IDBI Bank Asked To Pay Rs42.80 Lakh with 6% Interest in a Forged Signature Cheque Case
Moneylife Digital Team 06 May 2024
While upholding an order passed by the state commission, the national consumer disputes redressal commission (NCDRC) directed IDBI Bank Ltd to pay Rs42.80 lakh along with interest at 6%pa (per annum) to a customer for failing to detect and prevent processing of a cheque with a forged signature. This is a 16-year-old case of using forged signature on a cheque to transfer money from the IDBI Bank customer’s account. 
In an order last month , the NCDRC bench of Dr Sadhna Shanker (presiding member) says, "I am of the view that IDBI Bank's failure to detect and prevent the processing of a cheque with a forged signature, constitute a breach of its duty of care which certainly constitutes a deficiency in service on the part of the Bank. This breach has resulted in significant harm and financial loss to the complainants for which they are entitled to appropriate compensation."
The case concerns a debit of Rs42.80 lakh on 24 April 2008 from the IDBI Bank account of Chandigarh-based Sameer Jain using a cheque. During his travel preparations, he received an SMS about the debit of Rs42.80 lakh from his account to Spectra Computer. Before leaving for his business trip on 25 April 2008, he checked his account through internet banking and discovered the transaction. 
Believing that the payment was meant for 'Spectra Computech', an old vendor, he presumed an error in recording. However, upon investigation, Spectra Computech denied receiving the payment. Subsequently, Mr Jain discovered that the cheque bearing his forged signature and the name was 'Spectra CompuPech', not 'Spectra CompuTech' or 'Spectra Computer' as previously indicated. 
Despite repeated requests, IDBI Bank did not provide a copy of the cheque to Mr Jain. He filed complaints with the economic offence wing (EOW) and registered a first information report (FIR) on 30 November 2008 with the Manimajra police station, leading to forensic analysis revealing significant differences in signatures. Despite notices and assurances of investigation from the Bank, he deemed their actions negligent and deficient in service.
Being aggrieved, he filed a complaint before the Chandigarh (Union Territory-UT) state consumer disputes redressal commission seeking a refund of Rs42.80 lakh along with interest at the rate of 18%pa from the date of debit till it is refunded and a compensation of Rs50,000.
During the hearing, IDBI Bank contested the complaint, stating that the complaint involves complex factual questions that necessitate detailed evidence and fall outside the jurisdiction of the forum due to the case being criminal in nature. 
IDBI Bank admitted the debit of Rs42.80 lakh from the account and the remittance to 'Spectra CompuPech'. It claimed that a legitimate cheque was presented for clearing and the signatures on the cheque matched with the specimen signatures available in its records. It also denied any negligence on the part of the Bank officials who cleared the cheque.
It also submitted that it requested Kotak Mahindra Bank Ltd (KMB), the clearing bank, to freeze the account where the cheque was deposited and refund the amount to IDBI Bank. However, Kotak Mahindra Bank refused to refund the amount, despite the Bank's requests, it added.
Kotak Mahindra Bank vehemently denied any suggestion of connivance between their officials and those of the Bank. It explained that the account was opened in the name of Spectra CompuPech based on know-your-customer (KYC) documents submitted. "Any mention of Spectra CompuTech in internal documents of KMB was deemed erroneous. Therefore, Mr Jain's attempt to draw similarities between the two names was irrelevant, as the cleared cheque was indeed drawn in favour of Spectra CompuPech." 
Kotak Mahindra Bank also maintained that there was no deficiency in their service and the complaint against it is liable to be dismissed.
While allowing the complaint, the state commission on 4 March 2011 directed IDBI Bank to pay Rs42.80 lakh with 6% interest to Mr Jain. It also asked IDBI Bank to pay a litigation cost of Rs10,000 to Mr Jain.
Aggrieved, IDBI Bank approached NCDRC. It argued that the signature on the cheque, as visible to the naked eye, appeared to be similar to the specimen signature of Mr Jain, who is the authorised signatory. "In the present case, IDBI Bank made payment only after verifying and tallying the signature on the cheque with the specimen signature and finding no apparent discrepancy. Therefore no negligence can be attributed on the part of the Bank."
It also contended that the state commission overlooked the guidelines outlined by the Reserve Bank of India (RBI) which stipulate that, in instances where an individual not legally entitled to do so collects funds on a stolen instrument, the bank responsible for collecting the funds (here, Kotak Mahindra Bank) is obligated to compensate the rightful payee (Mr Jain). IDBI Bank asserted that Kotak Mahindra Bank, the clearing bank, bears the sole responsibility for any potential compensation owed to Mr Jain.
The counsel for Mr Jain submitted a report obtained under the Right to Information (RTI) Act from the directorate of forensic sciences under the Union ministry of home affairs on 17 November 2008 which concluded that the individual who signed the admitted signatures did not write the signatures on the disputed cheque. "Mr Jain, therefore, gave no authorisation to IDBI Bank to pay Rs42.80 lakh to the holder of the cheque." 
"Furthermore, the SMS incorrectly mentioned the name of the payee as Spectra Computer. Given these circumstances, the lack of response from Mr Jain did not grant authorisation to process the cheque, especially considering it had not been signed by him. It was also asserted that the registration of a criminal case or its investigation does not bar proceedings under the Consumer Protection Act, 1986," the counsel says.
The bench of Dr Shanker from NCDRC observed that IDBI Bank contended that there was negligence on the part of Mr Jain as he failed to keep the cheque in safe custody. "In the present case, the forensic lab has certified the forgery of the signature in question. The report also states that the other cheques mentioned in the report were signed by one and the same person. Further, no contrary evidence has been led by the Bank to prove that the signature on the disputed cheque was the same as the specimen signatures. In the circumstances, the Bank had no mandate to clear the cheque, and any negligence on the part of the complainants (Mr Jain) cannot be attributed," she says.
The bench also referred to RBI guidelines about the collecting bank refunding the amount to the paying bank in case of fraud. Commenting on filing of an FIR, the guidelines say, "As regards the issue of collection of an instrument which is genuine but the amount is collected fraudulently by a person who is not the holder in due course and has stolen the instrument, we advise that in such a case the collecting bank, which is defrauded, is obliged to compensate the actual payee of the instrument and file fraud report with RBI and also FIR with police or central bureau of investigation (CBI)."
Dr Shanker noted that the liability of the collecting bank arises only when a genuine instrument is collected fraudulently by a person who has stolen the instrument. In this case, the bench says, "The instrument itself is forged so the guideline relied upon does not apply. It is pertinent to note that there was no direct contractual relationship (privity of contract) between the complainant and Kotak Mahindra Bank, the clearing bank. No deficiency of service arises in respect of the complainants with regard to Kotak Mahindra Bank in the circumstances."
"Therefore, the direction of the state commission for payment of Rs42.80 lakh along with interest at 6%pa since the date of withdrawal till the amount is paid to Mr Jain is upheld. The direction to pay Rs10,000 as the cost of litigation is set aside. IDBI Bank is directed to comply with the order within a period of two months," NCDRC says.
(First Appeal No147 of 2011  Date: 26 April 2024)
2 months ago
It took fifteen years to get justiec in such a fraudulent transaction. IDBI Bank should have known the responsibilities of the clearing bank, i.e., KMB, which itself is now under regulatory action. The tragedy today is that most employees and bank executives are familiar with the system and not banking. It is high time that the training, mentoring, and coaching should be revamped in the entire banking industry. I was surprised the other day when the Manager of a PSB pleaded ignorance on the word 'endorsement '. Many are not familiar with the Negotiable Instrument Act and Banking Companies Act provisions. Banking is law and practice as M.L. Tannan who wrote a book with that title.
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