Banks Ought To Take Preventive Measures To Avoid Cheque-Related Fraud Cases, Chandigarh State Commission Holds Bank Of India Liable

The State Consumer Disputes Redressal Commission comprising, U.T. Chandigarh bench comprising Justice Raj Shekhar Attri (President) and Rajesh Arya (Member) directed Bank of India to pay Rs. 6 Lakhs to an NRI who had an account in the bank which resulted in a fraud of Rs 1.33 Crore rupees. Although the State Commission didn’t hold the bank liable of the fraud but it noted that the bank failed to follow the RBI circulars regarding preventive measures against cheque-related fraud cases.

Brief Facts:

Dr. Ajay Sood (“Complainant”) held an NRO (“Non-Resident Ordinary”) account with the Bank of India (“Bank”), while residing in the USA. In May 2018, he discovered that two fraudulent debit entries had been made from his account, amounting to Rs. 98 lakhs and Rs. 35 lakhs, despite the original cheques being in his possession. He promptly reported this to the bank via email and filed an FIR with the Chandigarh Police. After significant efforts and follow-ups, the bank reversed the fraudulent transactions, with Rs. 98 lakhs credited on 10.12.2018 and Rs. 35 lakhs on 11.12.2018/-, but without any interest. Furthermore, the bank paid a minimal interest amount of Rs. 4,32,115/- on 24.10.2019. Dissatisfied with the bank's response, Dr. Ajay Sood filed a consumer complaint before the District Consumer Disputes Redressal Commission-I, Chandigarh (“District Commission”)

The District Commission dismissed the complaint on the ground that the Bank had acted promptly to reverse the fraudulent transactions, lodged an FIR with the police, and paid interest to the Complainant and hence, no liability remained on the part of the bank. Feeling aggrieved, the Complainant filed an appeal in the State Consumer Disputes Redressal Commission, Punjab (“State Commission”).

The Complainant contended that the fraudulent withdrawals from his NRO account caused him significant financial loss and emotional distress. He argued that he had spent money to certify documents at the Consulate General of India in San Francisco and for traveling within the USA to arrange documents for legal proceedings. The complainant also claimed a loss of salary due to his absence from work to deal with the legal aspects of the case.

On the other hand, the Bank argued that the complainant failed to access his account and report the wrongful transactions promptly, waiting for over two months. The bank claimed that the crime was committed by a gang of criminals who had access to the complainant's account details and cheque book. They placed responsibility on the complainant, stating that the details of the account and original cheques were in his custody.

Observations by the Commission:

Firstly, the State Commission recognized that the Complainant’s bank account had indeed suffered substantial financial losses. However, the majority of the loss, amounting to Rs. 1.33 crores, had been rectified by the Bank in December 2018. This action demonstrated the bank's commitment to address and rectify the fraudulent transactions.

Secondly, the State Commission noted that there were no allegations or evidence to suggest any involvement of bank employees in the fraudulent activities. This fact weighed in favour of the bank, indicating that the bank's internal operations were not implicated in the fraudulent debits. Furthermore, the State Commission observed that the bank had not only rectified the major portion of the financial loss but had also paid interest to the Complainant. These actions indicated a commitment by the bank to compensate the complainant for the losses he had incurred.

However, the State Commission highlighted the bank's negligence in failing to adhere to preventive measures laid out in circulars issued by the Reserve Bank of India (RBI) regarding cheque-related fraud cases. The bank's failure to follow these preventive instructions contributed to the occurrence of the fraudulent transactions. The State Commission found this failure to be a significant lapse on the part of the bank.

Consequently, the State Commission directed the Bank to pay Rs. 5,33,627/- to the Complainant as compensation for the mental agony, harassment, and financial losses suffered as a result of the bank's negligence. The bank was further directed to pay interest at a rate of 9% per annum on the compensation amount, accruing from the date of filing the consumer complaint until the date of actual payment. It was also directed to pay litigation costs of Rs. 50,000/-.

Case: Dr. Ajay Sood vs Bank of India

Case No.: A/114/2023

Advocate for the Complainant: Munish Goal

Advocate for the Respondent: Sh. Ranjeet Singh Khural

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