DAV PUBLIC SCHOOL versus THE SENIOR MANAGER, INDIAN BANK, MIDNAPUR BRANCH & ORS. on 18 December 2019

1. The challenge in this appeal is to the final judgment and orderdated 24.4.2018 in the First Appeal[1] whereunder the National ConsumerDisputes Redressal Commission[2] dismissed the appeal of the appellantand upheld the order passed by the State Consumer Disputes RedressalCommission, West Bengal[3.]. Under the impugned judgment, the liability 1 First Appeal No. 386 of 2018

2 “NCDRC”

3 The State Commission

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Aof the respondent Indian Bank was limited to Rs 1,00,000/- althoughthe complainant suffered total loss of Rs 30,00,000/-, from their BankAccounts and sought return of the lost sum.

2.1 The complaint of the Principal of the DAV Public School[4]alleged deficiency of service against the respondent Bank inasmuchBas the School’s bank accounts without net banking facility, was linkedwith the personal Customer Information File (CIF) of the Principal ofthe School, facilitating online transaction which led to siphoning of Rs30,00,000/- (Rupees Thirty Lakhs), from the school’s account.

2.2 The complaint mentioned that the DAV Public School,CPaschim 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) SchoolPupils Fund Account – A/c No. 553625423 and iii) School InterestAccount – A/c No. 933045930. While the Withdrawal from the firsttwo accounts could be made through cheques under joint signature ofDthe Principal, DAV Public School, Midnapore and Managers/Principal,DAV Model School, IIT Kharagpur, the third referred account wasauthorised to be operated by the Principal of the DAV Public School,under his own signature. It was the specific case of the complainantthat the school never approached the Bank for net banking facility forany of their three accounts, but on 2.9.2014 when the Principal openedEhis personal savings account (distinct from the school accounts) for thepurpose of transferring money through net banking, he learnt that thethree accounts of the school got tagged with his personal savingsaccount. As the school Principal was required to go on an urgent officialtour, he decided to report the matter to the Bank after his return fromFthe official tour.

2.3 On 7.9.2014, one of the school employees was sent to theBank for updating the passbook but the passbook couldn’t be updatedfor technical reason as informed by the bank’s staff. Again on 9.9.2014the School employee went to the bank for updating the passbook andGit was then detected that Rs. 25,00,000/- (Rupees Twenty Five Lakhs)was unauthorizedly transferred from the school’s account. This wasbrought to the notice of the Bank’s manager on 9.9.2014, but the BankManager advised the concerned school staff to visit the Bank on thenext day morning. But by the time the account could be blocked, another H4 The School

sum of Rs. 5,00,000/- (Rupees Five Lakhs) got transferred from theschool’s account.

2.4 It was also mentioned by the complainant that the mobilephone sim of the complainant was blocked on 5.9.2014 and subsequentlythe complainant learnt that a duplicate sim card was issued against hismobile number and his phone bill was paid by somebody even beforethe normal bill could be generated on 8.9.2014. With this information,the complainant demanded return of the siphoned sum with interest inthe 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 facilitybut inadvertently the personal CIF of the then Principal of the Schoolgot tagged with the school’s accounts which facilitated the online transferof school’s money.

4. The BSNL Authorities who were arrayed as respondent Nos.4 and 5 in the Complaint before the State Commission pleaded thatthe then Principal on his way back from Howrah to Kharagpur lost hismobile phone with the BSNL post paid sim No. [REDACTED] for which,diary was lodged on 4.9.2014 at the Kharagpur GRP as GRPs No.1091. Thereafter, the Principal applied for duplicate sim which wasissued after completion of necessary formalities. Subsequently, requestwas made to the BSNL to port out the said phone number andaccordingly, the sim card was ported out from BSNL to another serviceprovider i.e. Bharti Airtel. But most curiously, the transfer was madenot in the name of the registered phone subscriber Sanjiva Kumar Sinha,but in the name of one Sanjay Kumar Sinha who purportedly residedin the same address.

5.1 The State Commission after noting the rival contentionsrecorded that admittedly the complainant school did not opt for netbanking facility in respect of any of their three accounts. Thus, grosserror on the part of the Bank was found in the siphoning of the moneyfrom the school’s account and accordingly, it was concluded that “itwas a clear case of gross deficiency on the part of the OP Bank”.The Commission then considered whether the OP Bank should be madeliable to make good the loss suffered by the Complainant. It was thenobserved that mere tagging of bank accounts with online banking facilityis not enough to transfer fund through RTGS/NEFT, since access tothe concerned bank accounts is through User ID, Login, Password, One

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ATime Password etc. Thus, complicity of the then Principal of the Schoolin those internet transactions was suspected. The Commission alsonoted that the school Principal failed to inform the BSNL authoritiesand the Bank in due time and thus despite detecting the illegal transferof the large sum i.e. Rs 25,00,000/-, the official complaint was notlodged on 9.9.2014 itself and this facilitated the transfer of another Rs.B5,00,000/-, from the school’s account.

5.2 Thus, inference was drawn by the State Commission thateither the then Principal of the complainant school was the mastermindbehind all the fraudulent withdrawals or he compromised the user IDand login Password with others but, in either case, the School PrincipalCcannot escape his personal liability and as a corollary thereof, thecomplainant cannot avoid their vicarious liability for acts and deeds oftheir employee. With these observations, while gross deficiency inservice on the part of the OP Bank in safeguarding the money of thecomplainant school was noticed and they were held liable to payDcompensation to the complainant, only partial relief was allowed bydeclaring that the Bank authorities (OP Nos. 1,2,3 and 6) shall be jointlyand/or severally be responsible for payment of Rs 1,00,000/- ascompensation together with cost of Rs. 10,000/-, to the complainant.Aggrieved by the limited relief granted by the State Commission byits order dated 4.1.2018, the complainant approached the NCDRCEthrough First Appeal No. 386 of 2018.

6. The Appellate forum referred to the facts noted by the StateCommission and observed that it is not in dispute that the complainantschool had not applied to the Bank for providing internet banking facilityfor their accounts and therefore, it was a mistake on the part of theFBank to tag the school’s account with the personal account of SanjivaKumar Sinha the Principal of the School. The NCDRC also advertedas to whether the transactions could have taken place either withconnivance or gross negligence on the part of Sanjiva Kumar Sinha.It refused to accept the contention that some unscrupulous personobtained the duplicate sim of the mobile phone of Sanjiva Kumar SinhaGand then obtained user ID, login and the transaction password, usingthe duplicate sim. The appellate forum also found it hard to acceptthat when the mobile phone of Sanjiva Kumar Sinha remained inactivefor six days between 5.9.2014 to 10.9.2014, the subscriber assumed itwas a network issue without suspicion of any wrong doing and did notHinform the matter to the service provider. The fact that duplicate sim

was issued by the BSNL authorities on compliance of necessaryformalities and eventually mobile connection was transferred in the nameof one Sanjay (Kumar Sinha) was treated to be another circumstancewhich allegedly indicated the involvement of Sanjiva Kumar Sinha inthe fraudulent transaction. With these observations, the NCDRCconcurred with the partial relief granted by the State Commissiondetermining 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. SurendraNath, learned senior counsel appearing on behalf of the appellant wouldsubmit that when deficiency in service by the Bank was found by boththe State Commission as also by the NCDRC, there is little justificationfor limiting the compensation to Rs. 1,00,000/- when the Schoolsuffered total loss of Rs. 30,00,000/-.

8. On the other hand, Mr. Dhruv Mehta, learned senior counselappearing on behalf of the Bank submits that a formal complaint withthe Bank was lodged only on the next day even after learning of thesiphoning of Rs. 25,00,000/- from the school’s account and this shouldbe considered to be a contributory factor in the loss occasioned to thecomplainant. The learned senior counsel accordingly tries to justify thelimiting of compensation to Rs. 1,00,000/-, by the forum.

9. Before proceeding any further with the matter, it is necessaryfor us to refer to the proceeding before the Banking Ombudsman onthe complaint No. 201415005002580 lodged by S.K. Sinha, Principal,on behalf of DAV Public School against the respondent Bank. TheBanking Ombudsman in their decision on 4.2.2015 (Annexure P-11) alsonoted that the Bank was at fault in linking the School’s account withinternet banking facility without request from the account holder andrecorded as follows:- “From the contentions of both the parties, I observe that there isfault of the bank as they have linked the school’s account withinternet banking facility without any request from the schoolauthorities which caused the fraud. The case is underinvestigation by police whoso outcome is not known. But as thereis a limit of Rs.10 lakh for giving an award under the BankingOmbudsman Scheme (BOS), 2006. I am not in a position toinstruct the bank to pay the amount of Rs. 30 lakh. Hence, the A

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Acomplaint is closed under clause 13(b) of BOS, 2006 as it isoutside the pecuniary limit of the BOS.”

10. That apart, on the basis of the School’s FIR, the Kotwali PScase No. 995/14 corresponding to GR No. 3246/14 was registeredwithin the jurisdiction of the Chief Judicial Magistrate, PaschimBMedinipur. The case was investigated by the police and chargesheet(Annexure P-20) was filed. The police referred to the allegations inthe FIR and noted that the Senior Branch Manager of the concernedBranch of Indian Bank was requested to clarify how an account withonly cheque facility can be operated with net banking process; secondly,Chow any institutional account can be linked with any personal account,without the request of the account holder and thirdly whether it ispossible to make net transaction of the account, in such situation. Thepolice noted that the Bank authority failed to convey their responseuntil the filing of the charge sheet on 29.4.2018. The charge sheet alsoDdisclosed that charges have been framed against two persons i.e. i)Akash Saha @ Niraj Sharma @ Boby Dutta and ii) Aditya NarayanKundu @ Rahul Bhattacharjee who siphoned of the money through aseries of illegal transactions. The charge sheet also revealed that therewas no complicity on the part of the School Principal Sanjiva KumarSinha in the fraudulent transaction from the bank through the criminalEacts of the two chargesheeted accused.

11. In the above backdrop, the key question to be considered hereis whether, without the school’s account being linked with net bankingfacility, any money from the bank account could have been siphonedout by the miscreants. The obvious answer to this question has to beFin the negative. As concurrently found by the State Commission, theBanking Ombudsman and also by the NCDRC, the bank has renderedthemselves liable by enabling net banking facility by linking the individualaccount of the school’s Principal, to the school’s account. The onlyreason why the State Commission as well as the NCDRC had limitedGthe compensation sum to Rs. 1,00,000/- was because of the perceivedcomplicity of the Principal. But the charge sheet filed by the policereveals how the fraudulent transaction was made by the two chargesheeted accused and more importantly the police did not find complicityof the Principal of the school, with those fraudulent transactions. TheHBanking Ombudsman too declared that the Bank was at fault which

facilitated the loss to the School but declined to order refund as thedemanded sum (Rs 30,00,000/-) was beyond the pecuniary jurisdictionof the Banking Ombudsman.

12. Considering the above, the denial of the compensationcorresponding to the extent of the School’s loss, by the StateCommission as well as by the NCDRC would not in our view, bejustified. The question then is whether the Bank should be asked tocompensate the school for the entire loss through such fraudulenttransaction. In this context, it may be noticed that when the siphoningof 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 nextdate, the complaint was filed with the Bank authorities. Whether theBank Manager was verbally informed on the very date of detection oron the next day is an aspect which is difficult to conclude conclusivelyand therefore the subsequent siphoning of Rs. 5,00,000/- by the nextday, may have been occasioned by the contributory negligence of theschool authorities. But, insofar as the loss of Rs. 25,00,000/- isconcerned, the complainant cannot be held responsible directly or evenvicariously, either as an institution or the Principal, as an individual. Weare therefore of the view that the respondent Bank should be directedto compensate the School to the tune of Rs. 25,00,000/- transferreduntil 9.9.2014, when the misappropriation was first detected but not forthe additional sum siphoned on the next date from the School’s account.It is ordered so accordingly. The impugned orders are interfered to thisextent. The appeal is allowed in these terms.

Ankit Gyan

Appeal allowed.

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