The Jammu & Kashmir State Consumer Disputes Redressal Commission, Jammu, comprising President (O) Smt. Nighat Sultana and Member Sh. Maheep Gupta, held Jammu & Kashmir Bank guilty of deficiency in service for unauthorisedly crediting the maturity proceeds of the complainant's Fixed Deposit Receipts (FDRs) to a third-party account without a valid mandate.

The Commission observed that once an FDR is issued in a person's name, title to the deposit vests in that holder irrespective of the source of the funds, and the maturity proceeds cannot be transferred to a third party without a valid authorisation. It further found that the authorisation letter relied upon by the bank was forged and, therefore, incapable of conferring a valid mandate.

Brief Facts

The complainant, S.C. Associates, Engineers & Contractors, stated that it had invested ₹12.25 lakh in two Fixed Deposit Receipts (FDRs) issued by Jammu & Kashmir Bank, Gujjar Mandi Branch, Rajouri, which matured on 16 September 2007 with a cumulative maturity value of ₹13,76,917.

According to the complainant, when it sought payment of the maturity proceeds in May 2008, the bank informed it that the entire amount had already been credited to the account of a third party, M/s Fazal Rehman Dar & Sons Construction Corporation. The complainant asserted that it had never authorised the bank to transfer the FDR proceeds to any third-party account and denied having executed any mandate or letter permitting such transfer.

The complainant further alleged that the bank relied upon a forged authorisation letter and an endorsement on the reverse of certain cheques to justify the transfer. It contended that the bank acted in violation of established banking norms by releasing the maturity proceeds without a valid mandate from the FDR holder, causing it financial loss.

Alleging deficiency in service and unfair banking practices, the complainant approached the Jammu & Kashmir State Consumer Disputes Redressal Commission seeking payment of the FDR maturity amount along with interest, compensation for the loss suffered, litigation costs and other appropriate reliefs.

Contentions of the Opposite Parties

The bank contended that the FDRs had been created using funds provided by M/s Fazal Rehman Dar & Sons Construction Corporation and that the complainant had expressly authorised the bank, through endorsements on the cheques and a letter dated 16 June 2005, to credit the maturity proceeds to the third party's account after expiry of the bank guarantees. It further argued that its action had already been upheld by the Banking Ombudsman and that there was no deficiency in service.

Opposite Party No. 3 (M/s Fazal Rehman Dar & Sons Construction Corporation) argued that the complaint was not maintainable, contending that the banking services had been availed for a commercial purpose and that the dispute involved complicated questions relating to alleged forgery requiring detailed evidence, making it unsuitable for adjudication by the Consumer Commission.

Observations and Decision

The Commission first held that the complaint was maintainable under the Jammu & Kashmir Consumer Protection Act, 1987, observing that unlike the Consumer Protection Act, 1986, the J&K Act did not exclude disputes relating to services availed for commercial purposes. It also rejected the contention that the dispute was too complex to be decided in consumer proceedings.

On merits, the Commission held that the bank had no valid mandate from the complainant to transfer the FDR maturity proceeds to the third party's account. It observed that once an FDR is issued in a person's name, ownership of the deposit vests in that holder irrespective of the source of the funds, and the maturity proceeds can be transferred to another account only on the strength of a valid mandate. Relying on the Government Forensic Laboratory's report, the Commission found that the alleged authorisation letter dated 16 June 2005 was forged and therefore incapable of authorising the transfer. It consequently held the bank guilty of deficiency in service and violation of established banking norms.

Accordingly, the Commission allowed the complaint and directed the bank to pay ₹34,02,629 to the complainant, comprising the FDR maturity amount, compensation for opportunity loss and litigation expenses, within 30 days. Failing such payment, the amount shall carry interest at 8% per annum until realisation.

Case Title: S.C. Associates v. J&K Bank & Anr.

Case No.: C.C. No. 3145 of 2010

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