Legal liability of a stolen cheque

Who is responsible for a stolen cheque and the amount which the original customer whose cheque was duly deposited but he did not get?

As all nationalized banks are working under the control of the Reserve Bank of India (RBI) they are expected to follow rules and regulations codified by the same regulatory authority. But if something unforeseen incident happens and if there is no co-ordination or understanding of co-operation between the banks, they are susceptible to legal confrontation.

This has happened in case of a stolen cheque which was deposited in one bank and was en-cashed by the person who stole it by producing it in the bank which had issued the cheque. A bank’s customer received a cheque which was deposited by him in the bank in which he has the account. But after the cheque was deposited it was stolen from that bank.

The person who stole the cheque went to the bank on which the cheque was drawn and en-cashed it and disappeared after getting the amount. Who is then responsible for the stolen cheque and the amount?

The said cheque is not of a small amount. It was issued to an employee of Maharashtra State Electricity Distribution Company (MSECDL) in payment of Rs1, 58 736. This was part of his total amount which he was to receive after retirement.

The person who stole the cheque received the amount but not the concerned employee Shripati Patil. He therefore demanded the amount from the bank to which he had deposited the cheque and it was after depositing it and receiving the due receipt, the cheque was stolen. Hence he should receive the amount. The bank had to pay the amount to Mr Patil who received it from Central Bank of India where he has the account in which he had deposited the cheque.

When the cheque was lost, the matter was informed to the police who circulated information about it to all banks in the area including Bank of Maharashtra on which the cheque was issued on behalf of MSEDCL. But before any such intimation, the stolen cheque was presented to the concerned branch of Bank of Maharashtra and the payment was made.

According to Bank of Maharashtra’s concerned officials the cheque was bearer and MSEDCL having account in the branch issues bearer cheques of such amounts  in view of immediate availability of the amount to its employees. MSEDCL has not confirmed that the cheque was bearer, on the contrary clarified that it was crossed.

As the dispute is whether the cheque was bearer or crossed, it was also pointed out that if the amount is over Rs50,000, identity of the person should be established by way of PAN card, etc. As this was not done it was the liability of Bank of Maharashtra to pay the amount to Central Bank which has paid the said amount to Mr Patil who is the legitimate receiver of the amount.

As the Bank of Maharashtra has not yet responded positively, a legal notice has been issued on behalf of Central Bank of India with demand to pay the amount as the stolen cheque was passed without verification and identification.

Bank of Maharashtra has not yet replied but says that the matter is being considered by its legal department. Thus the issue of a stolen cheque, which is being en-cashed by its thief and liability to pay the real recipient of the amount and responsibility of identification before making payment of a cheque over a certain amount—all these matters which are important in banking transactions are now at stake and more so because the tussle is between the two nationalized banks’ branches at Kolhapur in southern Maharashtra.



Vinod Thakur

4 years ago

Both banks are responsible for customer's loss, apart from the money the customer will get, Banks should compensate some more to him, and also Bank's official should be suspended.


5 years ago

If it was a crossed instrument, the bank which paid cash is duty bound to pay to the real beneficiary of the cheque as a crossed instrument is payable only to a bank's account and not across the counter in cash. Even if it was a bearer instrument, the bank where the beneficiary depsoited the cheque for credit to his account, should have affixed a bank crossing stamp which is what is the normal banking parctice- if it has not done so, it should reimburse the loss to the beneficiary. Above all, no company issues a bearer cheque for any purpose other than its own petty cash, petty purchase purposes & hence the issuer is also responsible-

Half of the money with EPFO Nagpur office is unclaimed deposits!

An RTI query revels that the Nagpur office of the EPFO (Employees Provident Fund Organisation) has almost half its current deposits in the ‘unclaimed’ category! The story is the same across the country. As per the latest rules, unclaimed deposits will now also stop earning interest 

An RTI application filed by Abhay Kolarkar found out that the Nagpur office of the EPFO (Employees Provident Fund Organisation) has almost half its current deposits in the ‘unclaimed’ category! Out of a total of about Rs308 crore, about Rs145 crore is dormant or unclaimed. As per the latest rules, all these unclaimed deposits will now also stop earning interest and, and for all we know, will also attract some holding charges. It is quite possible that funds are siphoned off by fraudsters. 
On the other hand, the Australian government, has taken all funds below 2,000 Australian dollars lying inactive in any account—savings or superannuation linked—for a year or more and transferred them to itself, so that it can protect the people from the money from being siphoned off. These funds will continue to earn interest, while the government tries to locate their rightful owners or heirs.
In India, the EPFO or the banks, despite having full contact details of depositors as well as their nominees and next of kin, won’t even make a phone call, send an email or drop an intimation letter. If you go to claim your own money, they will treat you with suspicion at every step, going as far as doubting your genuine documents presented personally, be it passport, PAN card, Aadhaar, driving licence, and what not. In the latest episode, an acquaintance was asked to get an affidavit re-verified by an elected representative. We all know what this means. No wonder people from the current generation, involved in changing jobs frequently, think of their EPF contributions as a tax rather than a savings instrument.
Recently, I received an email from an ex-colleague, who now lives abroad, with whom I had worked about 23 years ago, asking me for help to get his Provident Fund money back. In order to learn how the EPFO process works as well as help my ex-colleague, I decided to try and figure out the whole thing.
My colleague had not followed up because he was under the impression that the money lying with the EPFO was earning interest and would come to him automatically at the age of 58, or to his nominee. With computerisation, he assumed that pending as well as dormant accounts would surface one day, as though by magic, and would be able to trace his dues by name, father's name, company's name and so on. 
In his case, in the course of about five years starting in the late 1980s, he had worked for, let us say, company ‘A’, which merged with company ‘B’. The merged entity got renamed to company ‘C’ which was finally absorbed into the parent group company ‘D’. All its employees were transferred to yet another company ‘E’, which operated outside the parent group. The registered offices for A, B & C were located Mumbai, the registered office for ‘D’ was in a small town, and the registered office for ‘E’ was in Chennai. Prior to this episode, my ex-colleague had worked in Company ‘Z’, with their offices situated in Delhi. Way back in 1989, his transfer of Employee Provident Fund (EPF) from ‘Z’ to ‘A’ was hitting the walls of ‘babudom’. Now, ‘Z’ doesn't exist anymore nor does A,B,C and E. 
Here’s what I did:
• Emails have been sent to the companies ‘D’ and ‘E’ as well as the parent group where I worked, for information on how to proceed in this case, since all documentation appears to have gone adrift. Parent group where I worked has, however, been divided between heirs.
• Right to Information (RTI) applications will be prepared and sent to the headquarter offices of the Employees Provident Fund Organisation (EPFO).
• There are no known guidelines on what is to be done in case somebody wants to get more details about their dormant unclaimed amounts. Online data on this does not exist.
Likewise, I had worked with a shipping company, Indian flag, and never saw my Provident Fund money, which was earned from 1975 till 1981. The company, then listed, had vanished while the parent group is still around. Having been pilfered twice over, the Seaman's Provident Fund is, and was, one of those spectacular scams which still echoes.
The EPFO took some steps to fix matters, but appear to have come to a standstill again, as even their ePassbook scheme appears to have gone off the horizon again. Is this the best that our government can do, if we assume that 40% or more of all deposits lying with the EPFO are ‘unclaimed’, for any reason? 
(Veeresh Malik had a long career in the Merchant Navy, which he left in 1983. He has qualifications in ship-broking and chartering, loves to travel, and has been in print and electronic media for over two decades. After starting and selling a couple of companies, is now back to his first love—writing.)



Mr Jitendra

1 month ago

In my long observation of the EPFO, the only time it made a rapid progress was under the regime of Mr K K Jalan who was heading it until 2014-2015. He brought in several changes in EPFO, the UAN portal and other stuff. Sure some anomalies were there, he was then transferred and then the new UAN portal launched under the newly elected government in Dec-2016, which completely is upside down.

EPFO and UAN are not going anywhere, its backward progress. They want physical presence of the employee to authenticate his/her aadhaar in their offices? OMG!!!

Raghavendra Shenoy

5 years ago

What is worse is that in case of switching jobs, the employee has to correspond and wait endlessly for the PF accumulations to be transferred. The thick skinned babus don't give a damn to the concerns of employees and don't care to respond either. I am personally stuck in a situation where my previous employer has dispatched a cheque for the PF accumulations, but the same is yet to be deposited in my new PF account. YE HAI INDIA


Veeresh Malik

In Reply to Raghavendra Shenoy 5 years ago

Dear Raghavendra Shenoy, thank you for writing in, and you are not alone. Over the last few years it seems things have really deteriorated, if some ex and present employees are to be believed, and processes have become so complicated that withdrawals are difficult if not impossible without "help".

We do need to build some sort of a group, I think.



5 years ago

Copied below is a response to a report in Economic Times dated September 16, 2010. Thought it may be relevant in the context of the present position(I am not able to find out whether it was published by ET):

Unclaimed EPF money

This refers to the report on Employees’ Provident Fund interest rates (ET, September 16). While the hike in interest rates is a welcome move, the decision not to pay interest on inoperative accounts has far reaching implications. The proposal is to freeze about 3 crore EPF accounts in which there is no fresh contribution during the past three years or more. Earlier reports show that the unclaimed deposits in EPF accounts increased from around Rs 6000 crore in 2008-09 to about Rs 10,000 crore in one year. Interest accretion in 2008-09 balance may be around Rs 500 crore and the remaining Rs 3500 crore has to be balances in inoperative accounts added in one year. In a corpus of the fund running into about three lakhs crores this may look small. But the number of dormant accounts (more than half of the 5.6 crore accounts to date, 2009-10) is a matter of concern.

The EPFO is claiming that the decision not to pay interest is aimed at discouraging members of EPF from using the accounts as an investment conduit for earning higher returns. Viewed from any angle, the decision not to pay interest on unclaimed accounts older than three years sounds arbitrary. Keeping balances in one’s provident fund account cannot be considered a crime, as such facilities in social security schemes are not unheard of. Our own Public Provident Fund Scheme has an enabling provision to keep balances after maturity with accrual of interest at normal rates. And, it is irrational to ask the account holder to take away the maturity proceeds on a fine morning and search other avenues for investment. His membership was compulsory and was meant to provide him financial security in his old age.

As the EPFO is managing a large corpus of about Rs 1, 70,000 crore in the fund wisely, it should not cite administrative costs on just Rs 10,000 crore as a burden and deny normal interest payment till the organization is able to reach the money to the rightful beneficiaries or the later has a use for the hard earned PF money and opt to withdraw available balances.

If the EPFO finds the accounts unmanageable, they could consider transferring them to banks like SBI with legislative support from GOI to create a separate fund and allow continuity in transactions at par with PPF accounts. Or, better still, the unclaimed balances may be entrusted to a Mutual Fund on agreed terms, with the condition that claims (balance on the date of transfer plus accrued interest at the same rate as paid on EPF annually) of account holders will be met as and when they arise with a minimum interest accrual at those paid on EPF from time to time. Appropriating such balances to the EPFO or GOI sounds irrational.

GOI and RBI may look at the issue from a social security angle, lest people lose faith in government-sponsored savings instruments and social security measures.

M G Warrier
September 16, 2010


Veeresh Malik

In Reply to M G WARRIER 5 years ago

Dear MG Warrier ji, thank you for writing in, and you have raised many valid points.

The biggest issue is that top down at EPFO, the attitude that the decision makers as well as rank and file have is that they are holding on to some sort of tax imposed on members, and that only if you are from some segment of twice-blessed or similar, are you entitled to get your own money back. What they call "claim" is actually in real fact my "due".

Since a large number of claimants, however, are usually unable to understand the complicated steps involved as well as are often in dire need, there are all sorts of twists and turns which then require a typical solution.

And your last line - prophetic. Maybe that is why so many ponzi and MLM schemes succeed?



In Reply to Veeresh Malik 5 years ago

These kind of issues do not get media space. Government plays into the hands of those who corner small people's savings and make fortunes. There are several examples. In different ways, New Pension Scheme, routing subsidy through AADHAAR-enabled bank accounts are all pointers to this game.

Veeresh Malik

In Reply to M G WARRIER 5 years ago

We can all help by spreading these articles. Nothing works like the will of the masses, and for that there has to be knowledge shared.


Will the announced reforms be implemented?

All eyes are on the mood and tone of the Winter Session of Parliament. A plethora of changes are on the table and if the Monsoon Session is anything to go by, reformists will have a tough time


The Winter Session of Parliament, which begins on Thursday, will be a very important gauge as to the extent to which the announced reforms are being implemented. The direction of reforms in the coming months will depend on whether the ruling UPA government becomes stronger or weaker out of this winter session. This is the assessment of Nomura in its Asia Insights report.


Nomura does not see the UPA government at risk as the Congress has both inside (DMK, NCP, others) and outside (SP, BSP) support to tide over a no-confidence vote, in case the motion is raised, which itself is uncertain. The SP and the BSP are opposed to FDI (foreign direct investment) in multi-brand retail, but otherwise continue to support the government from outside. In terms of the reforms, Nomura expects the Companies Bill, Competition Bill, Banking Law and Forwards Contract Bill to sail through smoothly, but Insurance, Pension and Land Bills may face much more opposition.


Nomura’s worry is that even a discussion on FDI in multi-brand retail will lead to heated debates and could lead to disruption in parliamentary proceedings. If the debate on FDI in multi-brand retail is put to rest soon, there is hope that other reforms will also be passed. However, the Monsoon Session of Parliament did not inspire much confidence as the stand-off between the government and the opposition parties on issues of graft and corruption led to a complete washout of the parliamentary session. There is a risk that the Winter Session could go down the same road.


Media reports suggest that the TMC chief has not been able to gain enough support for the no-confidence motion, so the likelihood of the government falling is small. Instead, the government may choose to debate the thorny issue of FDI in multi-brand retail in parliament, as it is an executive decision and does not require parliamentary approval.


Pending reforms


According to Nomura, some of the reforms announced by the government since September 2012 that will come up for approval during the Winter Session of Parliament include:

  • Insurance Laws (Amendment) Bill: Increase the cap on foreign equity in insurance sector to 49% from 26% and allow foreign reinsurers to operate in India
  • Pension Fund Regulatory and Development Authority Bill: Set up a stronger pension regulatory body, and increase the foreign investment ceiling to 26%, or the limit in the insurance sector, which ever is higher.
  • Companies Bill (Amendment), 2011: Improve the standards of corporate governance.
  • Banking Laws (Amendment) Bill: Pave the way for the RBI to give new banking licenses to private participants in the sector.
  • Land Acquisition Rehabilitation and Resettlement Bill: To make the process of land acquisition transparent.
  • Direct Tax Code Bill: Simplify and consolidate the direct tax regime for individuals and corporates.
  • Forwards Contract (Regulation) Amendment Bill: To set up an independent regulator of the forward commodity markets and allow institutional investors and derivative instruments.
  • Competition Act (Amendment), 2002: To bring all sectors under the purview of the Competition Commission of India, except stressed banks or insurers.


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