Dav Public School vs The Senior Manager Indian Bank … on 18 December, 2019


Supreme Court of India

Dav Public School vs The Senior Manager Indian Bank … on 18 December, 2019

Author: Hrishikesh Roy

Bench: Hon’Ble Dr. Chandrachud, Hrishikesh Roy

                                                                                   [REPORTABLE]

                                      IN THE SUPREME COURT OF INDIA
                                      CIVIL APPELLATE JURISDICTION

                                    CIVIL APPEAL NO. 9352 OF 2019
                               (Arising out of SLP(C) No.3738 of 2019)


                      DAV Public School                                 Appellant (s)



                                                      Versus



                      The Senior Manager, Indian Bank,
                      Midnapur Branch & Ors.                            Respondent (s)

                                                J U D G M E N T

Hrishikesh Roy, J.

1. The challenge in this appeal is to the final judgment

and order dated 24.4.2018 in the First Appeal1 whereunder

the National Consumer Disputes Redressal Commission2

dismissed the appeal of the appellant and upheld the

order passed by the State Consumer Disputes Redressal

Commission, West Bengal3.. Under the impugned judgment,

the liability of the respondent Indian Bank was limited

Signature Not Verified

Digitally signed by
SANJAY KUMAR
Date: 2019.12.19
10:22:17 IST
Reason: 1
First Appeal No. 386 of 2018
2
“NCDRC”
3
The State Commission
Page 1 of 13
to Rs 1,00,000/- although the complainant suffered total

loss of Rs 30,00,000/-, from their Bank Accounts and

sought return of the lost sum.

2.1 The complaint of the Principal of the DAV Public

School4 alleged deficiency of service against the

respondent Bank inasmuch as the School’s bank accounts

without net banking facility, was linked with the

personal Customer Information File (CIF) of the Principal

of the School, facilitating online transaction which led

to siphoning of Rs 30,00,000/- (Rupees Thirty Lakhs),

from the school’s account.

2.2 The complaint mentioned that the DAV Public School,

Paschim Medinipur maintained three accounts with the

Indian Bank, Midnapur Branch in District Paschim

Medinipur, West Bengal namely, i) the School General Fund

Account – A/c No. 553624984; ii) School Pupils Fund

Account – A/c No. 553625423 and iii) School Interest

Account – A/c No. 933045930. While the Withdrawal from

the first two accounts could be made through cheques

under joint signature of the Principal, DAV Public

School, Midnapore and Managers/Principal, DAV Model

4
The School
Page 2 of 13
School, IIT Kharagpur, the third referred account was

authorised to be operated by the Principal of the DAV

Public School, under his own signature. It was the

specific case of the complainant that the school never

approached the Bank for net banking facility for any of

their three accounts, but on 2.9.2014 when the Principal

opened his personal savings account (distinct from the

school accounts) for the purpose of transferring money

through net banking, he learnt that the three accounts of

the school got tagged with his personal savings account.

As the school Principal was required to go on an urgent

official tour, he decided to report the matter to the

Bank after his return from the official tour.

2.3 On 7.9.2014, one of the school employees was sent to

the Bank for updating the passbook but the passbook

couldn’t be updated for technical reason as informed by

the bank’s staff. Again on 9.9.2014 the School employee

went to the bank for updating the passbook and it was

then detected that Rs. 25,00,000/- (Rupees Twenty Five

Lakhs) was unauthorizedly transferred from the school’s

account. This was brought to the notice of the Bank’s

manager on 9.9.2014, but the Bank Manager advised the

concerned school staff to visit the Bank on the next day

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morning. But by the time the account could be blocked,

another sum of Rs. 5,00,000/- (Rupees Five Lakhs) got

transferred from the school’s account.

2.4 It was also mentioned by the complainant that the

mobile phone sim of the complainant was blocked on

5.9.2014 and subsequently the complainant learnt that a

duplicate sim card was issued against his mobile number

and his phone bill was paid by somebody even before the

normal bill could be generated on 8.9.2014. With this

information, the complainant demanded return of the

siphoned sum with interest in the school’s bank account.

3. The Bank contested the case before the State

Commission. They acknowledged that the school did not

apply for net banking facility but inadvertently the

personal CIF of the then Principal of the School got

tagged with the school’s accounts which facilitated the

online transfer of school’s money.

4. The BSNL Authorities who were arrayed as respondent

Nos. 4 and 5 in the Complaint before the State Commission

pleaded that the then Principal on his way back from

Howrah to Kharagpur lost his mobile phone with the BSNL

post paid sim No. 9434340725 for which, diary was lodged

on 4.9.2014 at the Kharagpur GRP as GRPs No. 1091.

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Thereafter, the Principal applied for duplicate sim which

was issued after completion of necessary formalities.

Subsequently, request was made to the BSNL to port out

the said phone number and accordingly, the sim card was

ported out from BSNL to another service provider i.e.

Bharti Airtel. But most curiously, the transfer was made

not in the name of the registered phone subscriber

Sanjiva Kumar Sinha, but in the name of one Sanjay Kumar

Sinha who purportedly resided in the same address.

5.1 The State Commission after noting the rival

contentions recorded that admittedly the complainant

school did not opt for net banking facility in respect of

any of their three accounts. Thus, gross error on the

part of the Bank was found in the siphoning of the money

from the school’s account and accordingly, it was

concluded that “it was a clear case of gross deficiency

on the part of the OP Bank”. The Commission then

considered whether the OP Bank should be made liable to

make good the loss suffered by the Complainant. It was

then observed that mere tagging of bank accounts with

online banking facility is not enough to transfer fund

through RTGS/NEFT, since access to the concerned bank

accounts is through User ID, Login, Password, One Time

Page 5 of 13
Password etc. Thus, complicity of the then Principal of

the School in those internet transactions was suspected.

The Commission also noted that the school Principal

failed to inform the BSNL authorities and the Bank in due

time and thus despite detecting the illegal transfer of

the large sum i.e. Rs 25,00,000/-, the official complaint

was not lodged on 9.9.2014 itself and this facilitated

the transfer of another Rs. 5,00,000/-, from the school’s

account.

5.2 Thus, inference was drawn by the State Commission

that either the then Principal of the complainant school

was the mastermind behind all the fraudulent withdrawals

or he compromised the user ID and login Password with

others but, in either case, the School Principal cannot

escape his personal liability and as a corollary thereof,

the complainant cannot avoid their vicarious liability

for acts and deeds of their employee. With these

observations, while gross deficiency in service on the

part of the OP Bank in safeguarding the money of the

complainant school was noticed and they were held liable

to pay compensation to the complainant, only partial

relief was allowed by declaring that the Bank authorities

(OP Nos. 1,2,3 and 6) shall be jointly and/or severally

Page 6 of 13
be responsible for payment of Rs 1,00,000/- as

compensation together with cost of Rs. 10,000/-, to the

complainant. Aggrieved by the limited relief granted by

the State Commission by its order dated 4.1.2018, the

complainant approached the NCDRC through First Appeal No.

386 of 2018.

6. The Appellate forum referred to the facts noted by

the State Commission and observed that it is not in

dispute that the complainant school had not applied to

the Bank for providing internet banking facility for

their accounts and therefore, it was a mistake on the

part of the Bank to tag the school’s account with the

personal account of Sanjiva Kumar Sinha the Principal of

the School. The NCDRC also adverted as to whether the

transactions could have taken place either with

connivance or gross negligence on the part of Sanjiva

Kumar Sinha. It refused to accept the contention that

some unscrupulous person obtained the duplicate sim of

the mobile phone of Sanjiva Kumar Sinha and then obtained

user ID, login and the transaction password, using the

duplicate sim. The appellate forum also found it hard to

accept that when the mobile phone of Sanjiva Kumar Sinha

remained inactive for six days between 5.9.2014 to

Page 7 of 13
10.9.2014, the subscriber assumed it was a network issue

without suspicion of any wrong doing and did not inform

the matter to the service provider. The fact that

duplicate sim was issued by the BSNL authorities on

compliance of necessary formalities and eventually mobile

connection was transferred in the name of one Sanjay

(Kumar Sinha) was treated to be another circumstance

which allegedly indicated the involvement of Sanjiva

Kumar Sinha in the fraudulent transaction. With these

observations, the NCDRC concurred with the partial relief

granted by the State Commission determining Rs.

1,00,000/-, as the compensation payable by the Bank. The

appeal accordingly came to be dismissed on 24.4.2018 by

NCDRC.

7. Assailing the above decision of the NCDRC, Mr.

Surendra Nath, learned senior counsel appearing on behalf

of the appellant would submit that when deficiency in

service by the Bank was found by both the State

Commission as also by the NCDRC, there is little

justification for limiting the compensation to Rs.

1,00,000/- when the School suffered total loss of

Rs. 30,00,000/-.

Page 8 of 13

8. On the other hand, Mr. Dhruv Mehta, learned senior

counsel appearing on behalf of the Bank submits that a

formal complaint with the Bank was lodged only on the

next day even after learning of the siphoning of Rs.

25,00,000/- from the school’s account and this should be

considered to be a contributory factor in the loss

occasioned to the complainant. The learned senior counsel

accordingly tries to justify the limiting of compensation

to Rs. 1,00,000/-, by the forum.

9. Before proceeding any further with the matter, it is

necessary for us to refer to the proceeding before the

Banking Ombudsman on the complaint No. 201415005002580

lodged by S.K. Sinha, Principal, on behalf of DAV Public

School against the respondent Bank. The Banking Ombudsman

in their decision on 4.2.2015 (Annexure P-11) also noted

that the Bank was at fault in linking the School’s

account with internet banking facility without request

from the account holder and recorded as follows:-

“From the contentions of both the
parties, I observe that there is fault
of the bank as they have linked the
school’s account with internet banking
facility without any request from the
school authorities which caused the
fraud. The case is under investigation
by police whoso outcome is not known.

But as there is a limit of Rs.10 lakh
for giving an award under the Banking
Page 9 of 13
Ombudsman Scheme (BOS), 2006. I am not
in a position to instruct the bank to
pay the amount of Rs. 30 lakh. Hence,
the complaint is closed under clause
13(b) of BOS, 2006 as it is outside the
pecuniary limit of the BOS.”

10. That apart, on the basis of the School’s FIR, the

Kotwali PS case No. 995/14 corresponding to GR No.

3246/14 was registered within the jurisdiction of the

Chief Judicial Magistrate, Paschim Medinipur. The case

was investigated by the police and chargesheet (Annexure

P-20) was filed. The police referred to the allegations

in the FIR and noted that the Senior Branch Manager of

the concerned Branch of Indian Bank was requested to

clarify how an account with only cheque facility can be

operated with net banking process; secondly, how any

institutional account can be linked with any personal

account, without the request of the account holder and

thirdly whether it is possible to make net transaction of

the account, in such situation. The police noted that the

Bank authority failed to convey their response until the

filing of the charge sheet on 29.4.2018. The charge

sheet also disclosed that charges have been framed

against two persons i.e. i) Akash Saha @ Niraj Sharma @

Boby Dutta and ii) Aditya Narayan Kundu @ Rahul

Bhattacharjee who siphoned of the money through a series

Page 10 of 13
of illegal transactions. The charge sheet also revealed

that there was no complicity on the part of the School

Principal Sanjiva Kumar Sinha in the fraudulent

transaction from the bank through the criminal acts of

the two chargesheeted accused.

11. In the above backdrop, the key question to be

considered here is whether, without the school’s account

being linked with net banking facility, any money from

the bank account could have been siphoned out by the

miscreants. The obvious answer to this question has to be

in the negative. As concurrently found by the State

Commission, the Banking Ombudsman and also by the NCDRC,

the bank has rendered themselves liable by enabling net

banking facility by linking the individual account of the

school’s Principal, to the school’s account. The only

reason why the State Commission as well as the NCDRC had

limited the compensation sum to Rs. 1,00,000/- was

because of the perceived complicity of the Principal. But

the charge sheet filed by the police reveals how the

fraudulent transaction was made by the two charge sheeted

accused and more importantly the police did not find

complicity of the Principal of the school, with those

fraudulent transactions. The Banking Ombudsman too

Page 11 of 13
declared that the Bank was at fault which facilitated the

loss to the School but declined to order refund as the

demanded sum (Rs 30,00,000/-) was beyond the pecuniary

jurisdiction of the Banking Ombudsman.

12. Considering the above, the denial of the compensation

corresponding to the extent of the School’s loss, by the

State Commission as well as by the NCDRC would not in our

view, be justified. The question then is whether the Bank

should be asked to compensate the school for the entire

loss through such fraudulent transaction. In this

context, it may be noticed that when the siphoning of a

large sum of Rs. 25,00,000/- was first detected by the

school staff, the official complaint was not lodged

immediately and only on the next date, the complaint was

filed with the Bank authorities. Whether the Bank Manager

was verbally informed on the very date of detection or on

the next day is an aspect which is difficult to conclude

conclusively and therefore the subsequent siphoning of

Rs. 5,00,000/- by the next day, may have been occasioned

by the contributory negligence of the school authorities.

But, insofar as the loss of Rs. 25,00,000/- is concerned,

the complainant cannot be held responsible directly or

even vicariously, either as an institution or the

Page 12 of 13
Principal, as an individual. We are therefore of the view

that the respondent Bank should be directed to compensate

the School to the tune of Rs. 25,00,000/- transferred

until 9.9.2014, when the misappropriation was first

detected but not for the additional sum siphoned on the

next date from the School’s account. It is ordered so

accordingly. The impugned orders are interfered to this

extent. The appeal is allowed in these terms.

.…………………….………………………………………………J.

[Dr Dhananjaya Y Chandrachud]

.….…………………………………………………………………J.

[Hrishikesh Roy]
New Delhi
December 18, 2019

Page 13 of 13



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