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The Bank is entitled to compensate the entire loss due to its misappropriation- SC

DAV Public School v. The Senior Manager, Indian Bank, Midnapur Branch & Ors. CIVIL APPEAL NO. 9352 OF 2019 (Arising out of SLP(C) No.3738 of 2019) – December 18, 2019.

The bench comprising of Justice Dr Dhananjaya Y Chandrachud and Justice Hrishikesh Roy pronounced the judgment on the appeal against the judgment passed by the National Consumer Disputes Redressal Commission.

DAV Public School maintained 3 accounts with Indian Bank, Midnapur Branch. The withdrawal from first two accounts could be made through cheques under joint signature of the Principal, DAV Public School and Managers/Principal, DAV Model School and the third account was authorized to be operated by the Principal of the DAV Public School under his own signature. The school never approached the Bank for net banking facility for any of the three accounts until the Principal opened his personal savings account for transferring money through net banking. Also all the three accounts of the school got tagged with his personal savings account. As he was on an urgent official trip he planned to report the matter to the bank later. While the school updated its passbook it was found that Rs.2500000/- was transferred without authorization from the school account. Before the account was blocked another sum of 500000/- got transferred from the school’s account. It was also mentioned by the complainant, Principal, that the mobile phone sim was blocked and a duplicate sim was issued against his mobile and phone bill was paid by somebody even before it was generated. From this the complainant demanded the return of the siphoned sum with interest in the school’s bank account. The State Commission inferred that either the Principal was the mastermind or he compromised the user ID and login Password with others. The appellant forum referred the facts to the NCDRC concurred with the partial relief granted by the State Commission and the appeal accordingly dismissed.

Challenging the above decision a petition was filed by the school before this court.

The issue before this court is whether limiting compensation to Rs.100000/- is valid when the total loss suffered is Rs.3000000/-

The counsel appearing on behalf of the appellant argued that the deficiency in service was found by both the State Commission and NCDRC. It is unfair to limit the compensation to Rs.100000/- when the school suffered total loss of Rs.3000000/- The counsel for the respondent argued that the formal complaint was lodged with the bank only the next day even after knowing the fact of siphoning of Rs.2500000/- and the counsel tried to limit the compensation to Rs. 100000/-

The court after considering the arguments of both the parties observed the following. The court referred the ombudsman which noted that the bank was at fault in linking the school’s account with internet banking without request from the account holder. Also on the basis of the School’s FIR was registered within the jurisdiction of the Chief Judicial Magistrate. The case was investigated by the police and charge sheet was filed. As found by the State Commission, the Banking Ombudsman and the NCDRC, the bank has rendered themselves the liability by enabling net banking facility by linking the individual account to the school’s account. The reason why the State Commission and NCDRC had limited the compensation is the perceived complicity of the principal. Ombudsman too declared that the Bank was at fault which facilitated the loss to the school. From the above reasons the court decided that the denial of the compensation to the extent of the school’s loss would not be justified. In the extent of the compensation to be granted by the bank should be decided based on the day on which the complaint was lodged. It can be found that the complaint was filed with the bank the next day of the unauthorized deduction of Rs.2500000/- and there is no proof that the bank authorities were verbally informed about the fraud on the day of the occurrence itself. Thus the next day loss of Rs.500000/- cannot be compensated by the bank authorities.  Thus the court directed the respondent bank to compensate the school to the tune of Rs.2500000/-  




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