Recovery Suit Against Bank For Misappropriating Funds From Current Account Maintainable Before Commercial Court: Karnataka High Court

The Karnataka High Court has said that misappropriation of funds, or loss of funds from a customer's 'current account' maintained by a banking institution, is a commercial dispute and the customer's recovery suit against the bank is maintainable before the Commercial Court.Justice M Nagaprasanna held thus while allowing the petition filed by M/s. Viswas Textile Processors. The petitioner had approached the court against an order passed by the Commercial Court dated August 30, 2022, holding that the petitioner's recovery suit was not maintainable before it.“The suit instituted by the petitioner-plaintiff for misappropriation of funds, or loss of funds from the current account maintained by the banking institution, based on the withdrawals of money by defendant No.3 by encashing forged cheques would become the subject matter of a commercial dispute, as it is arising from the ordinary transaction between the petitioner-plaintiff and defendant No.1 - banking institution.”The petitioner–plaintiff before the trial court is a partnership firm in the business of garment processing and manufacturing.ICICI Bank Ltd. is the respondent banking institution. The petitioner had appointed an employee with ICICI Bank as its Accountant with effect from 01.07.2017, and the other respondent employees are his associates. A current account is maintained at the branch of ICICI Bank for several years. Several irregularities in the said account were found in December 2019. It was alleged that huge sums of money were withdrawn in cash through cheques by the petitioner's account from the petitioner's current account by allegedly forging the signatures of the partners of the petitioner firm. It was alleged that all the cheques had been passed by ICICI Bank without due verification.The petitioner sent a legal notice to the Bank and its employees, calling upon them to jointly and severally pay Rs.4,58,75,000 with 18% interest per annum. The petitioner filed a suit; it thereafter filed an application seeking transfer of the suit to the Commercial Court, claiming that the dispute was commercial. The suit was transferred on 16.04.2022 and registered as a Commercial Suit. However, the Commercial Court framed an issue as to whether the Commercial OS was maintainable, as a preliminary issue and rejected the suit on grounds of maintainability. Against this, the petitioner approached the high court.Allowing the petition and setting aside the commercial court's order, the high court held, “It is declared that the Commercial Court has jurisdiction to try the suit and shall try it as a commercial OS. The Court shall regulate its procedure in accordance with law".Appearance: Advocates Hemanth R Rao, Rukkoji Rao H S for Petitioner.Advocate Jai M. Patil for R1.Citation No: 2025 LiveLaw (Kar) 232Case Title: M/S. VISWAS TEXTILE PROCESSORS AND ICICI BANK LIMITED & Others Case No: WRIT PETITION NO. 17588 OF 2022Click Here To Read/Download Order

Recovery Suit Against Bank For Misappropriating Funds From Current Account Maintainable Before Commercial Court: Karnataka High Court

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