his full loan and hence he was not the loanee farmer. The National Commission held that scheme announced by the Government of India is a welfare scheme for the benefit of the Coffee growers wherein the grower, the bank and the Coffee Board have to share equally the total interest burden and therefore, liable to refund the sum of Rs. 86,547/-. Revision Petition dismissed. Case Laws on Banking 3 State Bank of India vs. Anand Prakash III (2007) CP (2007) CPJJ 95 (NC) (NC) Fac actts Complainant was maintaining an account with Petitioner Bank. Complainant deposited one payee account cheque in his account bearing No. 807777 for Rs. 1,47,500/- drawn on Matunga Bazar Branch at Mumbai for collection. As the said cheque was not credited in his account complainant made various applications to the Petitioner Bank. Complainant when got no response he filed a complaint before District forum. The matter was contested by the Petitioner Bank taking defence that the cheque in question was sent on 10.4.1999 it self by the Petitioner to its service Branch at Mumbai through Madhur Courier Service. Service Branch of Petitioner sent the cheque to the Branch for collection and the credit of the amount of cheque could be given only after receipt of credit issued. Petitioner further submitted that they had been taking matter constantly with service branch, respondent No.2 and since the cheque was lost by Respondent No.2, the Petitioner cannot be held liable for payment thereof. The District forum rejecting the submission of the Petitioner Bank allowed the complaint. Against the order of District forum Petitioner Bank approached the State Commission, which disposed the appeal by reducing the rate of interest from 18 per cent to 12 per cent. Against this order of the State Commission Petitioner Bank filed Revision Petition before the National Commission. Issue Whether the drawee Bank can shift its liability for loss of cheque and payment of amount thereof on the Bank on which it was drawn? Held Petitioner has not adduced any evidence to show that the cheque in question was forwarded by its Service Branch at Mumbai to Respondent No.2. In absence of any such evidence and the stand taken by the Respondent No.2 in letter dated 20.2.98, Petitioner cannot shift liability for loss of cheque and payment of the amount thereof on Respondent No.2. Since the cheque was handed over for collection by Respondent No.1, complainant to the Petitioner Bank it cannot evade liability for payment thereof with interest. Respondent No.1, complainant was never informed in writing of the loss of cheque by the Petitioner Bank. Revision Petition dismissed with cost. 4 Case Laws on Banking Kamlesh Kumar (NRI) vs. Allahabad Bank II (2007) CP (2007) CPJJ 45 (NC) (NC) Fac actts Complainant, a NRI deposited $3124.05 on 21.11.92 with the respondent Bank @10% p.a. interest for two years and maturity value of deposit was $3797.28. Complainant further deposited $10,000/- on 19.4.93 on an interest of 8% p.a. for 3 years. He further deposited $10,000/- with the respondent Bank @8% p.a. interest for 2 years. Maturity value of these two deposits was $11,716.59 each. Complainant was made short payment of $118.53 in respect of earlier deposit maturing on 21.11.94 and short payment of $371.18 was made by respondent bank on remaining two deposits. Complaint was filed by complainant alleging deficiency in service against the respondent Bank. The District forum allowed the complaint. The State Commission disposed of appeal with a direction to the respondent Bank to calculate rate of interest at the rate prescribed by RBI from the date when the branch office received the circular and not at the prior point of time. Against this order complainant filed Revision Petition before the National Commission. Issues Whether Bank is liable to pay interest rate expressed in receipts though the same are in contravention to RBI instructions issued from time to time? Held Before the National Commission it was submitted by Petitioner that respondent bank is liable to pay contractual rate of interest as mentioned in 3 FDRs for all the time whereas respondent bank submitted that Petitioner is not entitled to interest over and above the rate(s) fixed by RBI. The National Commission after hearing both the parties held that in all the three FDRs towards right hand side it is printed that interest rate expressed in receipts is subject to RBI instructions that may be issued from time to time. This condition is binding on Petitioner. Therefore, despite higher rate of interest and maturity value of deposits having been indicated in 3 FDRs, the petitioner is entitled to interest on the deposit maturing on 21.11.1992 @8.75% as against 10 per cent and @7.25 per cent instead of eight per cent p.a. in respect of remaining two deposits. There was no deficiency in service on the part of the respondent Bank. Revision Petition dismissed. Case Laws on Banking 5 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 Jhunjhunu Primary Land Development Bank & Anr Anr.. vs. G anp anpa Ganp at R am & Ors Ram Ors.. II (2007) CP (2007) CPJJ 261(N 261(N C) 1(NC) Fac actts Complainants belonging to scheduled castes, with a view to buy a tractor, obtained a loan from the Petitioner bank to the extent of Rs.1,60,000/-. The Petitioner Bank made payment of loan amount to the dealer of the Swaraj Tractor and rest of the payment of the tractor was made by the complainants. Despite making of payment the dealer did not make the delivery of the tractor to the complainants. Complainants brought the matter to the knowledge of the Petitioner bank but when the same was not resolved, complainant filed complaint before the District forum alleging deficiency in service against the Petitioner Bank and others on the ground that despite making payment, the delivery of tractor was not given to them, instead possession of the tractor was delivered to some other person belonging to Jat Caste by making a forged bill in the name of the complainants. The District forum after hearing parties allowed the complaint, directing the petitioner bank not to recover any amount of loan from the complainants as they did not receive the possession of the tractor and further to pay Rs.61655/- to the complainant which was deposited by the complainants with Petitioner Bank. Aggrieved by this order, two separate appeals were filed before the State Commission by Petitioner Bank and Respondent No.4 which were dismissed by the State Commission. Against this dismissal order Petitioner Bank filed Revision Petition before the National Commission. Issues Whether the bank is liable for deficiency in service for not ensuring the delivery of the funded goods to the beneficiary? Whether the Bank is liable to reimburse the complainants to the extent of Rs.61,655/-? Held The National Commission disposed of Revision Petition filed by the Petitioner bank by modifying order passed by lower fora holding that since the complainants who belong to scheduled castes community, have very little knowledge/literacy levels. In such circumstances, the onus lies on the bank to ensure that the goods Case Laws on Banking 7 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 Bihar SStt ate Sugar C Sugar Coor p. Ltd. vs. SSttate B ank of In Bank d ia & Ors Ind Ors.. I (200 7) CP (2007) CPJJ 91 (NC) (NC) Fac actts Complainant corporation wholly owned by the State of Bihar, decided to take an insurance policy for the assets of Lauriya Sugar Factory vide its letter dated 10.12.1996 from the Oriental Insurance Co Ltd. who were earlier also insuring the assets of the complainant corporation for over a decade on year to year basis. The Oriental Insurance Co. issued insurance policies dated 28.03.1997 w.e.f. 23.3.1997. On 17.4.1997 at about 8.00 am molasses tank No.2 of Lauriya unit got burst accidentally resulting into loss of molasses and also affected the Sugar products stored adjacent and nearby places. Complainant Corporation lodged its claim with insurance company on 11.4.1997. On 6.5.1997 complainant got telephonic information that the cheque issued for premium was returned by Bettiah branch of respondent Bank on the ground that there was no balance at Lauriya account. The cheque was dishonoured despite sufficient fund in the account due to blunder of officer of respondent Bank. Since there was no payment of premium insurance company repudiated the claim of complainant on the ground that there was no subsisting policy. Complainant corporation filed the present complaint before the National Commission alleging that cheque was wrongly and negligently dishonoured by the respondent bank and the complainant is entitled to the loss with interest. Issues Whether complainant is allowed to recover damages from the Bank for not honouring the cheque despite having sufficient amount? Held Respondent bank, before the National Commission, admitted that the cheque was dishonoured despite there being sufficient funds in the account of complainant enabling bank to honour the cheque and for payment to be made. However, it is submitted that the policy for which the cheque was issued was not covering the damage with regard to explosion of molasses tanks. The National Commission on question that whether the complainant is entitled to the reimbursement as claimed held that since for the loss suffered by the complainant, there was no insurance coverage. So dishonour of cheque by the bank has not resulted on loss of reimbursement from the Insurance Company. Therefore, it would be difficult to 10 Case Laws on Banking 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 Neel kant ha Jute De antha al Deal ers vs. C alers ent entrral B Cent ank of In Bank Inddia & Anr Anr.. I (200 7) CP (2007) CPJJ 11 1177 (NC) (NC) Fac actts Respondent Bank issued a letter of credit on 1.1.1992 for a sum of Rs.6,50,000/- to make payment of invoices of jute to be supplied to Respondent No.2. The last date of presentation of documents was fixed for 24.3.1992 and thereafter extended to 24.6.1992. The complainant invoked the letter of credit and the bills were submitted on 22.9.1992. Out of eight bills, only one bill was paid and seven bills were returned by letter dated 21.10.1992 which was received on 29.10.1992. These seven bills were returned on the ground of cuttings and overwritings within 24 hrs of receipt of the letter, complainant submitted fresh bill receipts and requested for payment but the respondent bank refused to honour the same on the ground that letter of credit had already been expired on 24.9.1992. Complainant filed complaint before the State Commission. By majority of two members, the State Commission held that there was no deficiency as undisputed documents were honoured but alteration in the bill created doubt and thus, dismissed the complaint, whereas the President of the State Commission took the view that on the basis of documents filed, it was not possible to decide the point of deficiency in an effective manner and rejected the complaint taking view that the matter could be dealt by civil court. Feeling aggrieved by the dismissal of the complaint, complainant filed present appeal before the National Commission. Issued Whether a Bank can be held liable for deficiency for not following the terms of UCPDC? Held The National Commission held that if the respondent Bank suspected the genuineness of the invoices only on the basis of suspicion, it could not have rejected in terms of the judgment of Supreme Court. If the documents sent on 17.9.1992 & 22.9.1992 were received by the Central Bank of India, the documents were presented in stipulated time i.e. before 24.9.1992 and if all the parties were at Calcutta, they could have been easily contacted on phone or on fax etc. instead of waiting for nearly a month before sending the letter of credit and rejecting the documents on 21.10.1992. The State Bank of Bikaner and Jaipur had its office at 14 NS Road, Calcutta 12 Case Laws on Banking 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 Allahabad Bank vs. Shiv Swarup Srivastav I (200 7) CP (2007) CPJJ 2221(N 21(NC) 21(NC) Fac actts Complainant invested Rs.35,000/- in a fixed deposit for a period of one year on 11.11.1992 with the Petitioner bank. After maturity period the Petitioner Bank refused to pay the maturity amount. Complainant filed complaint before the District forum praying for refund of maturity amount alongwith interest. Before the District forum petitioner Bank submitted that complainant was also holding a saving account with petitioner bank. Amount of Rs.20,000/- on 16.5.1991 and Rs.10,000/- on 10.2.1992 were not actually deposited in that account and the enteries made in pass book and ledger book in regard to deposit of these two amounts were fabricated with the help of one of its employee Sh. Ram Gopal Srivastava. Though he was not authorized to receive or deposit money in cash but complainant in collusion with said employee got the enteries of deposit of Rs.20,000/- & Rs.10,000/- made in the pass book and ledger book and issued FDR of Rs.35,000/-. The said employee found to be guilty and sentenced to undergo imprisonment in a criminal case. As on 11.11.1992 an amount of Rs.35,614.10 was lying in credit in the said account including the said amounts and FDR of Rs.35,000/- was issued after transferring money from the saving account. Thus, the liability to pay the amount denied as the transfer of money from saving account was without consideration and the enteries of the said two accounts made in the pass book and ledger book were fictious and the bank cannot be held liable for the fraud committed by the employee and made to pay the awarded amount. The District forum rejected the contention of Petitioner bank and held liable for deficiency in service. On appeal, the State Commission dismissed the appeal. Against dismissal order Petitioner bank filed the present Revision Petition before the National Commission. Issues Whether Bank is liable to pay the amount of the fixed deposit with interest despite the fact that the fraud was committed by complainant in collusion with its own employee? Held The National Commission held that in absence of evidence to the effect that complainant got the fictious enteries of two amounts of Rs.20, 000/- and Rs.10,000/ - made in the pass book and ledger book and issued FDR of Rs.35,000/- in collusion 16 Case Laws on Banking 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 Allahabad Bank vs. JDS Electric Company I (200 7) CP (2007) CPJJ 22770 (NC) (NC) Fac actts Complainant was sanctioned with cash credit facility of Rs.2,00,000/- on 14.2.1997 which was increased to Rs.3,50,000/- on 25.11.1998 by the petitioner bank. To secure that facility complainant hypothecated the stocks of finished goods, semi- finished goods, raw material, goods in process, plant and machinery/equipment, etc. with Petitioner Bank. The Petitioner Bank from the very inception getting the stocks and equipment, etc. insured and debiting the premium amount in the account of respondent. Due to fire in the premises of the complainant, he suffered loss of more than four lacs. Complainant filed complaint against the Petitioner bank alleging deficiency in service as the Petitioner bank failed to insure the stock and equipments of the complainant. Petitioner Bank contested the matter on the ground that under hypothecation agreement it was the responsibility of the complainant to take insurance of the hypothecated goods and after taking insurance supply copy of policy to the bank. District forum allowed the complaint. On appeal the State Commission dismissed the appeal. Against dismissal order Allahabad Bank filed Revision Petition before the National Commission. Issues Whether the Bank is liable for deficiency in service in the circumstances when under the hypothecation agreement loanee himself is required to take insurance on hypothecated goods and supply the copy of policy to Bank? Held The National Commission after hearing both the parties came to the conclusion that for preceding two years the stock and equipment, etc. were got insured by the Petitioner Bank and premium amount debited in the account of respondent. No notice was given calling upon the respondent to get the hypothecated stocks and equipment, etc. insured directly for the subsequent year in which occurrence took place. No illegality or jurisdictional error in the orders passed by fora below holding petitioner bank to be deficient in service on ground of its not having got insured the hypothecated stocks and equipments, etc. Revision Petition dismissed. 18 Case Laws on Banking 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 Shanti Devi vs. Bhojpur Rohtas Gramin Bank IV (2006) CP CPJJ 83 (NC) (NC) Fac actts The husband of the complainant opened one Bank account on 12.11.1997 in his own name with the Respondent Bank. After few days, complainant was also joined as an account holder with the mandate ‘either or survivor’. After some time due to family dispute, both of them withdrew the mandate of ‘either or survivor’. After the death of the husband of the complainant Bank asked for succession certificate in order to allow operation of the account. Complainant filed complaint before the District forum on the ground that the complainant could operate the account alone being a survivor or being a joint account holder and the respondent bank should not ask for succession certificate. The District forum directed the respondent Bank to allow complainant to operate the account. Against the order of the District forum respondent Bank filed appeal before the State Commission. The State Commission allowed the appeal. Aggrieved by the order of the State Commission, complainant filed Revision Petition before the National Commission. Issues Whether a Bank can be hold liable for deficiency in service in safeguarding its own interest and asking the complainant for succession certificate? Held The National Commission upheld the view of the State Commission and held that the State Commission was justified in holding that the Bank could not allow operation of the account by one of the account holders alone without there being succession certificate and in case the Bank would do so, it may face litigation later on which may be initiated by the other legal heirs of the deceased. However, a solution-cum-justice oriented approach is need of the hour. If other heirs of the deceased give consent on an affidavit on due identification and have no objection, then the Bank should release the amount in favour of the complainant along with other heirs or should allow the complainant Petitioner to withdraw 50 per cent amount from the Bank account after taking an indemnity Bond from her to safeguard the interest of the Bank, as well as other legal heirs. Revision Petition disposed of. Case Laws on Banking 21 American Express Bank Ltd. vs. Narender Kumar Rai IV (2006) CP CPJJ 116 61 (NC) (NC) Fac actts Complainant purchased traveller cheques amounting to 10,000 USD on 9.6.2001 and again of 2,000 USD on 9.7.2001 at Novosibrisk City of Russia, while he was returning from Russia to his home country India. After reaching India, while the complainant was coming to Patna from Delhi through Rajdhani Express, he lost his hand bag containing traveller cheques alongwith other valuable documents including passport, etc. Complainant lodged complaint at Patna on very next day and also immediately informed the Traveller Cheque Related Service about the loss of the Travellers cheques and filed claim in the office of appellant Bank. Despite completing the claim format, sent by appellant Bank, appellant Bank disapproved the claim of the complainant without assigning any reason. Complainant filed complaint before the State Commission. The State Commission directed the appellant Bank to issue duplicate traveller cheques of 12,000 USD in lieu of lost cheque with interest. Feeling dissatisfied by the order of the State Commission, appellant Bank filed appeal before the National Commission. Issues Whether the State Commission, Patna has jurisdiction to entertain the complaint? Whether the bank is liable for deficiency in service for repudiating the claim of its customer in respect of loss of traveller cheques? Held The National Commission held that if bag was lost at Patna station, the cause of action had arisen at Patna and within the jurisdiction of the State Commission, Patna. It cannot be said that the State Consumer Disputes Redressal Commission, Patna has no jurisdiction. In order to deny the claim, the opposite parties are trying to find unnecessary faults. It is not a case of isolated loss of traveller cheques alone, the complainant had also lost his passport and valuable articles kept in the bag. It is not a case that all reasonable information was not included in the FIR and in the report sent. There is no dispute in the fact that the complaint was immediately lodged with the Railway Police and in the claim form with affidavit, he mentioned that no amount of traveller 22 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 Bank of India & Ors. vs. Chinmay Barik & Ors. III (2006) CP CPJJ 2299 (NC) (NC) Fac actts Complainant with a view to start an oil processing unit, obtained a term loan from Orissa State Financial Corporation and also got sanctioned ‘working-capital’ limit of Rs.1,00,000/- from the appellant Bank. The bank released Rs.10,000/- as loan to the complainant on 13.6.1988 and the same was repaid on 3.2.1989 & 12.4.1990 but the bank failed to release ‘working-capital-limit’ of Rs.1,00,000/- to the complainant due to which his unit became sick and the complainant filed complaint before the State Commission. The State Commission hold the appellant bank deficient in service and allowed the complaint with compensation of Rs.10,000/-. Feeling aggrieved by this order appellant bank filed appeal before the National Commission. Issues Whether the act of Bank in not honouring its commitment of releasing balance loan amount to the complainant amounts to deficiency in service? Held The appellant bank submitted that no deficiency in rendering service could be fastened on them as they were not expected to advance loan to a unit which was closed. The complainant repaid his earlier loans and since the unit was closed and therefore, they did not release any further instalment of loan to the complainant. The National Commission held that in the meeting held on 16.11.1998 the Dy. GM of the appellant Bank committed to release Rs.10,000/- to the unit and the subsequent instalments were to be released after verification of stock. Not honouring this commitment would amount to deficiency in service on the part of the appellant. Further, if they had any reservation that the unit was closed or electricity was not there, then all these points should have been raised in the meeting where all concerned parties were present including the District Industrial Centre, Orissa State Financial Corporation Bank and Ors. The assurance in this meeting was categorical on the part of the appellant that the instalment would be released and not honouring this would be a case of deficiency in service. Appeal dismissed. Case Laws on Banking 33 Ashok Kumar Kalra vs. Allahabad Bank III (2006) CP CPJJ 334 4 (NC) (NC) Fac actts Complainant took loan of Rs.1,50,000/- for purchasing a tractor and mortgaged one land measuring 74 kanals for the purpose of securing loan. As per Hypothecation agreement dated 7.1.1996 the Insurance premium of the tractor was to be paid by the respondent bank and debited into the account of the complainant. The complainant’s tractor on 5.9.1997 met with an accident wherein one person died and the complainant had to pay Rs.69,000/- by way of compensation to the father of the deceased before MACT. On lodging claim before Insurance company, it was repudiated by Insurance Company on the ground of non-payment of premium. Complainant filed complaint before the District forum alleging deficiency in service against respondent Bank. Before the District forum, Respondent bank took plea that under Para IX of hypothecation agreement it was the duty of the Petitioner to pay the premium and not the duty of the respondent bank to get the tractor insured and pay premium. The District forum accepted the complaint with a direction to the respondent bank to pay Rs.69,000/- with interest @10 per cent p.a. Respondent Bank filed appeal before the State Commission which allowed the appeal. Against the order of the State Commission, complainant filed Revision Petition before the National Commission. Issues Whether Bank can be held liable for negligence for not getting the tractor insured? Held The complainant/petitioner before the National Commission submitted that on the asking of petitioner the respondent bank had earlier paid premium to the Insurance Company. The National Commission rejected the submission of the Petitioner and held that bare reading of Hypothecation agreement it was primarily the obligation of the Petitioner to have got the tractor insured and premium paid. The Petitioner did not issue any instruction to the bank to obtain insurance of the tractor for the relevant period and debit the premium amount in his account. Revision Petition dismissed. 34 Case Laws on Banking Tirupati Agencies vs. HSBC Bank & Ors. III (2006) CP CPJJ 37 (NC) (NC) Fac actts Complainant was awarded with an overseas contract for consignment of 2300 dozen of goods of children garments in Jeddah, Saudi Arabia. Foreign buyer obtained a documentary credit no. DCBJD 100149 dated 22.1.2001 for USD 37,300.00 issued by Saudi British Bank, Saudi Arabia in favour of the complainant. The documentary credit in their favour was in accordance with the terms of Article 7(A) of UCP 500 which was received by Respondent Bank on 23.1.2001. Respondent Bank entrusted the job of delivery of the said letter of credit to their agent, an authorized courier M/ s First Flight Courier Ltd. for onward delivery of letter of credit to the complainant on 24.1.2001. Inspite of all the correct details given regarding the particulars of the office address, Courier Company returned the said envelope containing the L/C to the Respondent Bank with the remark that party shifted to unknown place. Based on report of the courier company, Respondent Bank informed the foreign buyer that the complainant is unreachable. The respondent bank did so without ascertaining from the complainant. On receiving such report foreign buyer become suspicious about the very existence of the firm and cancelled the L/C immediately. Complainant filed complaint before the National Commission claiming payment of an amount of Rs.17,35,000/- for loss arising out of loosing foreign consignment transaction. Issues Whether Bank can be held liable for deficiency in service when the conduct of the complainant itself dubious in not sending consignment within scheduled time despite having knowledge that L/C cannot be cancelled unilaterally by the Bank. Held Respondent bank before National Commission submitted that the letter of credit was received on 23.1.2001 and they delivered the same to the complainant at the address mentioned in the letter of credit but courier company was unable to deliver the said letter of credit to the complainant as complainant was not present at the said address. Courier company made various efforts to deliver the said L/C to the complainant and finally returned the same to the respondent bank on 5.2.2001 and thus, constrained to inform the issuing Bank i.e. Saudi British Bank on 6.2.2001 about the non-delivery of the L/C under the bona-fide belief that the complainant Case Laws on Banking 35 must have moved away from that address to an unknown address. Further, L/C was duly received by the complainant on 26.2.2001. The issuing bank of the L/C gave a message on 28.2.2001 asking for cancellation of the said L/C. Complainant was informed on 19.3.01 that Saudi British Bank (SBB) had asked them to return the L/C for cancellation with the consent of beneficiary i.e., the complainant but the same remained unreplied. National Commission agreeing with the submissions of the Respondent Bank held that respondent Bank on 4.5.2001 sent a letter to the complainant explaining that once L/C is issued and received by the beneficiary, it cannot be cancelled by the issuing bank, without the consent of the beneficiary but the same remained unreplied. The said L/C was received by the complainant on 26.2.2001. He had ample time to supply the garments before the expiry of the last date and shipment i.e. 21.4.2001 and then SBB was legally bound to honour the L/C. Hence, for reasons best known to the complainant he preferred not to supply garments and hence, he is responsible and liable for the loss, if any. It is an admitted position that as per law once the L/C reached the beneficiary the issuer cannot unilaterally cancel the same. Respondent bank rightly informed the same by a reminder to the complainant and the complainant did not bother to send the consignment within the time frame of L/C nor did he reply to the letters written by O.P.No.1 complainant at a later stage cannot take a view that O.P.No.1 had hurriedly sent a message to the issuing bank. In the light of the complainant’s own conduct, the so-called intention to export seems questionable. The consequential damages he has claimed cannot be awarded as there is no deficiency in service by O.P.No.1. Complaint dismissed. 36 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 Om Prakash vs. Allahabad Bank, Daliganj Branch, Lucknow III (2006) CP CPJJ 41 4188 (NC) (NC) Fac actts Complainant approached the respondent Bank on 8.8.2004 for the renewal of FDRs though the date of maturity was in the year 1995 and 1997. Complainant filed complaint before the District forum with a prayer to direct the respondent Bank to pay interest prevailing in the year 1995 and 1997. The District forum vide its order dated 30.6.2004 directed the respondent Bank to pay the amounts of 3 FDRs with interest prevailing at the relevant period for saving bank accounts. Complainant and the Respondent Bank preferred appeals before the State Commission. The State Commission dismissed the appeal of the complainant relying on the circular dated 7.6.2001 issued by RBI binding on all banks in India as per which renewal of overdue term deposit at the rate of interest prevailing on the date of maturity be allowed only for an overdue period of 14 days. In case, the overdue period exceeds 14 days if the depositor places entire amount of overdue deposit or a portion thereof as a fresh term deposit, banks may prescribe their own interest rate for the overdue period on the amount so placed as a fresh deposit. Banks, however, have to inform the depositors in advance of their policy for renewal of overdue deposits. Against this dismissal order complainant filed Revision Petition before the National Commission. Issues Whether Bank can be held liable for deficiency in service for not granting rate of interest on the renewal of overdue FDR prevailing on the date of maturity? Held The National Commission relying on circular dated 7.6.2001 held that renewal of overdue term deposit at the rate of interest prevailing on date of maturity, can be allowed only for overdue period of 14 days and thereafter interest rate is to be calculated for 15 days on date of presentation of FDRs for renewal. Petitioner, thus could not have been allowed interest prevailing in 1995-1997. Revision Petition dismissed. Case Laws on Banking 39 Debabrata Mukherjee vs. Allahabad Bank & Ors. III (2006) CP CPJJ 44223 (NC) (NC) Fac actts Complainant alongwith two others opened a joint current ‘over Draft’ A/c and a FDR of Rs.22,000/- and 208 shares of ITC Ltd. in the name of one Ms. Pratima Mukherjee was given as security to the United Industrial Bank Ltd. The United Industrial Bank Ltd. was taken over by the respondent Bank. On 31.10.1989 the complainant received a letter showing an outstanding amount of Rs.45,135/- after adjusting amount of FDR for which no information was given to the complainant. Complainant pointed out to the respondent bank that amount of interest calculated on FDR was not taken into account on the other hand respondent bank threatened to sell the pledged shares and actually sold on 12.7.1991 and this amount was not shown as ‘credit’ in favour of the complainant. Complainant filed appeal before the State Commission. The State Commission directed the appellant Bank to refund Rs.302 shown as excess in favour of the complainant alongwith compensation of Rs.10,000/-. Aggrieved by the order both complainant as well as Allahabad Bank filed two separate appeals before the National Commission. Issues Whether the Bank can be held liable for deficiency in service for not informing the complainant about adjustment of the amount of FDR in his account and raising further demands? Held The National Commission held that the State Commission rightly held that the shares were held in the name of Pratima Mukherjee (since expired) and the complainant had no right to sell the shares even if they were to be released in his favour. Since the complainant had no authority to sell the shares standing in the name of the deceased, hence it cannot be held that the complainant under went any loss in view of non-sale of the shares. Shares were kept as security on over draft obtained by the complainant and they were returned after the outstanding dues were liquidated, hence rightly held by the State Commission on this account no deficiency can be fastened on the part of the bank. Further, the very fact that the Bank did not inform the complainant about adjustment of the amount of FDR in the name of the complainant, along with 40 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 Canara Bank vs. Agnes D’mello I (2006) CP CPJJ 8 (NC) (NC) Fac actts Appellant Bank provided locker No.37 to the Complainant on 7.5.1987. On 12.5.1987, the complainant alongwith her sister-in-law went to the bank and deposited jewellery in the said locker and locked the locker. After assuring themselves that the locker was properly locked and further after verifying that the lock of the locker was properly locked and then went home. On 11.6.1987 the complainant went to Muscat. The Manager of the Bank vide letter dated 13.8.1987 informed her sister-in-law that the locker was found opened and the jewellery kept in the locker was found missing. She filed FIR with the Police. The complainant sent letters to bank but the bank did not properly respond to it. Ultimately after coming from Muscat on 9.5.1988, complainant surrendered locker’s key to the bank and also filed complaint before the State Commission. The State Commission directed the appellant bank to pay Rs.1,12,500/- for the loss of ornaments kept in the locker with 18 per cent p.a. interest. Against the order of the State Commission, Petitioner Bank filed appeal before the National Bank. Issues Whether the Bank is liable to compensate the customer the loss of ornaments? Held The National Commission held that insofar as the question of deficiency in service is concerned, a person who provides a locker just virtually undertakes to ensure safety of the valuables kept in the locker. Without master key the locker could not be opened. After it is locked the person who looks after the locker is supposed to see before leaving the office that all the lockers are properly locked. Room of the locker is also supposed to be properly locked to ensure safety. If the locker Manager fails to discharge his duty to ensure safety of the locker room and lockers containing articles and valuables kept therein then the locker Manager and the concerned bank cannot be absolved until and unless a robbery or dacoity takes place at gun point by breaking open the locker. In view of the statement of official of the Godrej Co. the key of the consumer could not be taken out without locking the locker. There is undisputed evidence that the locker was locked and it was verified by the complainant and her sister-in-law, in view of the statement of the complainants, for the sake of argument it is taken for granted that it might have 42 Case Laws on Banking 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 Mahad Co-operative Urban Bank Ltd. vs. United In nited Inddia Insuran ancce C Insuran Coo. Ltd. & Anr Anr.. I (2006) CP CPJJ 444 4 (NC) (NC) Fac actts M/s Ibrahim Ahmed Taj & Co./Akil Ibrahim Taj was engaged in purchase and sale of dry fishes at Mahad, Maharashtra. Storing their goods in three stores/godowns and took three insurance policies from Respondent Insurance Co. covering risk against flood of Rs.30 lacs, 10 lacs & 15 lacs w.e.f. 25.3.1987 to 25.3.1988. Due to heavy flood & rain on early hours of 19.8.1987 dry fishes being sensitive to water started striking. Under the direction and supervision of the officials of Mahad Municipal Council, dry fishes stored in three godowns were removed and thrown into river. The surveyor appointed by Insurance company assessed loss at Rs.52 lacs, however, Insurance company repudiated the claim. On the other hand, Sangli Bank Ltd. through its Mahad branch instituted various proceedings for recovery of loan amount against the complainant. Under a Tripartite agreement dated 9.6.1992 between Sangli Bank Ltd. and complainant and the Akil Ibrahim Taj, complainant paid an amount of Rs.48 lacs to the Sangli Bank Ltd and the O.P.No.2 M/s Akil Ibrahim Taj transferred all its actionable claims in favour of complainant Bank. In complaint by Ibrahim Taj against repudiation, the National Commission directed insurance company to pay compensation of Rs.18 lacs in full and final settlement. The Supreme Court dismissed the appeal on the ground that LRs of Ibrahim Taj not pursuing the matter before the National Commission. Mahad Co-operative Urban Bank Ltd. filed fresh complaint before the National Commission based on the same three policies. Issues Whether a fresh complaint filed by bank based on same three policies could be maintainable despite the fact that the earlier complaint based on these same three policies was disposed of by the National Commission? Held The National Commission held that earlier complaint based on three policies of Rs.30 lacs, 10 lacs and 15 lacs disposed of by this commission by order dated 8.9.2000 awarding compensation of Rs.13 lacs in full and final settlement to O.P. No.2. Appeal filed by O.P.No.2 against that order was dismissed by the Supreme Court. Again based on same three policies, a fresh complaint would not be maintainable and thus deserves to be dismissed. Complaint dismissed. 44 Case Laws on Banking Allahabad Bank, Bhopal vs. Ranbir Singh Bhadoriya I (2006) CP CPJJ 994 4 (NC) (NC) Fac actts Complainant was availing locker facility on hire with Petitioner Bank bearing No.138. On 18.5.1998 when the complainant visited the Petitioner Bank to operate the locker, Mohan Lal Verma, officer of the bank went inside the locker room alongwith the complainant. While the complainant was trying to open the locker, he noticed that it was broken and empty and all ornaments kept therein were missing. Immediately an FIR was lodged with Habibganj Police Station. When the Petitioner bank did not settle the claim of the complainant of total cost of ornaments amounting to Rs.4,35,260/- complainant filed complaint alleging deficiency in service against Petitioner Bank. The District forum allowed the complaint, which was affirmed by State Commission on appeal. Against this order of the State Commission Petitioner Bank filed Revision Petition before the National Commission. Issues Whether Bank is deficient in service for not taking immediate steps as per instructions No.6.3, 9.1 & 9.2 in chapter 16 of the Mannual of Instructions governing operation lockers? Held The National Commission the contentions of Petitioner Bank which submitted that complainant mischievously removed the four bolts of the locker from inside remained, removed the contents thereof and went away closing the locker without key on 18.1.1997 and held that if the locker was closed without key after removing the contents thereof by the respondent/complainant, the Petitioner bank should have detected that fact on inspection of the locker immediately after it was used by the respondent as also on physical verification of locker at the end of day on 18.1.1997 as required by instructions dated 6.3, 9.1 & 9.2 in chapter 16 of the Mannual of Instructions governing operation of lockers. Respondent operated the locker after a gap of 16 months. In case the respondent wanted to falsely make out a case of theft of jewellery from locker, he would not have waited for the said period after operating locker on 18.1.1997. Revision Petition dismissed. Case Laws on Banking 45 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 C.L. Khanna vs. Dena Bank IV (2005) CP CPJJ 139(N 139(N C) 9(NC) Fac actts Complainant, proprietor of Apee Industries, started small scale unit for manufacturing LPG stoves in February 1973. For financial assistance complainant approached the respondent Bank to provide facility of(i) Term Loan and (ii) Loan on hypothecation for day to day expenses. The limit sanctioned in the term loan A/C was Rs.75,000/- out of which complainant availed of Rs.44,000/- against the collateral security of the property bearing No.52-A Okhla Industrial Estate, New Delhi and for this purpose complainant pledged registered gift deed as simple mortgage duly acknowledged by the bank vide its letter dt. 19.01.1973. Complainant was also provided with overdraft facility of Rs.25,000/- in the Hypothecation A/c against the machinery and stock. The Bank was charging interest as per the term loan A/c. In 1978, the bank on an audit objection asked the complainant to furnish additional security. The complainant deposited title deed of his other residential property bearing No.11, Abdul Fazal Road, New Delhi. The outstanding amount in both the accounts of complainant in the year 1985 was approximately Rs.1,00,000/-. The complainant was prepared to pay the said amount on release of aforesaid title deeds. Since the title deeds were not returned, the loan continued and complainant continued to make regular payments towards the liquidation of his liability. In spite of repeated requests title documents pledged with the Bank were not returned. Complainant could not clear the outstanding and was forced to maintain the loan account and thus paid the interest and instalments. Despite this, complainant was asked to pay Rs.1,48,534.90 on 9.5.1995 which included Rs.1,29,158/- towards the interest from January 1985 to March 1993. Complainant on 23.11.1998 requested the bank to settle the matter without any further delay. However, in the year 2001 under the RBI guidelines the Bank offered one time settlement, the complainant insisted that his original deeds should be returned but of no avail. Complainant approached Bank ombudsman and also filed a complaint for deficiency in service before the National Commission. Issues Whether the complaint filed is barred by limitation? Whether the Bank is liable for deficiency in service? Case Laws on Banking 49 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 Deep Chand Jain vs. Bank of Baroda & Ors. III (2005) CP CPJJ 551(N 1(NC) 1(NC) Fac actts Complainant/Petitioner purchased certain shares and same were sent for transfer in the name of the complainant which required the verification of the signature of the third opposite party, for which the complainant approached the respondent No.2, verification of the second respondent related to the ‘signature, name, address and seal’ of attesting officer. While ‘signature and seal’ put in but the name and address’ of attesting officer was not entered. Petitioner sent these documents to the share broker at Bhopal for transfer but same were received back in August 1997 with the observation that the signatures of the seller are not properly attested. As the complainant/petitioner was keen to sell the shares but due to deficiency on the part of Respondent Bank lot of time elapsed within which the prices of share fell to Rs.50/- from Rs.160/- per share. Complainant filed complaint before the District forum alleging deficiency in service after long protracted correspondence. The District Forum dismissed the complaint. The State Commission, on appeal, partly allowed the complaint. Not satisfied with the relief granted, complainant filed Revision Petition before the National Commission. Issues Whether Bank can be held liable for deficiency in service for doing an act out of goodwill? Held The National Commission, confirming the view of the State Commission held that there indeed was deficiency on the part of the bank by not mentioning ‘name and address’ in the attestation form of the transfer certificate, but it is not the Bank alone who should be held responsible. Equal responsibility also rests on petitioner who should have been vigilant and should have observed the deficiency when he received the attestation form from the respondent Bank. This is not a statutory duty cast upon the bank to attest the signature, they were doing it out of goodwill. If all the claims in the attestation form were not complete then the petitioner should have taken care at the time of receiving the form that it is complete in all respects. The plea that complainant suffered loss on account of delay resulting from the incomplete attestation, does not withstand scrutiny and the bank could be faulted at was for being partly deficient in service. Revision Petition dismissed. Case Laws on Banking 53 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 Anumati vs. Punjab National Bank IV (200 4) CP (2004) CPJJ 21 (SC) (SC) Fac actts Complainant and her husband made a joint fixed deposit of Rs.20,000/- with respondent Bank on 31st May 1988 for a period of 84 months (7years) which was to be matured on 31.5.1995 and the amount payable on maturity was Rs.39,930/-. On 24th June 1988, a loan was taken by one Khem Chand for his sole proprietary business of M/s Verma Agro Industries. In 1991 the respondent Bank filed a suit against M/s Verma Agro Industries, Khem Chand and against Complainant’s husband. It was pleaded in the suit that Khem Chand and complainant’s husband had secured the loan amount by creating a mortgage in respect of immovable property consisting of agricultural land. The respondent Bank in suit prayed for a decree for Rs.2,57,625/- together with additional interest and for enforcement of the claim against the hypothecated and the mortgaged properties with a further prayer that if the aforesaid securities were found insufficient for realization of the amount payable under the decree, it may be given liberty to recover the balance from the properties of complainant’s husband and one other Nanak Chand who executed guarantee agreement on 24th June 1988. While the suit was pending complainant and her husband sent a legal notice to the respondent Bank asking for premature encashment of the fixed deposit receipt. Respondent Bank did not respond to the notice and thereafter second notice was issued through an advocate on 26.5.1995 again demanding the amount payable on maturity of the fixed deposit stating that the original FDR receipt had been lost by the complainant and her husband. Respondent Bank did not answer to this notice too. The respondent Bank on 3rd July 1995 filed an application before the court where the suit was pending informing the court that the fixed deposit receipt had been mortgaged “as security towards the disputed loan, complainant’s husband filed an objection to the Bank’s application stating that he had never given any such guarantee and that the FDR had never been mortgaged to the Bank. The trial court allowed the application of the Respondent Bank and held that the amount of fixed deposit account had rightly been adjusted in the account of the disputed loan. Complainant’s husband challenged this order of the Trial court by way of Revision application. Revisional court dismissed the application holding that same is not maintainable under section 115 CPC as amended by UP Act No.31/1978. It further held that complainant and her husband can initiate legal actions/proceedings for the recovery of the amount deposited against the Bank. The Revisional Court found as a fact that the fixed deposit receipt Case Laws on Banking 57 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 suit was yet to be quantified? Held The Supreme Court held that the contract in respect of the joint account was between the Respondent bank and the husband and wife. The FDR was not a debt due by the bank to Complainant’s husband alone which could be set off by the bank against any claim that the bank may have had against Mamchand (Complainant’s husband). Besides the right of Mamchand was to receive the money deposited only after it matured, if he survived and in case of death of complainant’s husband before maturity of FDR, the only person entitled to get money would be the appellant (complainant). This right of the appellant could not have taken away without her consent. It further held that the State and National Commission both erred in proceeding on the basis that the civil court’s decision was that the FDR had, in fact been pledged by Mamchand to the Bank. In such circumstances, the Bank had no right to refuse payment of the amount deposited to the appellant. The refusal as disclosed to this court, was contrary to banking norms. The District forum was correct in accepting and the State Commission and National Commission erred in rejecting the appellant’s complaint. Appeal allowed order of the State Commission and National Commission set aside. Case Laws on Banking 59 P un jab & Sin unjab dB Sind ank vs. Suk Bank hR SukhR hRaaj B Baajwa & Anr jwa Anr.. III (200 4) CP (2004) CPJJ 1(NC) 1(NC) Fac actts Complainant obtained one FDR for Rs.2.40 lacs on 6.2.1987 which was due on 6.8.1992 for Rs.5,13,419.99. Rs.7,28,848/- was again put in fixed deposit on 18.6.1996. On maturity after 3years the amount was to become Rs.12,71,995/-. The Petitioner Bank on being pointed out by the Local Audit that the higher rates of interest was given for the interregnum period, reduced the face value of fixed deposit to Rs.5,78,822/- giving an interest @5 per cent and not 13 per cent p.a. on the mentioned amount of Rs.5,13,419. 1990 resulting in short payment of Rs.2,61,828/- as on 18.6.1999. Complainant filed complaint before the District forum alleging deficiency in service on the part of Petitioner Bank. District forum after hearing both the parties directed the Petitioner Bank to pay Rs.2,61,828/- along with 12 per cent interest from 18.6.1999. Aggrieved by the order of the District forum both the parties filed two separate appeals before the State Commission. State Commission by common order dismissed both the appeals. Against this dismissal order of the State Commission both parties filed Revision Petition before the National Commission. Issue Whether Petitioner Bank is liable to pay interest to the complainant at the rate granted by bank inadvertently to the complainant beyond the permissible rate prescribed by the RBI? Held Before the National Commission Bank admitted their mistake and stated that it was on account of inadvertence on the part of the bank that the rate of interest i.e. 13 per cent was given for the period. The National Commission held that no Bank can go beyond the guidelines issued by RBI especially in regard to NRI accounts. Whatever might have been the terms of the contract, i.e. in FDR, RBI guidelines have to prevail. If the contract ab initio is against the authority on the subject then the contract loses its value to that extent and cannot be enforced. The deficiency albeit on account of inadvertence in giving interest @13 per cent has been admitted by the bank causing loss and agony to the complainant. Bank is directed to pay Rs.50,000/- as compensation for the deficiency on the part of Petitioner Bank. Revision Petition of complainant dismissed. 60 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 Swadeshi Polytex Ltd. vs. Central Bank of India & Ors. III (200 4) CP (2004) CPJJ 447(N 7(NC) 7(NC) Fac actts Complainant company was carrying on business of manufacturing and marketing polyester staple fiber and same was sold under the trademark ‘Jailene’. Complainant received an order by telex on 30.12.1994 from opposite party No.4 – Shri Minakshi Mills Ltd. for supply of Jailene PSP. On 21.1.1995 opposite Party No.4 confirmed the order after accepting the terms and conditions put forward by the complainant where in it was written that the term of payment would be sight L.C. and opened on 19.4.1995, an irrevocable without recource at sight letter of credit in favour of the complainant through Central Bank of India, Madurai Branch, opposite Party No.2 for Rs.66 lacs Subsequently, this L.C. was amended on 7.6.1995 as per which complainant was required to submit certain documents to opposite Party No.2 i.e. bank for claiming payment. The complainant submitted documents as per the terms & conditions of the amended LC. through its Bank–Opposite Party No.3 which were forwarded by them to the Central Bank between 17.6.1995 & 10.7.1995 before the date of expiry of validity of LC which was up to 15.7.1995. When the complainant did not receive payment despite submitting of documents complainant and its banker took up the matter with Central Bank of India opposite Party No.2. Central Bank of India intimated the complainant through telex message dated 27.6.1995 about some discrepancies in the documents submitted by the complainant and a letter dated 18.7.1995 to the opposite Party No.4 (Shri Mirakshi Mills Ltd.) pointing out said discrepancies in the documents which were waived out by them and requested vide its letter dated 21.7.1995 to the bank to accept the documents and effect payments of the bills. Despite various correspondence between the parties and re-submission of documents as required Central Bank of India did not release the payments to the complainant and again returned the documents along with covering letter dated 9.10.1995 advising the complainant to take up the matter directly with the ordering company. Aggrieved by the actions of opposite party–Central Bank of India, complainant filed complaint before the National Commission alleging deficiency in service. Issues Whether the bank is liable for deficiency in service for refusing to honour the letter of credit despite having received intimation regarding waiving off all the discrepancies by the ordering party? Case Laws on Banking 63 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 Ratnachand Morakar vs. Bank of Maharashtra, Bombay II (200 4) CP (2004) CPJJ 225(N 5(NC) 5(NC) Fac actts Complainant on 10.8.1990 deposited Rs.1,50,000/- & Rs.1,20,000/- with the respondent Bank for the issuance of pay order and a demand draft to be issued in favour of M/s Pratap Rajasthan Special Steel Ltd., Jaipur and M/s Indian Enterprises. Subsequently, the pay order of Rs.1,20,000/- was cancelled by the respondent bank and issued in favour of one M/s J.K. Industries for which complainant did not authroise to any one i.e. neither for canceling the pay order and than for the issuance of in favour of M/s J.K. Industries. Complainant was making regular enquiry with regard to encashment of the said pay order. Respondent Bank vide its letter dated 4.11.1991 issued a certificate that pay order was issued in favour of M/s Keshri steel Ltd., Bombay. On enquiry from M/s Keshri Steel Ltd., it was found that it had not received the pay order. Complainant kept on making enquiries but bank gave no response, then complainant vide its letter dated 7.4.1993 following with reminder dated 26.4.1993 asked the respondent bank to resolve the matter by either issuing fresh pay order or to credit Rs.1,20,000/- in his favour. Thereafter, Respondent bank disclosed to the complainant that the said pay order was cancelled on 30.11.1990 and a new pay order for the said amount was issued is favour of one M/s J.K. Industries. Complainant filed complaint before the State Commission against respondent bank for deficiency in service. The State Commission, dismissed the complaint and arrived at conclusion that on the instructions of the manager of the bank, the payment in favour of Keshri Steel Ltd. was withheld and fresh pay order was issued in favour of M/s J.K. Industries. Complainant challenged the order of the State Commission before the National Commission by way of present appeal. Issue Whether Bank is deficient in service for canceling the pay order and than issuing it in favour of other party? Held Before the National Commission respondent Bank submitted that complainant (a partnership firm) was having their current account with the Bank and he had authorized their representative Ms. Lalit Seth to deal with same account. It is the representative of the complainant who approached the respondent bank for issuance of the pay order by filling in the request form on 10.8.90 in favour of M/s Case Laws on Banking 65 Keshri Steel Ltd., Bombay. Thereafter, one authorized representative of the complainant wrote a letter dated 20.10.1990 addressed to the Manager, Bank of Maharashtra to cancel the pay order and issue a fresh pay order for the said amount in favour of M/s J.K. Industries. Along with the said letter, he also produced the pay order dated 10.8.1990. On the basis of said letter, Respondent Bank cancelled the pay order dated 10.8.1990 and issued fresh pay order in favour of M/s J.K .Industries, as requested, the National Commission considering the submission of the respondent Bank held that the action of the Bank was in good faith on the basis of the instruction of the authroised representative and in any case if authroised representative had done something wrong complainant should take action against Authroised Representative and not against the Bank. Appeal dismissed. 66 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 agreed to participate in lending programme to the beneficiaries sponsored by the complainant, the programme continued and complainant kept on depositing the seed capital money. The seed amount was not fixed deposit as understood in usual sense and therefore, bank has rightly marked its general lien on the “seed capital”. After hearing both the parties the National Commission held that prima facie, it was a joint commercial venture between complainant and the bank to give loan as per ‘Differential Interest Rate” Scheme and therefore, the complainant cannot be said to be a consumer and would not be a fit case for deciding under the Consumer Protection Act and requires to be dismissed. Complaint dismissed. 68 Case Laws on Banking ABN Amro Bank vs. Sangeeta Srivastava II (200 4) CP (2004) CPJJ 2289(N 89(NC) 89(NC) Fac actts Complainant purchased a Tata Indica Car after taking loan from the Petitioner Bank. Loan amount was to be repaid in equal monthly instalments of Rs. 7427/-. Complainant due to financial difficulty could not make payment of instalments for three consecutive months amounting to Rs.21,741/-. Due to default Petitioner Bank forcibly took possession of the car despite the fact that the complainant was ready to pay the amount due on her account. Complainant sent a notice on 25.11.2002 to the Petitioner bank which was replied back by letter dated 2.12.2002 by the Petitioner bank with false averments. Complainant in such circumstances filed complaint before the District forum against the Petitioner bank. Petitioner bank was proceeded ex-parte as it failed to put in appearance despite service of notice. District forum in its ex-parte order directed the Petitioner bank to refund Rs.65,223/- (margin money) to the complainant. Petitioner bank filed an appeal before the State Commission. The State Commission dismissed the appeal of the Petitioner Bank. Against the dismissal order passed by the State Commission Petitioner Bank filed Revision Petition before the National Commission on the ground that complainant is not entitled to the refund of margin money amount. Issue Whether the District forum rightly proceeded ex-parte against the Petitioner Bank? Whether Bank is liable to refund the margin money to the complainant? Held The National Commission on the issue of non-service of notice held that court file shows that notice was sent by post to the Petitioner on 1.5.2003 and an entry to that effect was made at serial No.2447 in the Despatch Register for postal dak. Notice was sent on the address of the Petitioner Bank shown in the cause title of the complaint. It is not the case of the Petitioner that the said address is incorrect. Thus, under Indian Evidence Act, 1872 it has to be presumed that the notice for 15.7.2003 was sent by the District forum and received by the Petitioner Bank. Though issue of non-service of notice was not considered by State Commission still the National Commission held that Petitioner bank was served with notice for 15.7.2003 Case Laws on Banking 69 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 Indian Export Corporation & Ors. vs. Chairman-cum Managing Dir Direecto torr, SSyy nd icate B ank & Ors Bank Ors.. IV (200 3) CP (2003) CPJJ 45(NC) 45(NC) Fac actts Complainant for starting the business of rice approached the respondent Bank for grant of loan of Rs.9,50,000/- by way of overdraft facility. Sanction for ODMS Limit in the said sum was conveyed to the complainants vide letter dated 18.8.2000 which was to be expire on 31.8.2001. Respondent Bank vide its letter dated 27.9.2000 informed the complainants about the extension of period of limit upto 31.10.2002. Complainant on the basis of extended period limit of overdraft facility placed orders for purchase of rice. Twenty five per cent of the ordered value of rice was paid to the broker in advance and 75 per cent was to be paid at the time of lifting the stocks which was to be lifted within 60 days and in case the stock was not lifted within 60 days, the money paid by way of advance was to be forfeited. The complainants paid total sum of Rs.3.9 lacs to the broker out of which Rs.1.20 lacs were drawn from the said account. Respondent Bank vide its letter dated 2.3.2001/14.3.2001 communicated their decision to the complainants about unilateral withdrawal of sanctioned overdraft facility without giving any prior notice. As a result of that action, complainants suffered loss and thus, filed complaint before the State Commission against the respondent bank alleging deficiency in service for unilateral withdrawal of OD facility without any prior notice. The State Commission dismissed the complaint with liberty reserved to the complainants to pursue remedy that may be available to them under any other law. Against this dismissal order complainants filed appeal before the National Commission. Issue Whether the State Commission was justified in dismissing the complaint on the ground that the alleged deficiency in service on the part of bank was connected with commercial purpose? Held The National Commission placing reliance on the decision of Supreme Court in Cheema Engineering Services v. Rajan Singh held that engaging a technical person for quality control, seven persons for loading and unloading gunny bags, peon and receptionist for the office as alleged in the complaint would show that alleged 74 Case Laws on Banking 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 St ate B ank of PPa Bank at iala vs. R iala Raaj en endder LLal al & Anr Anr.. IV (2003) CP (2003) CPJJ 553(N 3(NC) 3(NC) Fac actts Complainant deposited one cheque for collection on 12.5.1999 issued by Mr. V.K. Arora of M/s V.K. Industrial Corporation, Ludhiana for Rs.75,000/- dated 1.5.1999, drawn on Bank of Maharashtra Service Branch, Ludhiana, in his saving account maintained with the Petitioner Bank. On some of the visits to the branch of the Petitioner Bank complainant was informed that neither the cheque nor the amount thereof had been received. Complainant made a complaint in writing to the Petitioner Bank to know the fate of the said cheque on 13.7.1999 then the complainant was informed in writing that Petitioner had not received any intimation about the cheque from the Bank of Maharashtra. Complainant filed complaint before the District forum alleging deficiency in service on the part of the Petitioner Bank. District forum allowed the complaint ex-parte against the Bank of Maharashtra and the Petitioner Bank, State Bank of Patiala. Petitioner Bank filed appeal before the State Commission. The State Commission dismissed the appeal and affirm the order of the District forum whereby Petitioner was directed to pay the amount of cheque with interest. Against this order of the State Commission Petitioner Bank filed present Revision Petition before the National Commission. Issue Whether the Bank is liable for deficiency in service? Held The Petitioner Bank admitted the fact that the complainant deposited the cheque for collection on 12.5.1999 which was sent by the Petitioner Bank at Ludhiana Branch for the purpose of collection and Ludhiana Branch presented the cheque for clearing on 19.5.1999 by Bank of Maharashtra, Bank of Maharashtra returned the cheque same day with Memo insufficient fund, and the cheque alongwith that memo was sent by the branch at Ludhiana to the Chandigarh branch by post but it was lost in transit and therefore could not be returned to the complainant. The National Commission on this submission of the Petitioner held petitioner Bank to be liable for deficiency in service in not informing the complainant about dishonour of cheque on 19.5.1999 and its having lost in transit because on coming to know about the dishonour of cheque complainant could have initiated civil/criminal action based on the said cheque against the drawer thereof. In this backdrop, the 76 Case Laws on Banking 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 accompanied by technicalities. Merely because recording of evidence is required, or some questions of fact and law arise which would need to be investigated and determined, cannot be a ground for shutting the doors of any forum under the Act to the person aggrieved. Further Supreme Court held that the decision arrived at by the National Commission is premature. The Commission ought to have issued notice to the respondent and taken its pleadings on record. Only when the pleadings for both parties were available the commission should have formed an opinion as to the nature and scope of inquiry, i.e., whether the questions arising for decision in the light of the pleadings of the parties required a detailed and complicated investigation into the facts which was incapable of being undertaken in a summary and speedy manner. Then the commission could have justifiably formed an opinion on the need of driving away the complainant to the civil court. Mere complicated nature of the facts and law arising for decision would not be decisive. Appeal allowed matter remanded back for fresh hearing. Case Laws on Banking 79 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 Om Prakash Sahni vs. State Bank of India & Ors. II (2003) CP (2003) CPJJ 1100(N 00(NC) 00(NC) Fac actts Respondent Bank invited applications for allotment of equity shares of Rs.10/- at a premium of Rs.90/- in response to the capital issue float. Complainant applied for allotment of 100 shares each but failed to receive any allotment advice. Since there was no response from the State Bank of India, Complainant approached the District forum alleging deficiency in service on the part of respondent Bank. Before the District forum respondent Bank did not appear and the District forum on the basis of record available held that the complainants were prospective investors and hence, could not be deemed to be consumers, dismissed the complaint. Against dismissal order complainant approached the State Commission. The State Commission placing reliance on the decision of the Supreme Court in the case of Morgan Stanley Mutual Fund v. Kartik Das affirmed the order of the District forum and held further that the complainants have no case before the fora constituted under the Consumer Protection Act and can approach civil court and dismissed the appeal. Complainants approached the National Commission invoking its revisional jurisdiction. Issue Whether the complainants are Consumers under the Fora constituted under Consumer Protection Act. Held The National Commission held that complainants are not consumers, but they are only prospective investors, and remedy, if any, lies in civil court. The National Commission dismissed the revision Petition without prejudice to their right to approach civil court for appropriate remedy. Revision Petition dismissed. 86 Case Laws on Banking 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 Andhra Bank vs. Vishwapriya Financial Service & Securities Ltd. III (200 2) CP (2002) CPJJ 21(NC) 21(NC) Fac actts One concern M/s Shree Ganesh approached the respondent for discounting bills of exchange raised by it on M/s S.T.R. laboratories, Hyderabad and produced a Bank Gurantee issued by appellant Bank, Juntapalli Branch, Andhra Pradesh for a sum of Rs.5.5 lacs alongwith a letter from the appellant confirming the issuance of Bank Gurantee. Respondent believing the said Bank Gurantee discounted the bills of exchanged raised by M/s Shree Ganesh. When the respondent sent its representative for presentation of bills, no one was found at the given address and thus respondent invoked the Bank Gurantee given by appellant Bank vide its letter dated 30.8.1993. In response appellant Bank asked about the particulars of the Bank Gurantee which was furnished to the respondent as no such Bank gurantee was noted in their record and referring the matter to higher authorities and ultimately informed the respondent that the appellant Bank has not issued any such Bank gurantee to M/s Shree Ganesh. Respondents referred the matter to RBI but without any progress. Respondents filed complaint before the State Commission against the appellant Bank for not honouring the Bank gurantee. The State Commission rejected the plea of appellant Bank that Bank gurantee could be invoked only after exhausting all other remedies and directed the appellant Bank to honour the Bank gurantee holding that since the Bank gurantee was actually issued by the branch of the appellant and if the Manager of the appellant did not act bonafide then it cannot absolve the appellant Bank from its liability under the letter of gurantee. Against this order appellant Bank filed appeal before the National Commission. Issues Whether the Bank is deficient in services for not honouring the Bank gurantee issued by it? Held The National Commission after referring various judgments held that it is well settled principle of law that if the act is done in course of employment which is authorized, then the master is liable for the acts of its servant. The National Commission further held that the evidence on record well establishes that the Branch Manager acted within the normal course of his duties when he issued the Bank gurantee and the plea raised by the appellant Bank that the customer should Case Laws on Banking 95 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 Indian Overseas Bank vs. Klebert Pierre III (2002) CP (2002) CPJJ 777(N 7(NC) 7(NC) Fac actts Complainant deposited US$36, 701.33 on 16.7.1990 with Petitioner Bank for a period of 18 months @9.5 per cent interest. Later same was renewed on 20.1.1992 @10.5 per cent rate of interest, on 19.7.1993 @10.5 per cent on 17.1.1994 @4.5 per cent and on 18.1.1995 @6.5 per cent rate of interest. During audit inspection the Petitioner Bank found that the rate of interest on FCNR Account in 1992 was 6.75 per cent and not 10.5 per cent. This error was brought to the notice of the complainant and requested the complainant to forward the deposit receipt for necessary correction and re-transmission, which was refused by the complainant. The Petitioner Bank paid US$52,786.36 to the complainant after deducting excess amount paid due to clerical mistake. Aggrieved by such deduction complainant filed complaint before the District forum. The District forum allowed the complaint and directed the Petitioner Bank to pay deducted excess amount with interest. Petitioner Bank filed appeal before the State Commission. The State Commission affirmed the order of District forum. The Petitioner Bank filed Revision Petition before the National Commission. Issues Whether excess amount deducted by the Petitioner Bank amounts to deficiency in service? Held The National Commission relying on the decisions of Supreme Court and its previous decisions held that the depositor could not be paid interest at the rate higher than the maximum prescribed by the RBI which in the present case is 10.5 per cent plus one per cent i.e. 11.5 per cent and the Bank could not be faulted for reducing the rate of interest to the extent of interest prescribed by the RBI and applicable at the time of acceptance of FDRs. Revision Petition allowed; orders of both the fora below are set aside. Case Laws on Banking 99 Indo Steels vs. Central Bank of India III (2002) CP (2002) CPJJ 11552(NC) 2(NC) Fac actts Complainant is carrying on business of iron and steal and enjoying an overdraft facility with respondent Bank since 1986. While the facilities were being enjoyed by the complainant respondent bank locked the premises of the firm. Complainant filed complaint before the State Commission alleging deficiency in service on the part of respondent Bank on account of locking the premises of the firm, the reputation of the complainant suffered substantial damage. The State Commission dismissed the complaint. Against the dismissal order of the State Commission, Complainant filed Appeal before the National Commission. Issues Whether the Bank is liable for deficiency in service for protecting its own interest by locking the premises of the Loanee? Held The National Commission rejected the contention of the complainant that it suffered loss of reputation due to the action of the Respondent Bank which locked the premises of the firm without any notice to the appellant and accepted the submission of respondent Bank that the overdraft facility provided to the complainant by the respondent bank was subject to the condition that he would maintain adequate stocks to cover the dues and he was also required to submit its periodic stock statement for the reason that the complainant was overdrawing his account leading to a huge balance of Rs.40 lacs outstanding and therefore the respondent Bank insisted for adequate security and asked the complainant to regularize his accounts but when the surprise inspection conducted by the officers of respondent, the stock in the premises were hardly worth of Rs.15 lacs. Therefore, the respondent Bank, with a view to secure Bank’s interests the Bank converted the hypothecation of all movable stocks into pledge as per the terms of hypothecation agreement. After considering the terms & conditions of hypothecation agreement and the contention of the respondent Bank, The National Commission held that in view of huge outstanding which remained uncleared the action of the Bank in taking possession of the securities to protect its interests cannot be assailed. Appeal dismissed. 100 Case Laws on Banking Commander Rakesh Sharma vs. Punjab National Bank III (2002) CP (2002) CPJJ 116 65(NC) 5(NC) Fac actts Complainant, holder of a saving Account with Respondent Bank issued two cheques one for Rs.60,350/- dated 10th May 1991 & other for Rs.20,000/- dated 13th May 1991. To ensure the availability of necessary balance in his account he deposited two cheques in his account on 12th May 1991 drawn on Nankpura Branch of PNB for Rs.10,000/ - and another drawn on Bank of India, Parliament Street for Rs.6,000/-. The Respondent Bank sent the cheque drawn on Bank of India on the very next working day i.e. 13th May 1991. The cheque was cleared and credited to the account of complainant on 15th May 1991 while the other cheque could not be sent for clearing even on 14th May 1991 being an off day for Nankpura Branch & also for Motibagh Branch. The said cheque was sent for realization only on 15th May 1991 and till 16th May 1991 was not cleared. Meanwhile, both the cheques issued by complainant in favour of Air Force Naval Housing Board were presented in the account of complainant on 15th May 1991. The Bank on its own decided to clear the cheque for smaller amount i.e. for Rs.10,000/- and referred the other cheque to the drawer on account of ‘insufficient funds’. Aggrieved by this complainant filed complaint before the District forum alleging deficiency in service against the Respondent bank as the complainant was made to pay penalty of Rs.1,508.85 and had to suffer humiliation as the Air Force Naval Housing Board refused to accept cheques from the complainant in future. The District forum dismissed the complaint. Complainant filed appeal before the State Commission. The State Commission also rejected the argument of the complainant that the Bank should have returned the cheque with the remarks ‘effects not cleared’ and not on with remark ‘refers to drawer’ and dismissed the Appeal. Against this dismissal order complainant filed Revision Petition before the National Commission. Issues Whether there is any illegality or jurisdictional error in the judgement passed by fora below for not holding Bank deficient in service? Held The National Commission affirmed the order of Fora below and held that there appears to be no element of neglect or deficiency in service nor is any ground which could lead to the inference of any illegality or jurisdictional error in the judgment below. Revision Petition dismissed. Case Laws on Banking 101 Hanuman Hosiery vs. Canara Bank III (2002) CP (2002) CPJJ 22553(NC) 3(NC) Fac actts Complainant, a partnership firm applied for a loan of Rs. two lacs from the respondent Bank. Respondent Bank released Rs.75,000/- only out of Rs. two lacs to the Complainant and gave assurance to sanction further amount but did not sanction the same. Complainant filed complaint before the National Commission alleging deficiency in service on the part of Respondent Bank for not releasing Loan amount of Rs.12,5000/- out of Rs. two lacs which was promised to be given to the Complainant. Issues Whether Bank is liable for deficiency in service for not releasing loan amount of Rs.1,25,000/- out of Rs. two lacs which was promised by respondent Bank to be released to the complainant. Held The National Commission dismissed the complaint holding that when the complainant did not submit detail of estimates, requirement of working capital, proof of present overdues with Bihar State Financial Corporation, sources of raw material and arrangements for sale of finished goods, sources of margin, stock statement, etc. Therefore, there was no question of sanctioning of any further loan. An amount of over Rs.47.50 lacs claimed by the complainant towards compensation is an abuse of the process of Consumer Forum under the Consumer Protection Act. Complaint dismissed. 102 Case Laws on Banking State Bank of India vs. Ugam Singh III (2002) CP (2002) CPJJ 267(N 267(NC) 7(NC) Fac actts Complainants had a locker facility with the respondent Bank. Complainant operated his locker last on 5.12.1990 and while he came next time to operate his locker and was completing formalities for the same, he heard the Bank Manager quarrying a staff member “if this was the very person Ugam Singh whose locker was opened”. Thereafter when the complainant went into the strong room to operate his locker, he found the locker already opened and no ornaments were there. The complainant lodged an F.I.R. and also filed complaint before the State Commission for compensation from the Petitioner Bank. The State Commission held the appellant Bank liable for deficiency in service. According to the State Commission, non-production of locker ‘register’ furthered the cause of the complainant and directed the appellant Bank to pay the cost of the jewellery. Complainant filed appeal for the enhancement of the compensation and the appellant Bank filed appeal before the National Commission for setting aside the order of the State Commission. Issue Whether Bank is liable for deficiency in service when the locker found to be opened? Held The National Commission allowed the appeal filed by the bank. It is submitted by the bank that it is well established fact that locker can be operated by two keys, one of which is with the individual and the other is kept by the bank. Once the complainant says that he had locked the locker, then who and how the locker could be opened without the locker operator’s key? Whereas it is argued on behalf of the complainant that the bank has been deficient in providing service. Bank take locker charges for rendering services. As soon as locker was opened and finding the jewellery missing, complainant reported to the Bank Manager, lodged FIR with the Police but Bank did not initiate any departmental action which was must for the Bank. The National Commission after hearing arguments advanced by both the parties held that complainant is a literate and sensible person. It cannot be believed that he lent his key to close his locker and then re-opened it. It is not disputed that Case Laws on Banking 103 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 State Bank of India vs. Mohinder Sing & Ors. III (2002) CP (2002) CPJJ 2275(N 75(NC) 75(NC) Fac actts Complainant took a loan from the Petitioner Bank for the purchase of a truck in 1981, repayment of which was to be made in 50 equal instalments. Due to irregularity in repayment of instalments, the Petitioner Bank filed a civil suit to recover the outstanding amount. Complainant requested for NOC from the Petitioner Bank at the time of renewal of route permit for the truck i.e. in February, 1992, whereas the same was issued in the month of November 1992. Complainant file complaint before the District forum alleging deficiency in service on the part of petitioner bank and sought damages for non-issue of NOC for the period February 1992 to November 1992. The District forum held Petitioner Bank to be deficient in rendering services and awarded damages. Petitioner Bank filed Appeal before the Sate Commission which was dismissed. Petitioner Bank against this dismissal order filed Revision Petition before the National Commission. Issues Whether the order passed by lower Fora holding Bank to be deficient in rendering services is correct? Held The National Commission while allowing the Revision Petition held that the conduct of the complainant speaks for itself. Outstanding stretched for six years. Bank cannot be faulted for non-issue of NOC when such a huge amount was outstanding. It is the complainant who was a defaulter and could not claim the right to NOC. Complainant continue to make money by plying the truck and yet not paying the instalments, takes away his right to any help, goodwill from the Bank. Both the lower forums did not appreciate the importance of non-paying of instalments and therefore, order passed by lower forums cannot be sustained and donot find any deficiency in service rendered by the Bank. Revision Petition allowed, order passed by lower forums set aside. Case Laws on Banking 105 Virender Narang vs. M/s Syndicate Banks Ors III (2002) CP (2002) CPJJ 2279(N 79(NC) 79(NC) Fac actts Complainant, being a businessman, was availing overdraft facilities from the respondent Bank since 1995. He started availing the overdraft limit of Rs.50,000/- which was later enhanced to Rs.3.25 lacs. The complainant applied for further enhancement of the facilities from Rs.3.25 lacs to Rs.5.50 lacs. The complainant was informally informed that the enhanced limit has been sanctioned and can operate his account. On receiving such informal information complainant booked its sales of proportionately increased quantum. Later on, it transpired that the enhanced limit has not been sanctioned and received a letter from the respondent bank requiring imposition of further pre-conditions for release of the enhanced overdraft facility. Complainant filed complaint before the State Commission against the respondent bank alleging deficiency in service on account of non-granting of additional overdraft limit, he suffered serious prejudice and losses in business. The State Commission dismissed the complaint exonerating the respondent bank. Complainant against the dismissal order filed present appeal before the National Commission. Issues Whether the bank acted unreasonably in not sanctioning the overdraft facility to the complainant, making itself liable to deficiency in service? Held The National Commission after perusing the material on record relying on its precedents held that since the letter of sanction of additional facilities clearly sets out that enhancement was subject to the appellant offering some collateral security. Apart from that respondent Bank also asked the complainant to complete the formalities and execute all necessary documents. The respondent Bank further complained to the complainant that he had been diverting the sale proceeds to some other account which was in breach of the agreement for overdraft. The Bank have to exercise their discretion and act in accordance with their best judgment after taking into account various relevant factors and hence, mere failure to provide financial facility cannot be said to constitute “deficiency in service”. In the peculiar facts and circumstances of the present case, it cannot be said that the respondent Bank had acted unreasonably. Appeal dismissed with costs. 106 Case Laws on Banking Mrs. Anumati vs. Punjab National Bank III (200 2) CP (2002) CPJJ 2280(N 80(NC) 80(NC) Fac actts Complainant jointly with her husband put Rs.20,000/- in Fixed Deposit for a period of 84 months with Respondent Bank. Despite maturity of the FDR respondent Bank did not credit the FDR and adjusted the same, same being mortgaged, against the loan taken by M/s Verma Agro industries, by the husband of complainant. Complainant filed complaint before the District forum contending that the respondent has no right to adjust her half share in the fixed deposit as she is the joint holder of the fixed deposit. The District forum accepting the contention of the complainant allowed the complaint. Respondent Bank filed appeal against the order of the District forum on the ground that the husband of the complainant alone was competent to pledge the fixed deposit receipt against the loan taken from the respondent Bank and no consent of the complainant was required for the same. The State Commission referring to the form filled for fixed deposit receipt reached to the conclusion that the mode of payment was “either or survivor” which shows that on maturity payment could have been made by the respondent Bank either to the complainant or to her husband and it was not necessary that the fixed deposit should have been encashed by both the depositors and when the payment could have been made to a single individual then the Bank was at Liberty to accept the mortgage of the fixed deposit receipt on behalf of one of the depositors. Against this order of the State Commission complainant filed Revision Petition before the National Commission. Issues Whether Bank is deficient in service for adjusting the maturity amount of FDR on joint name against loan, same being mortgaged by one of them without the knowledge/consent of other? Held The National Commission affirming the order of the State Commission held that the financial institutions have every right to protect their interests by taking conscious decisions. When a respondent Bank took a conscious decision it cannot be faulted for deficiency in service. Revision Petition dismissed, order of the State Commission affirmed. Case Laws on Banking 107 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 Patna Co-operative Bank Ltd. vs. Hasmukh B. Shah III (2002) CP (2002) CPJJ 223(N 3(NC) 3(NC) Fac actts Navinchandra B. Shah placed five fixed deposits with the Petitioner Bank which were to be matured on 13.10.1989. These Fixed Deposit receipts were having printed terms at the back of each Fixed Deposit Receipt providing that: “Receipt not transferable by a endorsement. Payment to third party must be sanctioned by a letter of authority accompanied by the Receipts duly discharged.” The State Bank of India presented said five receipts on 25.6.1987 for payment before their maturity dates. At the back of these receipts, depositor had discharged by an endorsement which read as under: “I hereby authorize you to prematurely pay these Fixed Deposit Receipts to Echbee Corporation.” On receiving the same Petitioner Bank asked the original depositor for his confirmation about the said endorsement. The original depositor vide its letter dated 29.6.1987 instructed the Petitioner Bank not to pay the same as the deposits were not matured. In view of the same Petitioner Bank returned the said receipts expressing its inability to encash the same. On the very next day Petitioner Bank was served with a notice of attachment under section 132(3) of Income Tax Act attaching the amounts covered by the said Fixed Deposit Receipts. The Bank was again served with another notice from the Income Tax Officer, K-IV ward, Bombay, requiring the Petitioner Bank to pay to the Reserve Bank of India, the proceeds of the said Fixed Deposit Receipts towards income tax payable by the original depositor. It was in pursuant to the order from the Income Tax Office, the Petitioner Bank deposited the amount in the Reserve Bank of India. The complainant in October, 1993 presented the FDRs for encashment but Bank failed to encash the same. The complainant lodged a police report which was failed. It is after a lapse of almost seven years from the date of first presentation on the return of the Fixed Deposit Receipts and a lapse of little less then five years from the date of maturity of Fixed Deposit Receipts, a complaint was filed before the District forum which dismissed the complaint. The State Commission, in appeal, reversed the order of the District forum on point of limitation and condone the delay and allowed the appeal directing Petitioner Bank to pay amount of Fixed Deposit Receipts together with 15 per cent interest till the date of payment. Against this order Petitioner Bank filed Revision Petition before the National Commission. Case Laws on Banking 117 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 Arvind Sahni vs. Punjab & Sind Bank III (2000) CP CPJJ 8(S C) 8(SC) Fac actts Complainant/Appellant filed complaint before the State Commission, Chandigarh against the Respondent Bank for deficiency in service as the Respondent Bank wrongly honoured the cheque of Rs.30,000/- from the account of the complainant without verifying the sigunatures on the cheque. Since the cheque for Rs.30,000/- did not bear signature of complainant/appellant the State Commission, Chandigarh held the Bank to be deficient in service and passed a decree for Rs.34,000/-. Respondent Bank challenged the order of State Commission, Chandigarh before the National Commission. The National Commission affirmed the fact that the signatures on the cheque were not that of the appellant. Respondent Bank submitted that the amount involved has already been paid to the appellant/complainant, The National Commission directed the appellant to furnish indemnity Bond. Appellant/Complainant challenged the order before the Supreme Court. Issue Whether the National Commission is right in requiring the appellant/ complainant furnishing of an indemnity bond? Held The Supreme Court held that admittedly the cheque was not signed by the appellant/complainant and the amount involved has already been reimbursed, the National Commission erred in requiring the furnishing of an indemnity bond especially when it does not appear to be a categorical case of the respondent that there was any sort of connivance between the appellant and the forgery. Appeal allowed, part of the order of the National Commission which has required the appellant to furnish the indemnity bond set aside. Case Laws on Banking 119 Vimal Chandra Grover vs. Bank of India II (2000) CP CPJJ 11 (SC) (SC) Fac actts Complainant applied for an overdraft limit of Rs.5,00,000/- against pledge of shares of Rs.10,60,900/- to the respondent Bank. As per the terms of sanction of the overdraft limit shares were got to be transferred in the name of the Bank. In due course of time appellant/complainant paid an installment of Rs.1,45,600/- to the Bank against the overdraft limit. Overdraft amount was to be adjusted in three equal installments. Appellant vide its letter dated 23.04.1992 requested the respondent Bank to sell 500 shares of Castrol Ltd. apart from shares of other companies. After 12 days of the receipt of the letter of complainant, the Nagpur branch of respondent Bank sent a letter dated 5.5.1992 to its Head office, Bombay agreeing to the terms of the appellant set out in his letter dated 23.4.1992, Nagpur Branch vide its letter dated 29.07.1992, after receiving letter from Head office found that the shares were not in the Head office and informed the appellant/complainant that Head office was not holding shares and found lying with the Nagpur branch only and therefore could not sell the shares. In the meantime, the prices of the shares fell and thus could not be sold at the price indicated by the Complainant. Therefore, complainant filed claim for Rs.5,09,037.53 from the Bank before the National Commission.* Issues Whether the transaction between customer and bank, being a commercial activity, comes under the purview of definition ‘services’ of the Consumer Protection Act, 1986? Whether the Bank is bound to dispose of the shares on the instruction of its customer and is not liable for deficiency in service for not doing the same? Held Before the Supreme Court Respondent Bank submitted that appellant/ complainant is not Consumer within meaning of sub clause (2) of clause (d) of Sec.2 of the Act and overdraft unit provided by the bank is not, ‘service’ within the meaning ---------------------- *The National commission held that there was no significance on the part of the bank against this order. An appeal was preffered before the Supreme court. 120 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 Bade Krishnaveni vs. Canara Bank III (2000) CP CPJJ 335(N 5(NC) 5(NC) Fac actts Complainant and her mother jointly deposited Rs.22,000/- and Rs.10,000/- in fixed deposit with Respondent Bank. After the death of her mother, complainant claimed the amount of FDR standing in the name of her deceased mother which was rejected by the respondent Bank on the ground that the amount of FDR has been adjusted against loan taken by the husband of the complainant and a suit has been filed for the balance amount. Complainant filed complaint before the District Forum which dismissed the complaint with an observation that the complainant had given authorization to the Bank to adjust the FDR amounts towards the lorry loan of her husband in writing but the District Forum did not go into the question whether the complainant’s signatures on the blank paper was forged or not or whether the complainant’s husband had signed blank papers and therefore, the District Forum directed the complainant to seek redress in the civil court. The State Commission, Andhra Pradesh affirmed the order of the District Forum. Complainant challenged the order and filed Revision Petition before the National Commission. Issue Whether fora has jurisdiction to give direction to seek redress in civil courts in respect of disputed questions? Held The National Commission held that the District Forum has come to a right decision on the facts of this case. The fixed deposit made by the complainant and her mother were adjusted against the loan taken by the husband of the complainant on the authorization of the complainant and her mother. A suit for recovery of the balance amount of loan has already been filed by the Bank. The authorization was in writing which was produced before the District Forum. Whether the documents were forged as alleged by the complainant will have to be decided by some other forum. Direction given to complainant that he will have the liberty to go to the civil court to prove its case remain in force and therefore, can seek remedy in civil court in accordance with law. Revision Petition dismissed. 122 Case Laws on Banking 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) MODEL FORM OF NOTICE, COMPLAINT, AFFIDAVIT AND REPLY MODEL FORM-1 NOTICE BEFORE FILING THE COMPLAINT Name and address ................................................................................................................. (of the trader, dealer, firm, company, etc.) .................................................... ............................................................ (Complete address) IN RE: (Mention the goods/services complained of giving details) ................................................................................................................. Dear Sir, This is to bring to your kind notice that 1 had purchased………….............from your ............................... for a consideration of Rs……………………………...... paid in cash vide your cash memo/Receipt/Invoice No....................................................... (or through cheque No ........................... dated ................... drawn on ........................................bank for a sum of Rs .................... The said goods are suffering from the following defects: (i) ............................................ (ii) ............................................ etc 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) which you are liable to compensate to me. You are hereby finally called upon to (i) remove the said defects in the goods and/or Case Laws on Banking 127 (ii) replace the goods with new goods and/or (iii) return the price/ charges paid (iv) pay compensation for financial loss/injury/interest suffered due to your negligence ................................................................. (give details) in the sum of Rs ............................................ with interest @.............................. % per annum within……………………days of the receipt of this notice failing which 1 shall be constrained to initiate against you for redressal of my aforesaid grievances and recovery of the aforesaid amount such proceedings, both civil and criminal as are warranted by law, besides filing a complaint under the statutory provisions of The Consumer Protection Act, 1986 exclusively at your own risk, cost, responsibility and consequences which please note. Place…………………….. Dated............................... Sd/- .………. . . 128 Case Laws on Banking Model Form –2 -The complaint BEFORE THE HON’BLE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT ........................................................ OR BEFORE THE HON’BLE STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT ..................................................... OR BEFORE THE HON’BLE NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION AT NEW DELHI IN RE: COMPLAINT NO ........................ OF 20 ......... IN THE MATTER OF: (FULL NAME) (DESCRIPTION) (COMPLETE ADDRESS) ............... 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) Place: ................................... Dated: ................................... Complainant Through ................................... (Advocate or Consumer Association, etc.) 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. Note: Although it is not compulsory, complainant may file an affidavit in support of the complaint which adds to the truth and veracity of allegations and gives credibility to the cause. It need not be on a Stamp paper but one should get it attested from an Oath Commissioner appointed by a High Court. The format is just as simple. Case Laws on Banking 131 Mo Moddel FFo or m –3- Af Afff idav it in supp suppoor t of tthe he cco omp mpllaint BEFORE THE HON’BLE…………………..IN RE: COMPLAINT NO………….OF 20……………..IN THE MATTER OF: ………………………………………………………… ................................................................................................................................................... Complainant ...................................................................................................................................................................................... .............................................................................................................................................. Opposite party 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 Model Form –4- Reply by the trader to the complaint BEFORE THE HON’BLE …………………………………….. THE CONSUMER DISPUTES REDRESSAL FORUM/ COMMISSION AT……………………… IN RE: COMPLAINT NO…………………….OF 20…………………….. IN THE MATTER OF: ...........................................................................................................................................................................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 1. That the present complaint is wholly misconceived, groundless and unsustainable in law and is liable to be dismissed as such. The transaction question was without any consideration and free of charge. 2. That this Hon’ble Forum/ Commission has no jurisdiction to entertain and adjudicate upon the dispute involved in the complaint in as much as it is not a consumer dispute and does not fall within the ambit of the provisions of the Consumer Protection Act,1986, hereinafter called the said Act and is exclusively triable by a Civil Court and as such the complaint is liable to be dismissed summarily on this score alone. 3. That the dispute raised by the complainant in the present complaint is manifestly outside the purview of the said Act and in any event, the Act is in addition to and not in derogation of the provisions of the.............. Act. The proceedings initiated by the complainant under the Act are honest, null and void and without jurisdiction. 4. That the definitions of ‘Complainant’, ‘Complaint’ ‘Consumer Dispute’ and ‘Service’, as defined in Section 2(1) of the said Act do not cover the claims arising under the present dispute and that from the aforesaid definitions, the complainant is not’ consumer’ and the controversy involved in the complaint is not a ‘consumer dispute’. 5. That the present complaint is baseless and flagrant abuse of process of law to harass and blackmail the answering respondent. 6. That the complainant has no locus standi to initiate the present proceedings. 7. That the complaint is bad for non-joinder of necessary and proper party and is liable to be dismissed on this score alone. 8. That the complainant has already filed a Civil Suit for ................. in a court of competent jurisdiction which is pending disposal in the Court of ............. and the present complaint has become infructuous. 9. That the present complaint is hopelessly barred by limitation. 10. That this Hon’ble Forum/Commission has no territorial or pecuniary jurisdiction in as much as the amount involved in the subject-matter exceeds/is less than the limit prescribed by Section 11(1) Section 17(1)(a)(i)/Section 21(a)(i) of the Act. 11. That the present complaint is frivolous and vexatious and liable to be dismissed under Section 26 of the Act. 12. That the present complaint has not been verified in accordance with law. 134 Case Laws on Banking 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) The allegations of defect/default/negligence and/or deficiency in service are wholly misconceived, groundless, false, untenable in law besides being extraneous and irrelevant having regard to the facts and circumstances of the matter under reference. Case Laws on Banking 135 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)