Holding Dena Bank (now merged in Bank of Baroda-BoB) vicariously liable for the fraud committed by its employees, the national consumer disputes redressal commission (NCDRC) directed the lender to pay within two months Rs65 crore with an interest of 9%pa (per annum) to Mumbai Agriculture Produce Market Committee (Mumbai APMC).
The case is related to Rs65 crore invested in 2014 by Mumbai APMC in 12 fixed deposits (FDs) of Dena Bank. However, Dena Bank's chief manager, Preetam Nagarkar and his associates created overdraft (OD) facilities in the name of Mumbai APMC and fraudulently transferred money from the FD account to the new OD account.
In
an order last week, the NCDRC bench of justice Ram Surat Ram Maurya (presiding member) and Bharatkumar Pandya (member) says, "Dena Bank (now BoB) has committed deficiency in service in not taking proper care of the fund transferred by Mumbai APMC to its branch which resulted in embezzlement and consequent loss to Mumbai APMC. The version in the written reply, in our considered opinion, is an afterthought and is not liable to be accepted. Dena Bank is vicariously liable for the act of its employees and is liable to refund the entire money to the complainant as held by SC in Canara Bank vs Canara Sales Corporation (1987) 2 SCC 666 and Pradeep Kumar vs Post Master General (2022) 6 SCC 351."
After Mumbai APMC opened FD accounts in Dena Bank on 5 July 2014, it was informed by the senior police inspector of the economic offences wing (EOW) of Mumbai police about the fraud in the overdraft accounts against FDs by Dena Bank's chief manager, Preetam Nagarkar.
Mumbai APMC wrote letters to the EOW and the investigating officer of the central bureau of investigation (CBI) informing them that it has not opened any OD facilities and that if any accounts were opened, it is a fraudulent account. It also submitted that the signatures on the OD account opening form are not of its additional commissioner and chairman and are forged ones. The name and address in the OD account opening form are also wrong, Mumbai APMC says.
In a letter on 8 July 2014, Mumbai APMC sent a letter to Dena Bank requesting to foreclose its 12 FD accounts. In its reply on 12 July 2014, Dena Bank admitted the deposits but gave an excuse that there was an outstanding amount in the OD account of Mumbai APMC worth Rs 58.29 crore, and it cannot accept the request for premature withdrawal of FDs.
Mumbai APMC then filed a complaint against Dena Bank.
In its written submission on 12 May 2015, Dena Bank contended that it was also a victim of the fraud perpetrated by some unknown persons whom they had authorised and empowered to deal with the bank. It also denied playing any fraud or aiding and abetting the commission of any such fraud.
It also contended that the same persons authorised by Mumbai APMC to open the FDs dealt with banks in advancing loans and OD facilities against the FD receipts. Dena Bank had no reason to doubt their honesty and integrity. Dena Bank even contended that the 12 FD receipts, worth Rs65 crore, held by Mumbai APMC are fabricated and forged. "Hence, the loss suffered by Mumbai APMC is entirely due to their own negligence."
The court commissioner appointed by NCDRC on 8 September 2016 cross-examined the witnesses of Mumbai APMC and submitted his report on 11 November 2016. Cross-examination of witnesses of Mumbai APMC was also done by the counsel for Dena Bank.
NCDRC observed that the plea that complicated issues of fact are involved, which requires trial by a civil court, is always raised by an opposite party for harassing a consumer. It says, "Section-3 of the old Consumer Protection Act and Section 100 of the new Consumer Protection Act provide that the provisions of the Act are in addition to and not in derogation to the provisions of any other law. A consumer can avail remedy before a civil court, the arbitrator (if the contract so provides) or any other tribunal or court constituted under the law. In the absence of any provision barring the jurisdiction of consumer fora, the question as to whether remedy available under 'consumer law' is barred specifically or impliedly does not arise, but the doctrine of election is applicable and a consumer has the right to choose the forum for redressal of its grievance."
According to Mumbai APMC, some of the employees of Dena Bank have committed fraud and the bank was negligent in not supervising and controlling the employees and is vicariously liable for the act of these persons. It contended that Dena Bank has committed a deficiency in service by not returning the FD receipts and hence, the complaint deserves to be allowed. "Even first information report (FIR) was lodged against the officers of Dena Bank and not against Mumbai APMC and its officers and hence there is no negligence on the part of Mumbai APMC and its officers. The investigation in the case of fraud is complete and a charge sheet is filed against the officer of the Bank. Hence Dena Bank is liable to refund the FD receipts with all benefits."
NCDRC also referred to internal inquiries conducted by Dena Bank. The Bank observed that its chief manager, Mr Nagarkar had not followed the due procedure, rather invariably received the know-your-customer (KYC) documents through one Vimal Barot and other persons in all the suspected fraud accounts. "Bank FD receipts were delivered based on the organisation's suspected fabricated authority letter brought by Mr Barot or his associates. Mr Nagarkar used to receive the loan application, including the original FD receipt duly discharged by the signatories who have signed in the documents given at the time of submission of KYC and also the resolution of the organisation or corporate on its letterhead through Mr Barot and his associates instead of personally verifying the genuineness with the concerned organisation or corporation."
The bench says it is proved that the branch office of Dena Bank received a total of Rs65 crore from Mumbai APMC from time to time for 'fixed deposit' of one year on which 'FD receipts' were issued. "But the branch office of Dena Bank, in collusion with the fraudster, opened an OD account without following KYC norms, through which Rs15.30 crore have been embezzled. There could be no reason for not following KYC norms while sanctioning OD facility of such a heavy amount except the collusion of the officers of Dena Bank with the fraudster," NCDRC says.
Further, it says NCDRC had decided various complaints against Dena Bank as also against other banks which had similar facts of fraud and forgery played by the officers of Dena Bank in league with other players, namely, Mr Nagarkar, Devendra Bhogle, Rahul Mukesh Gohil and Mr Barot.
"It has consistently been held in these decisions that even if there is any negligence or complacency on the part of the officers of the complainant organisation when due care and caution is not exercised by the supervisory officers of the bank in preventing the fraud resulting in loss to the customer-consumer, perpetrated by its own officers, the bank shall be liable for such negligence of the officers and for making good the resultant loss," it says.
In the present case, NCDRC says, "It is absolutely clear that embezzlement of the money of Mumbai APMC in complicity with Mr Nagarkar, chief manager from Dena Bank's Malabar Hill branch is proved. Dena Bank itself has filed a complaint against branch manager Nagarkar on the charge of committing embezzlement and fraud."
While allowing the complaint partly, NCDRC directed Dena Bank (now Bank of Baroda) to pay Rs65 crore with interest at 9%pa from the respective date of transfer of the money to it till the date of payment to Mumbai APMC, within two months from its judgement.
(Consumer Case No154 of 2015 Date: 23 July 2024)
Dena Bank is a service provider
Accordingly
APMC MUMBAI also a service provider......