Delhi District Court
Life Insurance Corporation Of India vs Ing Vysaya Bank Ltd & Anr on 8 July, 2014
CS No. 40/12 1 08.07.2014
IN THE COURT OF MS KIRAN GUPTA, SENIOR CIVIL JUDGECUM
RENT CONTROLLER, NEW DELHI DISTRICT, PATIALA HOUSE
COURTS, NEW DELHI
CS No. 40/12
Unique ID No. 02403C0079082012
In the matter of:
Life Insurance Corporation of India
Through its duly
Constituted attorney
Manager (Legal & H.P.F)
Divisional Officer I
25, Kasturba Gandhi Marg
New Delhi ......... Plaintiff
VERSUS
1. ING Vysaya Bank Ltd & Anr.
Through
Regional operations and Services Head,
9th Floor, Mercantile House,
Kasturba Gandhi Marg
New Delhi 110001
2. Department of Post
Through
Superintendent of Post Offices
New Delhi, West Division
Naraina
New Delhi 110 028 ........... Defendants
Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 1 of 15
CS No. 40/12 2 08.07.2014
Date of Institution : 05.12.2012
Date of Arguments: 07.07.2014
Date of Judgment : 08.07.2014
JUDGMENT :
1 Present suit is for recovery of Rs. 76,140/ instituted by the plaintiff corporation against the defendants. The proceedings against defendant no. 2 ie department of posts was dropped and the name of defendant no. 2 was deleted from the array of parties on the basis of the statement of AR of plaintiff vide order dt. 06.12.2012. Present suit is only against defendant no. 1, who hereinafter shall be referred as defendant bank.
2 The case of the plaintiff is that, it issued a LIC policy bearing no. 330095340 for a sum assured of Rs. 60,000/ on 28.12.1993 for a period of 15 years in the name of one Mr. Apul Choudhary. The said policy was to mature on 28.12.2008. On maturity , Apul Choudhary on 21.01.2009 submitted his duly signed discharge form and further submitted his new address to be 1055, Sector 37, Noida, Uttar Pradesh 201303, where he was actually residing at that time. On receipt of the required documents, plaintiff corporation prepared an account payee cheque and accordingly maturity proceeds were sent vide account payee cheque no. 324771 dt. 29.01.2009 for a sum of Rs. 76,140/ drawn on corporation Bank favouring Apul Choudhary. The Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 2 of 15 CS No. 40/12 3 08.07.2014 maturity cheque was dispatched through defendant no. 2 on 02.02.2009 vide speed post ED 444922548 IN, through Sunder Nagar Post office. By mistake the cheque was sent at the old address of Mr. Apul Choudhary ie 435, Sector 37, Arun Vihar, Noida. Thereafter, plaintiff received a letter dt. 21.04.2009 from Mr. Apul Choudhary stating that he did not receive the maturity cheque sent by it and requested to issue a fresh cheque in place of the lost cheque. Thereafter the plaintiff corporation got scanned the image of cheque no. 324771 dt. 29.01.2009, which was encashed on 14.03.2009 through defendant no. 1 in favour of Apul Choudhary with account no. 634010000800 for a sum of Rs. 76,140/. Thereafter plaintiff corporation sent a letter dt. 12.05.2009 and reminder letter dt. 10.06.2009 to defendant no. 1 requesting it to provide name, address, date of opening of account and name and address of the introducer of the said account in favour of Apul Choudhary. It also filed simultaneous complaint with concerned police station. Defendant no. 1 vide its letter dt. 13.06.2009 informed the plaintiff that the name and address of the above said account holder is Mr. Apul Choudhary with address F12, Hazara Park, Chander Nagar, New Delhi 92 and the date of opening of the account to be 06.03.2009. When the plaintiff corporation sent the letter dt. 24.08.2009 at the address of Apul Choudhary provided by defendant no. 1 advising him to refund the amount, the same was received back undelivered with the remarks "no such house number in Hazara Park". Plaintiff corporation on 03.11.2009 filed a complaint before the banking ombudsman, RBI against defendant no. 1 vide complaint no. 200910014003799, which Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 3 of 15 CS No. 40/12 4 08.07.2014 was disposed off by RBI vide its letter dt. 29.12.2010 stating that the concerned bank had fully adhered to the KYC Norms. On further investigation from the Election Commission office, it was found that the voter I card on the basis of which the account was opened was forged and the address mentioned on it is non existing. Thereafter, plaintiff corporation vide its letter dt. 20.12.2011 demanded Rs. 76140/ from defendant no. 1 as the same was fraudulently withdrawn by someone because of the negligence on its part. Then plaintiff corporation sent the legal notice dt. 24.09.2012 to the account holder on the address as provided by defendant no. 1 calling him to pay the amount of Rs. 76140/, however the said letter was returned with remarks 'no such person', 'no such address'. It is prayed that since the amount of the cheque was encashed due to the negligence on the part of defendant no. 1 who did not verify the documents before opening the account, a decree for recovery of the amount of Rs. 76140/ along with interest from the date of misappropriation ie 14.03.2009 along with pendentelite and future interest @ 24 % per annum be passed in favour of defendant no. 1 along with the cost of the suit.
3 Detailed written statement has been filed by defendant no. 1 denying all the allegations levelled in the petition . It is stated that the account in the name of Mr. Apul Choudhary was opened after due verification of documents and in compliance of the KYC Norms prescribed by the RBI. It is further stated that the banking Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 4 of 15 CS No. 40/12 5 08.07.2014 ombudsman after examining all the documents including KYC documents, held in favour of defendant. It is stated that the plaint is liable to be dismissed as it does not disclose any cause of action in favour of the plaintiff and against the defendant. It is further stated that the present suit is bad for non joinder of necessary and proper party ie Apul Choudhary and further is barred by limitation as the cheque was dt. 29.01.2009, while the suit for recovery of the same has been filed in November, 2012. It is stated that the account holder Mr. Apul Choudhary dropped the cheque in question in the drop box and the said cheque was sent to clearance to Corporation Bank, which cleared the same. The letter dt. 05.05.2009 sent by the plaintiff corporation was not received by it and the subsequent letter dt. 10.06.2009 was duly replied vide letter dt. 13.06.2009. It is stated that its representative on visit to Mr. Apul Choudhary at F 12, Hazara Park, Chander Nagar, Delhi 92 found that the address existed and to be correct. It is stated that it had taken due care and caution while opening and clearing of the cheque deposited with it by Mr. Apul Choudhary. It is stated that amount if any, has been misappropriated by said Mr. Apul Choudhary and not by the defendant, hence the present suit be dismissed accordingly.
4 No replication has been filed by the plaintiff corporation to the written statement filed by defendant no. 1. On the basis of pleadings , following issues were settled vide order dt. 23.05.2013:
a) Whether the plaintiff is entitled for decree of Rs. 76140/ along with interest as prayed in Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 5 of 15 CS No. 40/12 6 08.07.2014 the suit ?
b) Relief. 5 Plaintiff corporation has examined Ms. Manjeet Kaur
Sirpaul , Assistant Admn. Officer as PW 1 who has tendered her evidence by way of affidavit , Ex. P1 and relied upon following documents :
a) Insurance policy bond bearing no. 330095340 for a sum assured of Rs. 60,000/ as Ex. PW 1/1.
b) Discharged form as Ex. PW 1/2.
c) Speed post booking list as mark A.
d) Letter dt. 21.04.2009 regarding issuance of fresh cheque in place of lost cheque as Ex. PW 1/4.
e) Copy of letter dt. 04.05.2009 as Ex. PW 1/5
f) Scanned image of cheque bearing no. 324771 dt.29.01.2009 as Ex. PW 1/6
g) Copy of letter dt. 05.05.2009, 12.05.2009, 19.05.2009 and 23.07.2009 as Ex. PW 1/7 to Ex. PW 1/10.
h) Complaint dt. 30.05.2009 as Ex. PW 1/11.
i) Copy of letter dated 10.06.2009 as Ex. PW 1/12.
j) Letter dt. 13.06.2009 sent by defendant no.1, copy of statement of account, copy of election I Card and copy of customer information form of account holder as Ex.PW1/13 to Ex.PW1/16 respectively.
k) Copy of application dt. 29.06.2009 and letter dt. 08.07.2009 as Ex.PW1/17 and Ex.PW1/18.
l) Copy of letter dt. 24.08.2009 and envelope as Ex.PW1/19 and PW1/20
m) Copy of appeal dt.08.10.2009 as Ex.PW1/21.
n) Reply dt.19.02.2010 and reply of Chennai Speed post centre of defendant no.2 as Ex.PW1/22 and Ex. PW1/23.
o) Copy of complaint dt.03.11.2009 and letter dt.
Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 6 of 15 CS No. 40/12 7 08.07.2014 29.12.2010 as Ex.PW1/24 and Ex.PW1/25
p) Copy of letter dt.20.12.2011 as mark B.
q) Undelivered postal envelope as Ex.PW1/27.
5.1 PW 2 Prem Kumar , Assistant LIC tendered his evidence by way of affidavit Ex. P2. PW 3 Sh Balbir Singh proved the report dt. 24.10.2011 signed by the Election Officer in respect of EPIC No. DL /08/025/1599951 of Apul Choudhary as Ex. PW 3/A and stated that as per report, EPIC appears to be fake.
6 Defendant no. 1 has examined Ajay Kumar Saxena as DW 1 who has tendered his evidence by way of affidavit Ex. DW 1/A and placed on record the power of attorney issued by the bank in his favour and KYC Norms as Ex. DW 1/B. 7 It is argued by Ld. counsel for the plaintiff that it is the defendant bank, who negligently opened the account in favour of one Apul Choudhary without verifying his address and due to the negligence of the bank, the maturity amount by way of cheque which was issued in favour of actual Apul Choudhary was released to someone else causing loss of Rs. 76,140/ to the plaintiff corporation, which the defendant bank is liable to pay. It is further argued that the defendant bank did not followed the KYC guidelines and negligently opened the account, hence is liable to pay the amount to plaintiff corporation.
Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 7 of 15 CS No. 40/12 8 08.07.2014 8 Per contra, it is argued by Ld. counsel for the defendant
bank that no liability can be attributed to the defendant bank for the misappropriation of the amount as alleged by the plaintiff corporation. It is argued that the ombudsman has given the finding in favour of the defendant bank that it had duly complied with the KYC guidelines. It is stated that the defendant bank had opened the account as per the KYC guidelines and after verifying the address and the cheque was cleared in due course. It is further argued that liability if any, is not of the defendant bank but of the person in whose favour the amount has been released.
9 Heard Ld. counsels for the parties. Perused the complete record file. As per the KYC Guidelines issued by the RBI, there is a process for customer identification procedure, according to which the banks need to obtain sufficient information necessary to establish , to their satisfaction, the identity of each new customer and to take certain documents regarding the customer and his permanent address. As per annexure 1 of the customer identification procedure , it is detailed out that any of the document which provides customer information to the satisfaction of the bank will suffice for opening the account. The documents detailed out are passport, PAN card, voters I card, Driving licence for his personal information. Telephone bill, bank account statement, electricity bill, ration card, letter from employer / recognized public authority for his correct permanent address. Thus as per the KYC guidelines which is a public document and has been Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 8 of 15 CS No. 40/12 9 08.07.2014 placed on record by the counsel for plaintiff and is not disputed by either of the party, the bank while opening the account of new customer is required to obtain any one of the document providing his personal details and permanent address.
10 The defendant bank has also placed on record the KYC norms Ex. DW 1/B. Under the head "Requirements To All Accounts"
in the said KYC Norms, it is stated that following documents are required.:
a) Duly completed CIF (form no. 924)
b) Introduction
c) Whether the introducer has maintained operative account for the last six months with the bank
d) Photocopy of address proof.
e) Photocopy of proof of identity
f) Photocopy of PAN/GIR Number/ form 60/61.
11 In addition to these documents the requirement for the opening of the remaining account is the providing of the nomination. Thus as per the KYC norms placed on record by the defendant bank , the basic requirement is introduction and the proof of address as well as identity of the proposed account holder. Under the head "requirement of introduction", it is stated stated in the Exhibit that :
Accept the introduction of a person / entity:
1. Who has an operative account with the branch for at least six months prior to the date of introduction with satisfactory conduct or Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 9 of 15 CS No. 40/12 10 08.07.2014 who is well known to the branch by virtue of his / her/ its social / economic status and or of great respect and good repute in the locality.
2. The person / entity introducing the account should be well aware of the identity, address, activity and antecedents of the prospective account holder.
3 The account of the person / entity introducing the account should reflect regular transactions that could be termed as genuine saving transactions/ business operations.
11.1 In Kerala State Cooperative Marketing Federation Vs. State Bank of India, 2004 (2) SCC 425, the Supreme Court of India while discussing the law with respect to the liability of the collecting banker, considering the provisions of Sections 131 and 131A of the Negotiable Instrument Act, 1881, in para 11 has held that:
"(1) As a general rule the collecting banker shall be exposed to his usual liability under common law for conversion or for money had and received as against the "true owner" of a cheque or a draft, in the event the customer from who he collects the cheque or draft has no title or a defective title.
(2) The banker, however, may claim protection from such normal liability provided he fulfills strictly the conditions laid down in Section 131A of the Act and one of those conditions is that he must have received the payment in good faith and without negligence.
(3) It is the banker seeking protection who has on his shoulders the onus of proving that he acted in good faith and without negligence.
Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 10 of 15 CS No. 40/12 11 08.07.2014 (4) The standard of care to be exercised by the collecting banker to escape the charge of negligence depends upon the general practice of banker which may go on changing from time to time with the enormous, spread of banking activities and cases decided a few decades ago may not probably offer an unfailing guidance in determining the question about negligence today.
(5) Negligence is a question of fact and what is relevant in determining the liability of a collecting banker is not his negligence in opening the account of the customer but negligence in the collection of the relevant cheque unless, of course, the opening of the account and depositing of the cheque in question therein from part and parcel one scheme as where the account is opened with the cheque in question or deposited therein so soon after the opening of the account as to lead to an inference that the depositing the cheque and opening the account are interconnected moves in a integrated plan.
(6) Negligence in opening the account such as failure to fulfill the procedure for opening an account which is prescribed by the bank itself or opening an account of, an unknown person or nonexisting person or with dubious introduction may lead to a cogent, though not conclusive, proof of negligence particularly if the cheque in question has been deposited in the account soon after the opening thereof.
(7) The standard of care expected from a banker in collecting the cheque does not require him to subject the cheque to a minute and microscopic examination but disregarding the circumstances about the cheque which on the face of it give rise to a suspicion may amount to negligence on the part of the collecting banker.
(8) The question of good faith and negligence is to be judged from the stand point of the true owner towards whom the banker owes no contractual duty but the Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 11 of 15 CS No. 40/12 12 08.07.2014 statutory duty which is created by this section and it is a price which the banker pays for seeking protection, under the stature, from the otherwise larger liability he would be exposed to under common law.
(9) Allegation of contributory negligence against the paying banker clause provide no defense for collecting banker who has not collected the amount in good faith and without negligence.
11.2 A reference to the aforesaid principles culled out by the Supreme Court in the judgment of Kerala State Cooperative Marketing Federation (supra) shows that there is never any mandate to pay under a forged cheque or forged bank draft and if payment is collected under such a bank draft by a bank, such bank is liable for conversion and therefore is bound to make payment of the amount of the forged cheque/bank draft.
11.3 The collecting banker can only avoid its liability provided it strictly fulfills the conditions laid down under Sections 131 and 131A of the Negotiable Instruments Act, 1881 i.e. it must show that the payment has been received by it in good faith and without negligence. Supreme Court has further observed that though negligence is towards collecting of the instrument however, the opening of the account is closely related to the deposit of the instrument and encashment thereof will give indication of the lack of good faith on behalf of the collecting banker. Supreme Court has also observed that the duties of a bank has changed over a period of time and the duty of a collecting Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 12 of 15 CS No. 40/12 13 08.07.2014 banker has to be seen from today's standpoint of the requisite facts for opening of account and collection of the instrument inasmuch as there is a considerable development with respect to the banking practices. Finally and most importantly, Supreme Court has held that allegation of contributory negligence against the paying banker (and which is the respondent/plaintiff bank in this case) does not provide a defense for a collecting banker who has not collected an instrument in good faith and without negligence.
12 Ex. PW 1/16 is the customer information form of the account holder Apul Choudhary which he filled at the time of opening of the account with the defendant bank. The said document is not disputed by the defendant bank and the same has been supplied by the defendant bank to the plaintiff corporation on its demand vide letter dt. 10.06.2009. On the said Ex. PW 1/16 , there is no column for introduction. No evidence has been lead by defendant bank that the account of Apul Choudhary was opened after proper introduction. When the witness was asked whether it was mandatory for the bank to ask for introducer while opening an account, he deposed that it was not mandatory at the time when the said account was opened. Though he has deposed such, however, no such copy of the rules or other documents have been placed on record by the defendant bank to show that there was no such requirement of proper introduction at the time of of opening of account. Thus, it is established that the account of Apul Choudhary was opened by the defendant bank Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 13 of 15 CS No. 40/12 14 08.07.2014 without any introduction. Opening of an account without proper/ any introduction is not only violative of banking practices but also the circulars of the RBI in this regard. The account opening form Ex. PW 1/16 , shows that the same did not reveal the account number of the introducer or any detail of the introducer and account was opened without any introducer, while as per the Ex. DW 1/B, one of the conditions for opening the account is the Introduction.
13 Though the defendant bank has submitted that the address was verified by its representative, however, no report in this regard has been placed on record by defendant bank. Further no such person who verified the address has been examined by defendant bank. DW 1 who deposed on behalf of of the bank has joined the services in the year 2013 and not at the time when the account was opened.
14 On the contrary, plaintiff corporation has examined PW 2 Prem Kumar, Assistant LIC who has deposed that when on the instructions, he went to the address i.e F12, Hazara Park, Chander Nagar, New Delhi 92, to meet Mr. Apul Choudhary, he found that there is no such person and the address could not be traced as the same is inexistent and there is no such person at the said address. PW 3 Sh Balbir Singh has proved the report dt. 24.10.2011 Ex. PW 3/A signed by the Election Officer in respect of EPIC No. DL /08/025/1599951 that the election I card Ex. PW 1/15 filed along with the account opening Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 14 of 15 CS No. 40/12 15 08.07.2014 form is fake. Thus the plaintiff corporation has proved that the document i.e the election I card relied upon by the defendant bank for opening the account of Apul Choudhary is fake and further the defendant bank opened the account without any introduction and verification, thereby causing loss to the plaintiff corporation by encashing the cheque amount. Plaintiff corporation has proved that it is due to the negligence of the defendant bank that the maturity cheque in the name of Apul Choudhary was encashed by some other person by opening the fake account. Due to such act of the defendant bank, the plaintiff corporation suffered the loss of Rs. 76140/, hence the plaintiff corporation is entitled to recover the same from the defendant bank. The issue is accordingly decided in favour of the plaintiff and against the defendant bank .
Relief 15 In view of above discussion the suit is decreed and defendant bank is directed to pay Rs. 76,140/. The defendant bank is further ordered to pay interest @ 9% per annum ( as per prevalent market rate) to the plaintiff on the said amount from the date of filing of the suit till realization. Defendant bank shall also pay the cost of proceedings to the plaintiff.
Decree sheet be prepared accordingly.
File be consigned to record room.
Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 15 of 15 CS No. 40/12 16 08.07.2014 Announced in the open ( KIRAN GUPTA ) court on 08.07.2014 SCJCUMRC:PHC:NEW DELHI Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 16 of 15 CS No. 40/12 17 08.07.2014
Life Insurance Corporation of India v. ING Vysaya Bank Ltd & Anr. Page no. 17 of 15