National Consumer Disputes Redressal
Dr.(Mrs.) A.Athilakshmi vs A. Ravi on 1 February, 2007
NCDRC National Consumer Disputes Redressal Commission Circuit Bench at Chennai First Appeal No. 29 of 2005 (From the order dated 23.12.2004 in O.P. No.103 of 1999 of the State Commission, Tamil Nadu) .1. The Chairman & Managing Director, Petitioner City Union Bank Ltd., 149, TSR Big Street, Kumbakonam 612 001 .2. The Manager, City Union Bank Ltd., 27-30, Sarojini Street, Ram Nagar Branch, Coimbatore 641 009 Versus R. Chandramohan, Managing Director, D-Cube Construction Pvt. Ltd., Residing at No.10, Big Street, Kipauk Garden Colony, Chennai 600 010. Respondent BEFORE: HONBLE MR. JUSTICE M.B.SHAH, PRESIDET, MRS. RAJYALAKSHMI RAO, MEMBER. For the Petitioners : Mr. J.Radhakrishnan with Mr. S.Viswanathan, Advocates For the Respondent : Mr. Aiyar V. Dolia, Advocate with Mr. Natarajan, T., Advocate. Dated the 1st February, 2007: O R D E R
M.B.SHAH, J. PRESIDENT:
Undisputedly, M/s. D-Cube Constructions Pvt. Ltd. was having Current Account No.3600 with the Appellant Bank, City Union Bank Ltd. The Complainant, D-Cube Construction Pvt. Ltd. was receiving drafts and/or cheques on occasions in the name of D-Cube Constructions and the Appellant Bank used to honour them. In the present matter, three drafts were received in favour of D-Cube Construction from one Mr.Ravindra, a NRI from Malaysia for purchase of three flats. One draft was dated 28.6.1996 for a sum of Rs.5 lakhs; another draft was dated 18.11.1996 for a sum of Rs.3 lakhs and the third draft was also dated 18.11.1996 for a sum of Rs.6 lakhs. All the three drafts were deposited with the Bank. Admittedly, the two drafts, namely, for Rs.5 lakhs dated 28.6.1996 and the other one for a sum of Rs.3 lakhs dated 18.11.1996, were not credited in the Account No.3600 which stood in the name of D-Cube Construction Pvt. Ltd. and were taken as fixed deposit in the name of one of its Directors, R.Thulasiram. Undisputedly, R.Thulasiram has not opened account in the name of D.Cube Construction on 28.6.1996 or 18.11.1996. Yet, for the reasons best known to the officers of the bank, the said drafts were taken as fixed deposits in the name of R.Thulasiram.
The third draft dated 18.11.1996 for the sum of Rs.6 lakhs was credited in the account of D-Cube Construction Pvt. Ltd.
It is to be stated that R.Thulasiram was also a Director of the D-Cube Construction Pvt. Ltd. He himself wrote a letter dated 15.2.1997 to the Manager of the Bank that the D-Cube Construction Pvt.
Ltd. has no objection if current account is opened by R.Thulasiram in the name of D-Cube Constructions and, it is alleged that on the basis of the said letter Account No.4160 was opened on 15.2.1997 in the name of D-Cube Construction and the amount of Rs.5 lakhs which was received by demand draft on 28.6.1996 and the amount of Rs.3 lakhs which was received on 18.11.1996 were credited in the account No. 4160 of M/s. D-Cube Constructions.
As the amount was not credited in the account of the D-Cube Construction Pvt. Ltd. complaint No.O.P. No.103 of 1999 was filed by the Managing Director of the said Company before the State Commission. By the impugned order dated 23.12.2000 that complaint was allowed, and the bank was directed re-credit the amount of Rs.8 lakhs in the current account No. 3600 of the Complainant. The bank was also directed to pay a sum of Rs.1 lakh as compensation and costs of Rs.1,000/- were also awarded. Hence, this appeal by the Bank.
Prima facie, from the short facts narrated above it is apparent that fraud is committed by R.Thulasiram, one of the Directors of the Company and the officers of the bank aided and abetted in conversion of the Demand Drafts which were drawn in favour of D-Cube Construction, i.e. the Complainant Company, in favour of R.Thulasiram.
Further, the Bank, did not produce the necessary records, namely, the ledger account, the opening forms and the authorization forms produced by the D-Cube Constructions Pvt. Ltd. when they opened Current Account No.3600. Only if it had produced it would have been known as to who was the authorized signatory, who was competent to sign the cheques, etc., and issue instructions with regard to the disposal of the cheques/DDs. No reason is stated by the bank as to why they were not in a position to produce the record.
Further, as per the settled law it is for the bank to establish that it has credited, in good faith and without negligence, the amount of the two drafts in favour of R.Thulasiram even though the drafts were in favour of D-Cube Construction. Nothing has been done by the bank in the present case. In the case of Kerala State Cooperative Marketing Federation Vs. State Bank of India & Ors. (2004) 2 SCC 425, while discussing Section 131 of the Negotiable Instruments Act, 1881, after referring to various judgments relied upon, the observation in the case of Indian Overseas Bank Vs. Industrial Chain Concern (1990) 1 SCC 484 wherein it has been held as under:
9. What is standard of care to be taken by a bank in opening an account? In the Practice and Law of Banking by H.P.Sheldon, 11th Edition., in Chapter 5 at p.64 it is said:
Before opening an account for a customer who is not already known to him, a banker should make proper preliminary inquiries. In particular, he should obtain references from responsible persons with regard to identity, integrity and reliability of the proposed customer.
If a banker does not act prudently and in accordance with current banking practice when obtaining references concerning a proposed customer, he may later have cuase for regret..
10. M.L.Tannan in Banking Law and Practice in India, 18th Edition at p.198 says:
Before opening a new account, a banker should take certain precautions and must ascertain by inquiring from the person wishing to open the account, if such person is unknown to the banker, as to his profession or trade as well as the nature of the account he proposes to open. By making necessary inquiries from the references furnished by the new customer, the banker can easily verify such information and judge whether or not the person wishing to open an account is a desirable customer. It is necessary for a bank to inquire, from responsible parties, given as references by the customer, as to the latters integrity and respectability, an omission of which may result in serious consequences not only for the banker concerned, but also for other bankers and the general public.
In the present case, if the officers of the bank were not party to the fraud, they would have immediately inquired as to what was the necessity of opening an account in the name of D-Cube Constructions even though they were having an account D-Cube Construction Pvt. Ltd. Further, they would not have permitted the amount of the two drafts to be kept in favour of R.Thulasiram, and credit the same in a subsequently opened account in the name of D-Cube construction. It was known to the bank that the drafts were being received by the Complainant Company in the name of D-Cube Construction without mentioning Pvt. Ltd and that is apparent from the fact that the third draft is deposited in favour of D-Construction Pvt. Ltd. even though the payees name is mentioned as D-Cube Construction.
In such a situation, it is for the bank to establish that its officers have acted in good faith and without negligence. Hence, in our view, there is no substance in this appeal.
However, learned counsel for the Appellant bank vehemently submitted that the Managing Director of the Complainant was not entitled to file complaint without production of proper resolution by the Company. In our view, this contention is made out of frustration. It has to be stated that the Consumer Fora is not bound by the technical procedure evolved under the Civil Procedure Code. Once the Complainant/Managing Director was operating the account, the complaint by him was maintainable. In any case such technical defence would have no meaning in the present case and before Consumer Fora.
Further, in the complaint it has been mentioned that the Complainant alone was permitted to operate Current Account No. 3600. It has also been specifically stated that as there was some misunderstanding between the Complainant and R.Thulasiram, on 8.1.1997, a letter was written to the bank not to permit withdrawal from the Current Account by Thulasiram.
Learned counsel for the bank further submitted that at the most there may be some dispute between the two directors, but for that the bank should not be held liable.
In our view, even if there is a dispute between the two directors of the Company, bank is required to act in good faith and not favour and credit the amount payable to the Company in favour of one of the Directors. This would amount to conversion of the money of the Company in favour of a Director. Not only this, the officers of the bank permitted one director to open an account in an identical name and have permitted him to withdraw the amount belonging to the Company.
Learned counsel for the Appellant further submitted that the order passed by the State Commission directing the bank to pay compensation of Rs.1 lakh is excessive. In our view, it cannot be said to be excessive. For this, reference may be made to the observations made by the Supreme Court in Lucknow Development Authority Vs. M.K.Gupta, (1994) 1 SCC 243.
Lastly, the learned counsel for the Complainant submitted that the amount awarded by the State Commission should be credited in the Current Account No.3600. For this contention, the learned counsel for the Opposite Party has no objection. Hence, only this part of the direction passed by the State Commission is required to be modified. Hence, it is directed that the amount of Rs.8 lakhs plus Rs.1 lakh and Cost of Rs.1,000/-, as awarded by the State Commission shall be credited in the Current Account No.3600 held by D-Cube Construction Pvt. Ltd.
In the result, the appeal is dismissed with the aforesaid modification in operative direction. The bank shall pay Rs.10,000/- as costs of this appeal to the Respondent.
..J. ( M.B.SHAH ) PRESIDENT ..
(RAJAYLAKSHMI RAO) MEMBER