National Consumer Disputes Redressal
Pratibha Pratisthan vs The Manager, Allahabad Bank on 6 September, 2007
NCDRC NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO.155 OF 1997 1. Pratibha Pratisthan (A Public Charitable Trust registered under the Bombay Public Trusts Act, 1950) having its office at 5th Floor, Industrial Assurance Building Churchgate, Mumbai-400 020 2. G.G. Kudalkar Kudalkars Bunglow, Opp.Star Textile Colony, Manpada Road, Dombivli (E) District Thane 3. Daji Bhatawadekar 215, Ram Mohan Roy Road, Girgaum, Bombay 400 004. 4. Mushtaq Antulay Glamour Flat No. 23, Shahid Bhagat Singh Road, Bombay-400 005. 5. Mrs. Sandya D. Kudalkar, Kudalkars Bunglow, Opp. Star Textile Colony, Dombivli (E), District Thane. 6. Dr. Jayantrao S. Patil C-27, Icchapurti Co-operative Housing Sociey Sant Muktabai Marg, Vile-Parle (East), Bombay-400 057. Complainants Vs. 1. The Manager, Allahabad Bank Juhu Vile Parle Branch Mumbai-400 049 2. The Manager, Allahabad Bank Andheri-West Branch Mumbai-400 049 3. Allahabad Bank Head Office Subhash Chandra Bose Road Calcutta-700 001. 4. Ismail N. Kanga 1, Kalpataru, 39, Dr. G. Deshmukh Marg, Bombay - 400026 5. R.S. Gavai 902, Purna, Worli Sagar Co-operative Housing Society Ltd., Sir Pochkhanwala Road Bombay-400 025. 6. Anant Kumar Patil Sai-Krupa, Gorakshan Road Akola 7. A.M. Hetavkar Small Causes Court Annexe Building, 5th Floor, L.T. Marg, Bombay-400 002. Opposite Parties AND ORIGINAL PETITION NO.156 OF 1997 1. Pratibha Pratisthan (A Public Charitable Trust registered under the Bombay Public Trusts Act, 1950) having its office at 5th Floor, Industrial Assurance Building Churchgate, Mumbai-400 020 2. G.G. Kudalkar Kudalkars Bunglow, Opp.Star Textile Colony, Manpada Road, Dombivli (E) District Thane 3. Daji Bhatawadekar 215, Ram Mohan Roy Road, Girgaum, Bombay 400 004. 4. Mushtaq Antulay Glamour Flat No. 23, Shahid Bhagat Singh Road, Bombay-400 005. 5. Mrs. Sandya D. Kudalkar, Kudalkars Bunglow, Opp. Star Textile Colony, Dombivli (E), District Thane. 6. Dr. Jayantrao S. Patil C-27, Icchapurti Co-operative Housing Sociey Sant Muktabai Marg, Vile-Parle (East), Bombay-400 057. Complainants Vs. 1. The Manager Canara Bank Bhat Bazaar Branch Mumbai-400 009. 2. Canara Bank Head Office, Bangalore-560002. 3. Allahabad Bank, Andheri (West) Branch Bombay-400 049. 4. Allahabad Bank Head Office Subhash Chandra Bose Road, Calcutta-700001. 5. Ismail N. Kanga 1, Kalpatru, 39, Dr. G. Deshmukh Marg, Bombay-400026. 6. R.S. Gavai 902, Purna, Worli Sagar Co-operative Housing Society Ltd., Sir Pochkhanwala Road Bombay-400 025. 7. Anant Kumar Patil Sai-Krupa, Gorakshan Road Akola 8. A.M. Hetavkar Small Causes Court Annexe Building, 5th Floor, L.T. Marg, Bombay-400 002. Opposite Parties BEFORE: HONBLE MR. JUSTICE M.B. SHAH, PRESIDENT MRS. RAJYALAKSHMI RAO, MEMBER. For the Complainants in : Shri Magan Bhai Barot, Both the petitions Senior Advocate with Shri K.R. Chawla, Shri. Arijit Prasada, Shri Jitender Kumar and Shri Sumit Gaur, Advocates. For the Opposite Parties : Shri Sanjay Hegde, Advocate For Allahabad Bank Shri R.P. Vats, Advocate for Canara Bank Shri Jay Savla, Advocate with Shri M. Naseem Advocate for Opp.Party No.4 in O.P. No. 155/97 and Opp.Party No.5 in O.P. No.156/97 Dated the 6th September, 2007 O R D E R
M.B.SHAH, J. PRESIDENT.
In both the aforesaid matters contents, contentions and defences are similar. Hence, both the matters are disposed of by this common judgment.
The main question involved in these two complaints is: Whether a bank is liable to reimburse the Complainant(s), (Pratibha Pratisthan Trust & Trustees) in case the Complainants and their authorized representative themselves are party to the fraud committed in collusion with the employees of the banks?
In our view, in case of fraud committed by the trustees and its authorized representative in connivance with the officers of the bank, the complaint filed by them, at least, under the Consumer Protection Act, 1986, is not required to be dealt with. Further, the persons who are party to the fraud are not entitled to get equitable relief from this Commission, under the Act.
In the present case, it would be apparent that for no justifiable reason the Trustees were keeping the Original FDRs in the custody of the banks. The reason could be to facilitate the FDRs to be pledged as security for the over draft facility being availed by M/s.Vijay Mutha & Co. Secondly, Mr. Vijay Mutha and Mr.Palav were being presented by the Trustees as their authorized representatives. And, in that set of circumstances, if the authorized representative commits fraud, the Complainants have to thank themselves and the banks may not be made liable for the same.
Further, if the trustees had taken reasonable care and precautions which an ordinary man is required to take and examined the affairs of the FDRs lying with the Banks they could not have failed to find out what was really happening to the FDRs and the subsequent repeated transfers of money. As that is not done, the blame could not be thrown upon the bank for the loss, if any, suffered by the Trust. The Bank officers are expected to take only reasonable care in verifying as to whether the Resolutions which are produced with the Bank by Mr.Vijay Mutha and Mr.Palav for withdrawal of the amounts, are passed by the trust or not.
Original Petition No. 155 of 1997 Facts:
The complainant, Pratibha Pratishthan, a public charitable trust, registered under the Bombay Public Trust Act, 1950, and some of its trustees, have filed this complaint against Allahabad Bank praying that the Bank may be directed to pay (a) a sum of Rs.1,32,18,423/- with interest thereon at the rate of 26% p.a. from 10.7.1995; (b) to pay a sum of Rs.57,73,985/- with interest at the rate of 26% p.a. from 8.8.1995, till the date of payment; and, (c) to pay liquidated damages amounting to Rs.10 lakhs along with costs.
It is contended that Complainant No.1 is a public charitable turst; Complainant No.2 is the Trustee-Secretary and Complainants No.3 to 6 are the Trustees of the said Trust. The corpus of the Trust consists of donations from the government, co-operative societies and other bodies. It is pointed out that Opp.Party No.4, Ismail N. Kanga, is the Chairman of the Trust. He is impleaded as Opp.Party No.4 because he has submitted his resignation as a trustee on health grounds. Opp.Party Nos.5, 6 and 7 are the Trustees of the Trust but as they were not available at the relevant time, they are joined as opp.parties.
Opposite Party No.1 is the Manager, Allahabad Bank, at Juhu Vile Parle Branch, Mumbai; Opp.Party No.2 is the Manager of Andheri West Branch of the said Bank; and, Opp.Party No.3 is the Head-office of the Allahabad Bank.
It is contended that in Writ Petition No. 1490 of 1982, the High Court of Bombay had directed the complainant Trust to invest the funds of the Trust in a Nationalised Bank on 6 monthly fixed deposit basis. In pursuance of the said direction and at the request of Opp.Party No.1 (Juhu Vile Parle Branch), the Trust kept an amount of Rs.1,32,80,423/- in a fixed deposit (No.604193/52/FD/605) for a period of 6 months for which an FDR was issued along with covering letter dated 10.7.1995.
Thereafter, the complainant Trust kept a further amount of Rs.57,73,985/- with the said Bank as fixed deposit (No.685039/52/FD/1196) for a period of 6 months on which interest was payable quarterly. That FDR is dated 18.9.1995.
It is contended that the complainant Trust had entrusted the above two original FDRs to Opp.Party No.1 (Juhu Branch) for safe custody. It also instructed the Juhu Branch to invest and issue further FDRs in respect of the quarterly interest accruing on the above fixed deposits.
Vide letter dated 2.1.1996, the complainant Trust requested the Juhu Branch to renew the FDR which was maturing on 8.1.1996 for a further period of 6 months along with the interest which had become due thereon. Thereafter, a second letter dated 7.2.1996 was sent for renewal of the second FDR (for a sum of Rs.57,73,985/-) which was maturing on 8.2.1996 for a period of further 6 months along with the interest thereon. It is pointed out that in both the letters, the Bank was intimated that the FDRs belonged to a public charitable Trust and it could not be pledged by anyone for any purpose whatsoever.
As against this, there is a letter dated 7.3.1996 written by Opp.Party No.1 (Juhu Vile Parle Branch) to the following effect :
The Trustee Hon.Secretary Pratibha Pratishthan Mumbai.
Dear Sir, With reference to your letter dated 7th February 1996 and enclosures regarding exemption of Income Tax on your FDRs for Rs.1,32,18,423/- and Rs.57,73,985/- we have to bring to your kind notice that the said FDRs have been prematurely withdrawn by you vide your letters dated 23.9.1995 and relative extracts of resolutions of your Trust of same date. The said payments were made by our Pay-orders of 28.9.1995 in favour of the Trust. As such, your aforesaid letter of exemption of Income-Tax does not pertain to us.
The complainants contended that the said amount was neither withdrawn by the Trust, nor such letter dated 23.9.1995, as contended by the Bank, was written, nor was there any Resolution to that effect.
Thereafter, vide its letter dated 16.3.1996, the Allahabad Bank of Andheri Branch stated that it had opened a Current Account No.450 of the complainant Trust and requested the complainant Trust to submit to it a duly certified copy of the Trust Deed as also the Resolution as to the present Trustees, Rules and Regulations. This letter reads as under:
In connection with your current account No.450 with us you are requested to submit a duly certified true copy of Trust Deed as also a Resolution as to the present trustees, the trust Rules and Regulation framed for administration of the Trust. The Trust Deed and other papers should be certified by public Notary or a firm of chartered accountants (Regd.).
Kindly treat the matter as urgent.
It is contended by the Complainants that the Andheri (West) Branch of the Allahabad Bank, by utter negligence, allowed the bogus Current Account No.450 to be opened in the name of the complainant Trust.
Because of this, the complainant Trust lost faith in Opposite Party No.1 and by their letter dated 3.4.1996 asked the said Bank to issue a Pay Slip to cover up the whole amount deposited by the complainant Trust. As the amount was not paid, this complaint is filed.
Thereafter, the complainant Trust had lodged a complaint with the CID, Mumbai on 11.9.1996 in respect of the offences committed with regard to withdrawal of the amount from the Bank.
Contentions of the Allahabad Bank:
On behalf of Allahabad Bank, written submissions are filed wherein it has been contended that
i) The complaint is not maintainable because it requires appreciation of enormous documentary and oral evidence. Also, there are serious allegations of fraud for which criminal prosecution is pending.
ii) One, Mr.Nandkumar Yashwant Palav, a finance broker opened Savings Bank Account by proper introduction by a customer of the Branch. He represented that he was a successful businessman having very good contacts and was also representative of the complainant trust for placing its deposits. At the instance of Mr.Palav, on 3.7.1995, the Juhu Vile Parle Branch of Allahabad Bank, requested the complainant trust for placement of its deposits with it. The letter was handed over to Mr.Palav and was also delivered to the complainant trust as admitted by the complainant. On 8.7.1995, Mr.Palav tendered to the Juhu Branch of Allahabad Bank, a copy of the letter addressed by the complainant trust to the Canara Bank, Mazagaon, instructing them to transfer the maturity proceeds of the fixed deposit for a sum of Rs.1,26,43,087/- which matured on 7.7.1995 either by way of Pay Slip or RBI cheque. The amount was to be kept in fixed deposit for a period of 6 months with a direction that the original fixed deposit receipt shall be kept in safe custody and forward the certified Xerox copy. Mr.Palav also tendered other documents like the account opening form and specimen signature card of the trustees and the instructions to operate the account. The officers of the branch met the second complainant, Mr.G.G.Kudalkar the Secretary of the trust, and Mr.M.V.Sangikar, Trustee, who confirmed the genuineness of opening of the account and the capacity of Mr.Palav as the representative of the trust. The fixed deposit was to mature on 8.1.1996. The entire operation was carried out at the instance of Mr.Palav and this was confirmed by Mr.Kudalkar and Mr.Sangikar.
iii) Thereafter, on 13.1.1995, the complainant trust addressed one more letter to Canara Bank, Mazagaon branch, Mumbai, instructing them to transfer the maturity proceeds of the fixed deposit for a sum of Rs.55,20,617/- which was maturing on 5.8.1997 to the Juhu branch of Allahabad Bank. A copy of the said letter was brought to the Juhu Branch by Mr.Palav. Acting on the instructions, the Juhu Branch of Allahabad Bank sent a letter to the Canara Bank seeking maturity proceeds by way of RBI cheque. On that basis, Canara Bank issued a demand draft for a sum of Rs.57,73,995/-. This was collected by the Juhu Branch of Allahabad Bank through banking channels. That amount was also kept in fixed deposit in the name of complainant No.1, which was to mature on 23.9.1995.
On 18.9.1995, at the instance of Mr.Palav, the above deposit receipt maturing on 23.9.1995 was cancelled and a fresh fixed deposit receipt indicating the maturity date as 8.2.1995 was prepared for the said amount and a copy of the said receipt was handed-over to Mr.Palav. The complainant No.1 had acknowledged its placement and receipt.
iv) The trust and the trustees held out and confirmed that Mr.N.Y.Palav was the representative of the trust and all admitted transactions were held through him.
(v) For the same facts, FIR was lodged by the trustee, Mr.Kudalkar, and after the investigation by the police, it was found that the trustees and their co-conspirators, namely, Vijay Mutha of Mutha & Co., Chartered Accountant and Mr.N.Y.Palav, have cheated the banks and the trustees. For this purpose, reliance is placed upon the charge-sheet submitted by the Senior Inspector of Police, General Branch Crime Branch, CID, Mumbai, against the accused namely, Vijay Mutha, N.Y. Palav, Gangadhar Govind Kudalkar and others.
The eleventh charge in the charge sheet, inter alia, pertains to G.G.Kudalkar (Accused No.4) which is as under:
That the accused No.4 during the aforesaid date, time and place with intent to cause injury to the bank officials instituted criminal proceeding (complaint) against them, with having committed an offence, knowing that there was no just or lawful ground for such charge against them and thereby committed an offence under Section 120(B)211 of IPC.
It is to be stated that before filing of the said complaint, a Resolution was passed on 8.1.1997 in the Board meeting of the trust.
It is pointed out that on the basis of the aforesaid charge-sheet, a criminal case is pending against the accused in Espalande Court, Mumbai.
(vi) The Trust issued a Legal Notice to the Allahabad Bank on 14.1.1997. In response to the said Notice, Mr.N.L.Ganapati, Advocate for the Bank has responded by giving a reply dated 10.2.1997 wherein it has been pointed out that the Trust has opened 2 F.D. accounts by advising the bank by writing 2 letters dated 5.7.1995 and 31.7.1995 respectively and to collect the amounts from the Canara Bank, Mazagaon Branch, Mumbai. It is also pointed out that all the formalities on behalf of the trustees were carried out by one Mr.Nandkumar Yashwant Palav, as a representative of the Trust. It has been further averred that the representative of the Trust Mr.Palav produced letters and extracts of the resolution with the bank for withdrawal of the FDR amount and hence, the bank made out Pay Orders dated 28.9.1995 for Rs.2 crores in favour of the Trust and handed over the same to Mr.Palav. It has been further stated that advise your client to contact the Settlor of your client who was fully aware of the happenings in the Trust, and Shri Nandkumar Yashwant Palav, representative of your client in the said transaction with my client, in this regard, which would put an end to your clients wild imagination.
Original Petition No. 156 of 1997 Facts:
Along with the aforesaid complaint, this complaint is also filed by the trust and some of the trustees against (1) the Manager, Canara Bank, Bhat Bazar Branch, Mumbai; and, (2) the Allahabad Bank, Andheri (West) Branch, Bombay, and other trustees, namely, Mr.Ismail N. Kanga, Mr. R.S.Gavai, Mr.Anant Kumar Patil, and Mr.A.M.Hetavkar, are also joined as Opposite Parties.
It is the say of the Complainants that on 13.3.1994 the trust had an amount of Rs.10,44,85,784/- with Corporation Bank, which was transferred to the Canara Bank, Bhat Bazar Branch, Mumbai (Opposite Party No.1) on 31.3.1994 with a request to Canara Bank to keep the said amount in FDR. The bank, thereafter, issued an FDR No.54/94 for the said amount. It is contended that the Opposite Party No.1 was directed to keep the original FDR in its safe custody by letter dated 28.4.1994.
On the basis of the letters dated 22.9.1994, 8.3.1995, and 13.9.1995 written by the Complainant to the Bhat Bazar Branch, Canara Bank, Mumbai, the FDR was renewed for a further period of 6 months on each occasion.
However, the Opposite Party No.1 by its letter dated 25.9.1995 informed that the FDR which was due on 30.9.1995 was pledged to the Bank vide letters dated 4.4.1994 and 20.7.1994 as security for a over draft limit of Rs.6 Crores granted to one M/s.Vijay Mutta & Co. and that there was an outstanding liability of the said Vijay Mutta & Co. for a sum of Rs.6,38,05,943/-. The Complainants were also informed that if the amount was not cleared before 29.9.1995 the bank would appropriate the FDR in liquidation of the said over draft facility. It is contended by the Complainant that they were not aware of the said over draft facility.
Thereafter, on 18.10.1995, the Bank informed the Trust that the OD facility of Rs.6 Crores granted to the Vijay Mutta & Co. has been cleared and that the FDR of Rs.11,81,54,538/- was renewed for a further period of 6 months from 30.9.1995 and that the earlier letter dated 25.9.1995 was withdrawn.
Thereafter on 21.10.1995 the Complainant wrote a letter to the Opposite Party No.1 to find out under what circumstances the FDRs were pledged without the knowledge and consent of the Trust. On the same day the Complainant sent also another letter requesting the Bank to send the renewed FDR in original as it was required for transmission to the Charity Commissioner.
On 26.10.1995 the Opposite Party informed the Complainant that the FDR was renewed for further period of six months w.e.f. 30.9.1995 and the original was kept with it under safe custody.
On 27.10.1995 the Trust wrote a letter to the general Manager of the Bombay Regional office of the Bank to ensure the safety of the FDR.
On 15.11.1995 the Trust asked the bank to sent another legible certified copy of the FDR. On 11.3.1996 a letter similar to this effect was also sent to the Opposite Party Bank.
Thereafter, on 23.3.1996 the Trust asked the Canara Bank to transfer the maturity amount of Rs.11,81,54,538/- with interest to the account of the Trust in the Indian Bank, Nariman Point Branch, on maturity of the FDR on 3.4.1996.
Finally, on 3.4.1996, Senior Manager of the Opposite Party No.1 wrote a letter to the Complainant to the effect that:
.(a) That Vijay Mutta & Co. approached the Opposite Party No. 1 for over draft limit of Rs.600 lakhs for which the complainant trust offered to pledge FDR 54/99 for Rs.10,44,85,784/-
.(b). That the Trust produced a copy of Resolution resolving to pledge the said FDR towards the over draft facility granted to Vijay Mutta & Co.
.(c). That the permission for the above was granted by the Charity Commissioner by letter dated 23.3.1994.
.(d). That the Over Draft facility of Rs.600 lakhs was given to Vijay Mutta & Co. by Opposite Party No.1.
.(e). That the loanee Vijay Mutta & Co. defaulted in repayment of the overdraft. The amount of the FDR of the complainant trust was adjusted against the liabilities of the loanee after issuing a Registered A.D. Notice to the Trust on 25.9.1995.
.(f). That Vijay Mutta & Co. repaid their liability.
The trust vide a letter dated 13.10.1995 requested the Opposite Parties to transfer the maturity proceeds of the F.D.R to Andheri (West), Branch of Allahabad Bank. The Complainant Trust sent to the Opposite Parties a resolution for the purpose alleged to have been passed by the Trust.
.(g). That as per those instructions demand drafts totaling to Rs.11,81,54,538/- was transferred to the account of the Trust at Allahabad Bank Andheri (West) Branch of Allahabad Bank being Account No.450.
.(h). That the above facts were duly informed to the Trust by registered letter dated 19.10.1995.
It is the contention of the Complainant that the trust has never pledged the FDR for any amount; the trust has never sought permission from the Charity Commissioner for over draft facility; the trust has never requested the bank to transfer the maturity proceeds to any account of the FDR to Allahabad Bank or anybody else or passed any resolution as falsely claimed; and, the trust was not informed anything by the letter dated 19.10.1995 as alleged or otherwise.
It is, therefore, contended that the aforesaid conduct and services of the nationalized bank reveals shockingly negligent conduct and that the Complainants have not sought transfer of the amount to the Allahabad Bank, Opposite Party No.3.
Therefore, the Complainant trust sent legal notice dated 14.1.1997 and requested to repay the amount of the fixed deposits totaling to Rs.11,81,54,538/- with interest at the rate of 26% p.a. It is also stated that the Complainant No.1 Trust has lodged FIR with the CID, Mumbai on 11.9.1996.
Finally, the Complainants have approached this Commission for a direction the Opposite Party No.1 to 4 to pay the sum of Rs.11,81,54,538/- with interest at the rate of 26% p.a. from 30.9.1995 till it payment. It has also claimed Rs.10 lakhs as liquidated damages for the mental agony, worry and anxiety caused to the Trust and Trustees.
Contentions of the Opposite Parties:
The Canara Bank has also raised similar contentions which are raised by the Allahabad Bank in Original Petition No.155 of 1997.
It if also contended that:
.(a). Considering the forgery and fraud committed by the Trustees, the parties must be referred to civil court for adjudication of the case;
.(b). The Complainant, Kudalkar, who has verified the complaint died during the course of proceedings and no formal application been taken out to continue the proceedings initiated by him. Therefore, the complaint must be deemed to have been abated.
.(c). Vide application dated 4.4.1994, one M/s.Vijay Mutha & Co., Chartered Accountants had requested the Opposite Party No.1 to grant an over draft of Rs.4 Crores. The Complainant No.1 agreed to pledge the said FDR with the Opposite Party No.1 as a security for the due repayment of the loan amount by M/s.Vijay Mutha & Co. The Complainant has also executed a letter of pledge dated 4.4.1994 pledging the said FDR No.54/94. For this purpose, the Complainant No.1 has produced a certified copy of the Resolution dated 2.4.1994 passed by the trust to pledge the FDR as security. Thereafter, an additional facility of Rs.2 Crores was also granted. For that purpose, another Resolution dated 8.7.1994 passed by the Trust was produced and that the Complainant had also executed another letter of pledge for the enhancement of the overdraft facility.
.(d). The renewed FDR remained to be pledged with the Opposite Party No.1 as security for due payment of loan amount by M/s. Vijay Mutha & Co.
.(e). As the borrower failed to repay the amount Opposite Party No.1 informed this fact to the Chairman of the Complainant No.1 vide its letter dated 25.9.1995 which is produced on record as R-1/15. Thereafter, M/s.Vijay Mutha & Co. deposited the amount equivalent to the outstanding in its over draft account.
Subsequently, vide letter dated 13.10.1995 the Complainant No.1 instructed the Opposite Party No.1 to transfer the proceeds of FDR No.107/95 to Allahabad Bank, Andheri (West) Branch, Mumbai. The letter is also produced on record along with the resolution passed by the Trust. Accordingly, Opposite Party No.1 remitted the said amount of Rs.11,81,54,538/- to Allahabad Bank and intimated about it to the Complainant No.1 vide its letter dated 18.10.1995 by registered AD and a copy of the said AD card is also produced on record as Annexure R-1/21.
The Bank has also produced on record a letter dated 31.5.1994 written to the Complainant No.1 that the FDR was lying with them as security. The Complainant No.1 duly acknowledged the same vide its letter dated 2.5.1995.
.(f). The amount was ultimately paid on the basis of the cheques issued by the Trust and the original documents are in custody of Criminal Court.
With regard to disbursement of Rs.13 Crores, it has been pointed out that on the same facts involved in the transactions herein, an FIR was lodged based upon the complaint of the trustee Mr. Kudalkar.
After investigations by the police it was found that the trustees and their co-conspirators had joined in cheating both the banks and the trust. Accordingly a chargesheet has been filed and prosecution launched. A perusal of the charge sheet, which is reproduced hereinafter, alone is sufficient to indicate the complicity of some of the trustees in the transactions complained of. Further, perusal of the 161 Cr. P.C statements elaborates their individual roles.
In the said prosecution, no officer of the Canara Bank is joined as co-accused and hence the complaint against the Canara Bank is totally misconceived.
Findings:
.I. Whether the complaint is maintainable?
On behalf of the opp.parties, it has been pointed out that the complaint filed by the Trust is not maintainable, and, in any case, the complaints are not filed by all the Trustees.
In our view, this submission is required to be accepted because, under the Consumer Protection Act, 1986, complaint can be filed by a consumer. Under Section 2(1)(d) consumer is defined to mean any person who buys goods or hires or avails of any services for consideration. The word person is also defined under Section 2(1)(m), which includes (i) a firm, whether registered or not; (ii) a Hindu Undivided Family; (iii) a Co-operative society; and (iv) every other association of persons whether registered under the Societies Registration Act, 1860 or not.
Further, in support, the learned counsel for the opp.party Bank has rightly pointed out an observation from DJ Hayton, Hayton & Marshall Commentary and Cases on The Law of Trusts and Equitable Remedies, wherein it has been observed that A trust, unlike a company, has no legal personality; thus, it cannot own property for entering into contracts, sue or are sued. It is the trustees who own the trust property, enter into contracts, sued or are sued. A trustee as such has no distinct legal personality in his representative capacity separate from himself in his personal capacity.
Considering the aforesaid definition of the word person, a public trust is not person which can be considered to be a consumer entitled to file complaint before the consumer forum. The reasons are:
.(i). trust is not included in the definition of the word person. The Legislature included cooperative society under the definition person but not public trust;
.(ii). secondly, trust is not a legal entity.
Hence, the complainant, Pratibha Pratishthan Trust, which is registered under the Bombay Public Trust Act, 1950, cannot be considered to be person which can file a complaint under the Consumer Protection Act, 1986.
Further, the Bombay Public Trust Act, 1950, defines the trustee as a person in whom either alone or in association with other persons, the trust property is vested and includes the Manager.
For this, it is to be stated that all the trustees are not made party-complainants. Though the Opposite Party No.4 was the Chairman of the Trust, he is not made a party (i.e. one of the Complainants) on the alleged ground that he had submitted his resignation as a trustee on health grounds. Rest of the trustees are made as Opposite Parties No.5, 6 and 7 on the alleged ground that they were not available at the relevant time.
Hence, we hold that the complaints filed by the Trust are not maintainable for the reasons that the Trust is not person entitled to file complaint under the Consumer Protection Act, 1986; and, also that both the complaints are filed by Trust without making the all the Trustees as Complainants. Hence, these complaints are not required to be entertained.
.II. Whether the Trustees can seek relief under the Consumer Protection Act, 1986 when they themselves are parties to the fraud ?
In the present case, the trustees are also parties to the fraud committed by Mr.Nandkumar Yashwant Palav and Vijay Mutha and, therefore, this would not be a fit case for exercising equitable jurisdiction under the Consumer Protection Act, in favour of the trust, and that the proceedings are not filed bona fide but are meant to cover up the illegal actions of the trustees.
In the criminal prosecution charge sheet was submitted by the CID, Crime Branch, Mumbai, against, in all, 9 accused. Accused No.1 is Vijay Kanhayalal Mutha, Accused No.2 Mr.Nandkumar Yashwant Palav; Accused No.3 Sujeet Shankarrao Jadhav; and, Accused No.4, Gangadhar Govind Kudalkar. The first charge as per the Charge-sheet is as under:
That the main accused No.1 to 9 during the period from March 94 to Sept.96 at Canara Bank, Bhat Bazar Branch, Allahabad Bank, JVPD Branch, Mumbai, Allahabad Branch, Andheri (W), Mumbai, did hatch a criminal conspiracy, whereby they cheated the Pratibha Pratisthan, when the accused No.3 forged signatures of Secretary viz. G.G. Kudalkar (accused no.4), chairman Ismail Kanga, and some other officials of the Trust, on resolution, Extract of resolution, Letters of the trust etc. On the basis of these bogus documents accused no.1 did obtain pay order of Rs.10,44,85,784/- from Corporation Bank, Kandivali Branch. Thereafter, the accused no.3 again forged the signatures of the trustees on the resolution letter etc. and with the help of these bogus/forged documents, the accused no.1 submitted these bogus documents to Canara Bank, Bhat Bazar Branch, Mumbai and deposited the said Pay Order with that Bank in FDR No.54/94. Thereafter accused no.1 did avail overdraft facility of Rs.600 lacs on the said FDR by submitting forged letter, Charity Letter and other documents etc. The accused no.4 having knowledge of fraudulent transfer of amount from Corporation Bank to Canara Bank, did renew three times dated Sept.94, March 95 and Sept.95 the said FDR in Canara Bank.
Thereafter accused no.1,2 and 3 again prepared bogus resolution, letter etc. and then the said documents were submitted by accused no.1 and 2 to Allahabad Bank, Andheri West Branch, Mumbai and then did open bogus A/c No.450 in the name of Pratibha Pratisthan & obtained the cheque book of the said A/c.
Thereafter, with the help of bogus documents, amount of Rs.11,81,54,638/- which was in the form of FDR in Canara Bank, was transferred to the said bogus A/c no.450 by way of issuing 13 DDs of Canara Bank. Then accused No.3 again did forge the signatures of Trustees on the resolution, letter, etc. Thereafter, accused no.1 and 2 did submit the said documents in Allahabad Bank, JVPD Branch, Mumbai and did obtain Pay Order of Rs.1,92,94,519/- from the Bank against the FDR of Pratibha Pratisthan. Thereafter the said P.O. was deposited in the bogus A/c No.450 in the name of Pratibha Pratisthan in Allahabad Bank, Andheri (W), Mumbai. And thereafter the accused no.3 did forge the signatures of the trustees on the cheques and were issued in the names of accused no.1 and 2 and by way of it, the amount of Rs.13,74,49,057/- in the A/c no.450 in Allahabad Bank, Andheri (W) Branch, Mumbai was siphoned off to the accounts of the accused no.1 and 2, and thereby they committed the offence punishable under Section 120(B) r.w.204, 409, 465, 467, 468, 471, 474, 420, 182, 211, 201 of IPC.
In this context it is to be stated that the officers of the Bank met Mr.G.G.Kudalkr, Secretary of the Trust and Mr.M.V.Sangikar, Trustee, who confirmed the genuineness of the opening of the account and the capacity of Mr.Palav, as the representative of the Trust.
From the contents of the charge-sheet referred to above, and the silence maintained by G.G.Kudalkar when the funds in the Trust account are transferred from one bank to another and, thereafter, siphoned off to the accounts of Vijay Mutha and Palav, it is apparent that the trustees, especially G.G.Kudalkar, are parties to the frauds and hence, they are debarred from seeking relief from the Consumer Protection Act, 1986.
.III. Whether the Trust can plead ignorance about extending of overdraft facility to M/s.Vijay Mutha & Co.?
In our view, it is not possible to accept the stand of Trust that they are ignorant about the giving of loan facility on the FDRs by the banks to M/s.Vijay Mutha & Co.
.(i). For this, we would reproduce the letters dated 28.4.1994, 22.9.1994, 8.3.1995, and 13.9.1995, addressed by the Complainant to the Canara Bank, Bhat Bazar Branch, Mumbai, which read as under:
.(a). The letter dated 28.4.1994 reads as under:
Sub: FDR No.54 of 1994 for Rs.10,44,85,784/- with interest dt 31.3.1994 in the name of Pratibha Pratishthan.
Sir, We are enclosing a copy of our letter dated 27th March, 1994 addressed to the Corporation Bank in the above matter.
We are in receipt of a Xerox copy of the above FDR issued in our favour by your bank. We now request you kindly to send us a certified copy of the said FDR for our record. The original may be kept in your safe custody till the date of maturity or till such time as we ask you to produce for our record.
We further request you kindly to invest in and issue in our favour further FDRs in respect of quarterly interest accruing on the above FDR.
Kindly acknowledge the receipt of this letter and send us a certified copy of the above FDR No.54 of 1994 on 31.3.1994 for the above amount for our record[1].
.(b). Thereafter, another letter dated 22.9.1994 requesting for extension of the FDRs, was written to the same Bank, which reads as under:
We have in your bank, the following Fixed Deposit Receipts which matures on 30.9.94 and 13.11.94 :-
.(1).FDR.No.Ref.No.54/94.(440700) Rs.10,86,65,215/-
.(2). FDR No.44714 ----
Rs. 4,64,000/-
You are requested to kindly renew both the above FDRs for a further period of six months along with interest which have become due thereon upto 30.9.94. Kindly keep the original Fixed Deposit Receipts in your safe custody and send zerox copies of the renewed FDRs.
.(c). Thereafter, to the same effect, letter dated 8.3.1995, to same bank was written, which reads as under:
We have in your bank, the following fixed deposit receipt which matures on 30.03.1995:
.1. FDR FMD No.440839 Rs.11,30,11,823/-
You are requested to kindly renew the above FDR for a further period of six months along with interest which has become due thereon upto 30.03.1995. Kindly keep the original fixed deposit receipt in your safe custody and send Xerox copy of the renewed FDR immediately for our record.
.(d). Thereafter, letter dated 13.9.1995, addressed to the same bank for the same purpose, which reads as under:
We have in your Bank, the following Fixed Deposit Receipt which matures on 30.09.1995.
(1). FDR No.440700 - Rs.11,81,54,538.00 Ref.54/94 You are requested to kindly renew the same for a further period of six months along with interest which has become due thereon thereon upto the date of maturity and keep it in your safe custody under intimation to us. Kindly send xexox copy of the renewed FDR.
In our view, there was no justifiable reason for the trustees to keep the original FDRs with the banks, i.e. to say, with the Canara Bank and the Allahabad Bank. The contention that the FDRs were kept in safe custody with the banks is unusual and totally imaginary and is a cooked up story. In a normal conduct the FDRs would be kept in safe at the Trust Office or by the trustees.
This conduct of keeping the FDRs in the Bank reveals much against the Trustees. Unless the intention of the trustees is to facilitate the FDRs being pledged to the Bank for the loan to be taken by Vijay Mutha & Co., they would not have kept the FDRs in the custody of the banks. This conduct of the Trustees indicates that the Trustees were knowing that on the basis of the FDRs, over draft facility could be availed by Vijay Mutha & Co. Therefore, from the beginning it appears that the trustees were knowing about the conduct of Mr.Vijay Mutha and Mr.Palav.
.(ii). It appears that the Trustees in the letters dated 7.2.96 and 8.2.96 and such other letters referred to above, (i.e. at the time of renewal of the FDRs) informed the Banks that the FDRs were belonging to Public Charitable Trust and that they could not be pledged by any one for any purpose.
This conduct would reveal the guilty conscious of the trustees that they were aware about the pledging of the FDRs.
Otherwise, there was no necessity of mentioning such a thing in the letters. It appears that the letters were written much after the FDRs were encashed on 28.9.95 which smacks of the advanced preparation.
.(iii). Thereafter, we would refer to the letter dated 25.9.1995 written by the Senior Manager of the Canara Bank to the Chairman of the Complainant Trust wherein it has been specifically stated that FDR was pledged to the bank vide letter dated 4.4.1994 and 20.7.1994 as security for the OD limit of Rs.600 lakhs granted to M/s.Vijay Mutha & Co. there is an outstanding liability of Rs.6,38,05,943/- inclusive of interest debited till 30.6.1995. It was also specifically stated that if the liability is not cleared on or before 20.9.1995, the bank would appropriate the deposit towards liquidation of the OD liability. This letter dated the 25.9.1995 reads as under:
In respect of your above deposit pledged to us vide pledge letter dated 4.4.94 and 20.7.94 as security for OD limit of Rs.600 lacs granted to M/s. Vijaya Mutha & Co. there is an outstanding liability of Rs.6,38,05,943/- inclusive of interest debited till 30.6.95. We have recalled the above advances and till date the party has not made any arrangement to clear the liability.
Hence please take notice that in case the liability Is not cleared on or before 29.9.95 we shall appropriate the deposit towards the liquidation of the OD liability together with up to date interest in terms of the pledge letter referred to above and as per your resolution in this respect.
After receipt of this letter, no action was taken to get the FDRs from the Bank nor any action was taken against Mr.Vijay Mutha.
In our view, this clearly establishes that the Chairman of the Trust and the trustees were knowing about the dealings and granting of overdraft facility to M/s.Vijay Mutha & Co. It cannot be said that the Chairman/trustees were ignorant about it.
.(iv). Further, the facts with regard to dealings of the FDRs is exhaustively narrated in the letter dated 3.4.1996 written by the Senior Manager of the Canara Bank to the Chairman of the Complainant Trust, which is reproduced hereinbelow.
Sub : Your KOR No.107/95 for Rs.11,30,11,823/- pledged to OD limit of M/s. Vijay Mutha & Co.
Ref : Your Letter dtd. 11.3.96, 15.3.96 and 23.3.93.(1)
appropos the letters emanated from your office, as cited above, we wish to bring to your kind notice the following facts to set the records straight.(2)
M/s. Vijay Mutha & Co., Chartered Accountants approached our branch for a OD limit of Rs.600 lacs for which your Pratibha Pratishtan trust offered to pledge an FDR NO. 54/94 for Rs. 10,44,85,784.00.(3)
Pratibha Pratishtan had produced a copy of resolution dt.2.4.94 and dt.8.7.94 resolving that the FDR NO. 54/94 dtd. 31.3.94 for Rs.10,44,85,784/- placed with our branch for a period of six months may be discharged and may be kept in safe custody with the bank against which M/s. Vijay Mutha & Co. should be allowed an overdraft facility loan to the extent of 75% of the face value of deposit of Rs.10,44,85,784/- during the currency of the fixed deposit period. It was further resolved that the bank be authorized to adjust the fixed deposit in case of failure to repay the loan.(4)
A permission letter dtd. 23.3.94 from Charity commissioners office giving no objection to grant loan to Mr. Vijay Mutha against deposits of Pratibha Pratishtan was also produced before us.(5)
Accordingly we granted overdraft of Rs.400 lacs on 4.4.94 to M/s. Vijay Mutha & Co. which was subsequently enhanced to Rs.600 lacs on 20.7.94 and you have duly executed concerned pledge letters for the same on 4.4.94 & 20.7.94 alongwith your trustee Mr.G.G. Kudalkar.(6)
The said FDR was subsequently renewed for a further period of Six months with effect from 30.9.94 and lastly on 30.3.95 for 6 more months.(7)
Since M/s. Vijay Mutha & Co.
defaulted in payment of their liability we had chosen to adjust the KDR against their liabilities and did so on 30.9.95 after giving registered AD notice to you on 25.9.95.(8)
Subsequently M/s. Vijay Mutha & Co. repaid their liability on 18.10.95.(9)
Vide your letter dtd. 13.10.95 you had instructed us to transfer the maturity proceeds of the said KDR to Allahabad Bank, Andheri (West) branch by enclosing a copy of resolution dtd. 13.10.95 passed to that effect.
(10) Acting upon your said instructions, we had issued Demand Drafts as shown below, in favour of Allahabad Bank A/c. Pratibha Pratishthan, and thus the entire sum due to you by us was transferred to Allahabad Bank for you account.
906718 dtd. 18.10.95 for Rs.99,00,000.000 806719 dtd. do for Rs.99,00,000.000 406720 -- do -- for Rs99,00,000.000 306721 do -- for Rs.99,00,000.000 206722 do-- for Rs.99,00,000.000 106723 do -- for Rs.17,89,823.00 906726 do -- for Rs.99,00,000.000 806727 do -- for Rs. 99,00,000.000 706728 do -- for Rs. 99,00,000.000 606729 do -- for Rs. 99,00,000.000 206730 do -- for Rs. 99,00,000.000 106731 do -- for Rs. 99,00,000.000 906734 do -- for Rs.74,64,715.00 _________________ Rs.11, 81,54,538.00 _________________ The above included the amounts repaid by M/s. Vijay Mutha & Co. towards their liabilities.
(11) The above facts were duly informed to you vide our registered letter dtd. 19.10.95 which was duly acknowledged by your office.
(12) We are surprised to receive your letter dtd.11.3.96 signed by your Trustee Hon. Secretary quoting a letter dtd. 18.10.95 purported to have been written by us forwarding a copy of FDR to you. We hereby deny that any such letter has ever emanated from our branch and the said fact was already brought to your notice by endorsing remarks on the overleaf of your same letter dtd. 11.3.96.
(13) We have received another letter dtd. 15.3.96 from you asking us to furnish you copies of pledge documents and other details.
(14) You have vide your letter dtd. 23.3.96 forwarded to us a zerox copy of a FDR No.107/85 and requested us to transfer the maturity amount of said KDR to Indian Bank, Nariman Point branch, Bombay.
(15) We wish to clarify as under in respect of the above three letters We did not write letter no. 521/CR/95/1008, Kvn dtd. 18.10.95 as alleged in your letter dtd. 11.3.96 nor have we kept any FDR 54/94 in our safe custody except for the purpose of pledge as mentioned above. We reiterate that the said FDR was pledged to us as stated above. The renewed FDR was adjusted towards the overdue liability of M/s. Vijay Mutha & Co. as detailed above. However, in terms of your instructions vide your letter dtd. 13.10.95. We have after collecting necessary amount from M/s. Vijay Mutha & Co. remitted Rs.11,81,54,538.00 to Allahabad Bank, Andheri (West) Mumbai as stated in para 10 above.
The said DDs were collected by the representative of Allahabad Bank against acknowledgement.
In view of the fact that we have paid the full amount of deposit with interest to Allahabad Bank as per your own instructions the question of complying with your request vide letter dtd. 23.3.96 to transfer the amount to Indian Bank Nariman Point Mumbai Branch does not arise. Secondly as the amount of your deposit with interest is fully repaid by us as per your request for sending copies of pledge letters is rendered infructuous.
In the light of what is stated above we have treated the matter as closed at our end.
This letter would reveal that the amount was paid by account payee cheques in favour of the Complainant-Trust. Hence it would be difficult to arrive at the conclusion that the Canara Bank is in any way at fault.
.(v). Further, there is no justifiable reason for transferring the amount from one bank to another bank. The amount was lying first with the Corporation Bank; it was shifted to Canara Bank and thereafter to the Allahabad Bank.
.(vi). As stated by the Allahabad Bank Officer, the Trustee, Mr.G.G.Kudalkar and Mr.M.V.Sangikar, have confirmed the genuineness of the opening of account and capacity of Palav as representative of the trust, before the officers of the Allahabad Bank.
.(vii). The charge-sheet submitted by the Crime Branch, CID, Mumbai, also reveals that the trustees were party to the fraud.
.(viii). The Resolution dated 8.1.1997 passed by the Trustees of the Board clearly reveals that Vijay Mutha of M/s.Vijay Mutha & Co. had agreed to reimburse Rs.12 Crores which he has embezzled by joining hands with the Banks officials in respect of the FDRs. The relevant portion of the Resolution is as under:
The progress made so far was discussed and reviewed in depth by the Board. It was brought to the notice of the Board that in its special meeting held on 22.5.96 the Board was informed that Shri Vijay Mutha of Mutha & Co., Chartered Accountant had come to Mr.Kangas office in the beginning of the last week of March 1996 and that he made a confession about the embezzlement of Rs.12 crores by him by joining hands with the Bank officials in respect of the Trusts FDR amount embezzeled by him from the Banks involved in the fraud and had promised that he was making arrangements to deposit all the dues in his Bank Account. On this Mr.Kanga insisted on immediate payment. Mr.Mutha then said that he would require about a weeks time.
Thereafter Mr.Mutha came to Mr.Kangas office on 30.3.96 and handed over to Mr.Kanga a cheque of Rs.12 crores. He requested Mr.Kanga that as he hoped to collect the requisite amount, it would be desirable that the cheque should not be produced for encashment immediately then. The meeting was told that the said cheque of Rs.12 crores was retained on Lawyers advice and kept in their custody with the hope that the embezzelled amount could be recovered from him and that it was a concrete evidence that the Trust money was embezzled by him in cooperation and collusion with the Bank officers.
It was then decided to make efforts to see that the amount was recovered from him as he had promised the same and therefore the said cheque was not presented to the Bank earlier. This was done on Lawyers advice. Advocate S.N. Desai was requested to pursue efforts to see if the amounts embezzelled could be recovered by contacting Shri Mutha as well as Shri Palav. However subsequently it was clear that Mr.Mutha was trying to buy time to avoid payment and that the cheque was part of the fraud.
Therefore, before handing over the cheque to the Police it was on Lawyers advice, decided first to present the cheque to the Bank to confirm that the said cheque was signed by Mr.Mutha.
When thus it was presented, it had bounced and it was then brought on record of the police.
From the above Resolution, it is clear that even though the cheque was dishonoured, yet, no prosecution was launched under Sec.138 of the Negotiable Instruments Act against Mr.Vijay Mutha. Even, the FIR for the alleged fraud was lodged after 6 months of the aforesaid Resolution.
In view of the aforesaid suspicious circumstances, there is force in the contentions of the Banks that these proceedings have not been lodged bona fide, but are only meant to cover up the illegal withdrawal of the amount.
In any case, the entire amount is received by Vijay Mutha and Palav from the banks. Therefore, the Complainants may recover the same from them and not from the banks. The amount was paid on the basis of the resolutions and the directions received by the banks from the Trust through the authorized representative of the trust.
Further, if the Trustees had taken care and had acted promptly with regard to affairs of the FDRs after receipt of the letters from the Bank stating that the FDRs were pledged for giving overdraft facility then the trust would not have lost this much amount. For the reasons best known to the Trustees, they are not acted with reasonable prudence in protecting the FDRs. No prompt action was taken despite the receipt of the following letters:
.(i). On 31st May, 1994 the Canara Bank informed that the FDR was lying with them as a security for the loan granted and the said letter was duly acknowledged by the Trust by their letter dated 2.5.95.
.(ii). On 7.3.96 the Juhu Branch of the Allahabad Bank wrote a letter to the Secretary of the Trust pointing out that on the basis of the Resolution of the Trust, the amounts of the two FDRs were paid by the Pay Order dated 28.9.95 in favour of the Trust.
.(iii). Again the Andheri Branch of the Allahabad Bank wrote a letter on 16.3.96 that a Current A/c No.450 was opened in the name of the Trust and the Trustees were requested to send Trust Deed and also Resolution along with the Rules and Regulations framed for administration of the Trust.
.(iv). Similarly, the Canara Bank by its letter dated 25.9.95 informed the Trust that the maturity date of the FDR was 30th September, 1995 but the FDR was pledged with the Bank on the basis of letter dated 4.4.94 and 20.7.94.
For the reasons stated above, we hold that the trust is not ignorant about the extending of the over-draft facility to M/s.Vijay Mutha & Co.
In view of the above discussion, these complaints are dismissed. There shall be no order as to costs.
Sd/-
.J. ( M.B.SHAH ) PRESIDENT Sd/-
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( RAJYALAKSHMI RAO) MEMBER [1] P.29