NCDRC Holds Axis Bank Liable For Refusing Demonetised Cash Deposit In KYC-Compliant Account, Orders ₹3.19 Crore Compensation
The National Consumer Disputes Redressal Commission (NCDRC) , Bench comprising AVM J. Rajendra, Presiding Member, and Justice Anoop Kumar Mendiratta, Member , has held Axis Bank Limited guilty of deficiency in service for refusing to accept deposits of demonetised currency in a KYC-compliant current account during the demonetisation period and directed the bank to compensate the complainant company for the loss suffered.
The Commission observed that the bank could not deny acceptance of deposits merely on the basis of internal suspicion when the account was duly verified and the deposits were attempted within the permitted period.
Brief Facts of the Case
The complainant, Procure Logistics Services Private Limited, maintained a current account with Axis Bank since 2011. On 8 November 2016, the Government of India announced demonetisation of ₹500 and ₹1000 currency notes and permitted deposit of such specified bank notes in KYC-compliant bank accounts within the prescribed period.
Following the announcement, the complainant deposited ₹8,00,000 on 10 November 2016 in its current account. Thereafter, it attempted to deposit further amounts, including ₹99,00,000 and later ₹20,00,000 on 10 December 2016.
According to the complainant, the bank resisted and declined to accept further deposits on the ground of suspicion despite the account being KYC compliant and despite the complainant informing the bank that the cash balance was supported by its audited financial records.
The complainant claimed that it repeatedly communicated with the bank through emails and made representations to the Reserve Bank of India (RBI). They also filed Writ Proceedings before the Supreme Court, which culminated in directions to the RBI to pass a reasoned and speaking order on the representations of the Complainant.
However, the bank allegedly continued to decline acceptance of the deposits. Due to this refusal, the complainant could not deposit the remaining demonetised currency amounting to ₹3,19,58,500 before the cut-off date of 30 December 2016, which according to the complainant resulted in significant financial loss.
Aggrieved, the complainant filed a consumer complaint before the National Consumer Disputes Redressal Commission (NCDRC) alleging deficiency in service.
Opposite Party's Contentions:
Axis Bank raised a preliminary objection that the complainant did not fall within the definition of a “consumer” under the Consumer Protection Act, 1986 as the current account was maintained for commercial purposes. The bank also contended that the complainant's account had been categorised as a high-risk account and that the deposits were subject to enhanced scrutiny under RBI's KYC and AML guidelines.
The bank submitted that large cash deposits during the demonetisation period required verification of the source of funds and compliance with regulatory requirements. It claimed that the complainant failed to furnish adequate documentation explaining the source of the cash and therefore the refusal to accept further deposits was justified.
Observation and Decision of the Commission
The Commission observed that the complainant maintained a KYC-compliant current account with Axis Bank and had repeatedly informed the bank about the availability of cash supported by audited financial records. The Commission noted that the Government notifications and RBI circulars issued during demonetisation permitted deposit of specified bank notes in KYC-compliant accounts within the prescribed period.
The Commission held that although banks were required to monitor suspicious transactions, they could not refuse deposits solely on the basis of internal policy or suspicion when the account was duly verified and the deposits were within the permitted period.
Accordingly, the Commission concluded that the bank's refusal amounted to deficiency in service. It directed Axis Bank to compensate the complainant for the loss of ₹3,19,58,500, along with interest at 6% per annum from 30 December 2016 until payment, which would increase to 9% per annum in case of delay.
Case Details: Procure Logistics Services Pvt. Ltd. v. Axis Bank Ltd.
Consumer Complaint No. 2755 of 2018 (NCDRC)
Appearances:
For the Complainant (s): Mr. Nalin Kohli, Sr. Advocate, Mr. Anshul Malik, Mr. Anant Bhushan, Mr. Ayushman Arora, Advocate
For the Opposite Party (s): Mr. Siddharth Dutta and Mr. Pratyush Singh, Advocates