1.      The present complaint alleges deficiency against opposite party no.1 Bank of Maharashtra having been negligent and deficient in taking care of the handling a sum of Rs.27 crores entrusted to the opposite party bank in the shape of fixed deposits due to non-observance of the KYC norms by the opposite party bank resulting in siphoning of the entire funds through a fake current account.  The contention of the complainant is that the amount was transferred by the complainant from its accounts directly to the bank for investing into fixed deposits that was confirmed by the bank.  The remittances were made to the Inter Branch Fund Transfer Account of opposite party no.1 and instructions were issued by the complainant for deposit of the same in fixed deposits.  Later on, it was found that a fake account was opened in the name of the complainant by some fraudsters and it is allegedly involving the officials of opposite party no.1, hence criminal proceedings have also been initiated that are pending but the present complaint has been filed praying for refund of Rs.27 crores invested by the complainant together with maturity amount of the fixed deposit receipts and further award of 18% interest on the entire amount together with a compensation of Rs.5 crores and costs of Rs.50 lacs for the litigation expenses. 

2.      It is alleged that the complainant being a society and non-profit organization registered under the Societies Registration Act with the exemption under the Income Tax Act, was established in the year 2006 and was later on also granted a corpus fund from the Government as well to the tune of Rs.65 crores.  A sum of Rs.69.22 crores was also contributed by the Bill and Melinda Gates Foundation, U.S.A. as well as from other sources.  The complainant holds funds as a trustee for the projects undertaken by it and for carrying out its activities which are charitable in nature and the donations as well as interest on the corpus funds are utilized for the purpose for which the society has been established.  In order to secure the donations and their effective utilization, the funds are invested for which several financial institutions banks make efforts and accordingly, in furtherance of the policy of investing surplus funds by way of term deposits, a decision was taken to invest a sum of Rs.27 crores with the OP no.1 bank. 

3.      It is alleged that one Mr. Devendra Suresh Bhogale, representing himself to be the manager of OP-1, approached the complainant soliciting fixed deposits for the investments, the remittance was made on 20.09.2013 of a sum of Rs.5 crores from the City Bank Account, Connaught Place, New Delhi of the complainant to the Non-Customer Inter Branch Fund Transfer Account no. 20071000009 through RTGS with a clear instruction for investment in fixed deposits in favour of the complainant.  The second remittance of Rs.6 crores was made on 26.09.2013 through the same method of RTGS.  The third remittance was made on 30.10.2013 for a sum of Rs.4 crores through NEFT to a current account no. 60146702654 with the opposite party no.1 with a specific instruction to invest the same in a fixed deposit.  A sum of Rs.12 crores was remitted in the same current account by NEFT for the same purpose.  This current account was later on found to be a fake account opened in the name of the complainant by fraudsters and of course, sanctioned by OP-1 officials. 

4.      The complainant had no clue about this fake transaction through the current account as they were paid interest through a bank demand draft dated 28.04.2014 for Rs.1785206/-.  One of the fixed deposits of Rs.4 crores had matured and therefore, it was renewed on 30.04.2014 for a further period of one year.  The complainant was given to believe through the said Mr. Devendra Suresh Bhogale about the confirmation and existence of the said fixed deposits to the tune of Rs.27 crores. 

5.      It appears that there were several such transactions which came to the knowledge of the Economic Offences Wing of the Police and one Mr. Prabhakar Loke, Senior Inspector informed the complainant to be alert about their deposits as the police had received information related to the funds being siphoned by the fraudsters.  The complainant thereafter, immediately contacted the bank for confirmation of their deposits but to their shock, they were informed by Mrs. Prema Venkat, Sr. Branch Manager of the Bank that their signatures did not match with the signatures on the Account Opening Form (AOF) of the current account and therefore, they were declined the information sought with regard to the balance confirmation of the fixed deposits.  The complainant was later on informed that the fixed deposit receipts in possession of the complainant were fabricated. 

6.      The bank set out for a preliminary investigation in the matter and a report was submitted on 11.07.2014 that there were serious errors committed in the opening of the fake current account.  The complainant, on 12.07.2014, issued instructions to opposite party no.2 to close all its fixed deposits and remit the funds deposited by the complainant in the above transactions to the tune of Rs.27 crores. 

7.      On the failure of the OP-1 to remit the funds as requested, the complainant, on 28.07.2014, lodged a written complaint before the Economic Offences Wing, Mumbai Police, coupled with similar complaints with the Central Bureau of Investigation, Bank Securities & Fraud Cell, Mumbai on the basis of which FIR No.407 of 2014 was registered at Economic Offences Wing, Mumbai Police.  Thereafter, correspondences ensued between the complainant and the bank and the bank denied to take any responsibility for the same.  The complainant called upon the bank to supply it with the documents relating to the current fake account but having failed to respond, the complainant persuaded the bank that was ultimately refused on 31.10.2015 whereafter, the present complaint was filed. 

8.      It may be mentioned that in the meantime, a chargesheet was filed by the Mumbai Police, Economic Offences Wing before the concerned Metropolitan Magistrate in the FIR referred to above where alongwith Mr. Devendra Suresh Bhogale, Ms. Amruta Mathews, Mr. Rahul Mukesh Gohil, Mr. Arun Kumar and Mr. Vimal Barot were charged for having opened the fake current account in the name of the complainant and siphoning of the funds from the same.

9.      The allegation of the complainant is that it is the bank which facilitated the opening of the fake current account without any knowledge of the complainant of the papers that contained fake signatures and identification papers.  As such, the absence of due care or may be possible involvement of the bank officials, funds of Rs.27 crores deposited by the complainant were allowed to be siphoned of by the bank and its deficiency is squared by the bank which failed to carry out the procedure of the KYC norms that has resulted in the perpetration of the fraud and the siphoning of the funds attributable clearly to the deficiencies of the bank. 

10.    For this, heavy reliance has been placed by the learned counsel for the complainant on the internal report about the irregularities submitted by the Chief Manager of the Malad Branch of the opposite party bank to the Zonal Manager. 

11.    Learned counsel has also relied heavily on the KYC norms prescribed for the opening of bank accounts, more particularly, customer identification process which is one of the main ingredients to be taken care of at the time of opening of the bank account.  It is urged that the current account through which these fake transactions have been carried out to siphon of the money of the complainant, was opened on the basis of fake documents without following the norms and without any verification from the complainant.  The fraudsters involved in it, had produced the said fake documents that ought to have been verified by the bank and its officials but they failed to do so which is evident from the facts on record as well as from the report dated 11.07.2014. 

12.    It is also submitted that chargesheet filed by the police also clearly indicates this lapse and negligence and therefore, the bank was liable to remit the entire amount which they had illegally withheld for the last almost more than ten years. 

13.    Mr. Sisodia, while advancing his submissions and taking the Bench through various documents in support of his arguments, has also filed a written synopsis dated 21.05.2019, followed by another written synopsis filed on 07.03.2023 and finally, a note of the submissions that was tendered at the time of the conclusion of the arguments on 30.05.2024. 

14.    Mr. B.P. Singh, learned counsel for the bank, has opposed the contentions tooth and nail, contended that the entire contribution of any such negligence lay on the complainant who transacted their own account through Mr. Devendra Suresh Bhogale and the other fraudsters with which the bank had no concern.  They were neither the employees of the bank nor any employees of the bank are involved in the transactions nor is there any evidence to that effect.  The complainants themselves had allowed the fraudsters to deal in this opening of the account and there is neither any negligence or any material available on record so as to establish any attributable fault on the part of the bank in the siphoning of the funds. 

15.    Mr. B.P. Singh has raised two preliminary objections and has referred to IA No.18013 of 2018 filed on behalf of the bank praying that the complaint should be dismissed firstly because the transaction as alleged, is a business to business transaction and is not a business to consumer transaction, hence, the same being for commercial purpose, the complainant does not fall within the definition of the word ‘consumer’.  The second ground taken is that the complainants have come up alleging fraud having been played with the opening of a current account which involved persons who acted on behalf of the complainants.  It is therefore, submitted that this investigation of fraud cannot be a matter of investigation and analysis by this Commission under the Consumer Protection Act.  It is urged that this highly disputable questions of fact as to how this fraud was committed, or as to who committed it, would need leading of evidence and therefore, the complainants are at liberty to file a civil suit to establish such allegations.  Consequently, a consumer complaint should not be entertained and should be dismissed. 

16.    On the merits of the matter, Mr. B.P. Singh, Advocate submitted that no official of the bank was involved in it, nor any vicarious liability can be fixed on the bank as it was the complainant who came forward and made investments through people of dubious character who may be responsible for having siphoned the funds but the bank cannot be charged with or held guilty of any such negligence as there is not even an iota of involvement of the bank so as to give rise to any deficiency for being adjudicated by this forum.  It is urged that the bank itself has been victimized and put to a loss hence, the allegations made against the bank are unfounded and without any basis for holding and establishing any deficiency in service. 

17.    Mr. B.P. Singh has invited the attention of the bench to the written submissions filed by him in two compilations alongwith judgments filed on 25.09.2023 and then at the time of the closure of the arguments on 30.05.2024. 

18.    Even though written submissions have been submitted on three occasions on behalf of the complainant as mentioned above, the latest submissions raised are as follows:

1. The Complainant seeks refund of Rs.27 Crores. (Rupees Twenty Seven Crores) with interest thereon which was admittedly received by the Opposite Party Bank for the purposes of Fixed Deposit. Attention invited to the reply of the Opposite Party at para 3 read with admitted RTGS/NEFT instructions for Rs.5 Crores remitted on 20.09.2013 @ page 32), Rs.6 Crores remitted on 26.09.2013 @ page 86), Rs.4 Crores remitted on 30.10.2013 @ page 91) & Rs.12 Crores remitted on 11.11.2013 (@page 94).

2. The opening of the alleged Current Account, migration of these amounts deposited in that alleged Current Account with or without creation of fixed deposits, directly and indirectly via intermediatory account and ultimate siphoning of these amounts has been possible only because of non-observance of the KYC norms. This is admitted in the internal report of the Opposite party bank (at pages 204 to 207 of the Complaint) which was extensively read out in course of the hearing. Notably, this internal report has not been denied but a cryptic statement is made in para 31 of the reply of the Opposite party bank that "the irregularity highlighted in the preliminary investigation report is the personal observation of the investigating officer".

3. Assuming whilst denying that this internal investigation report is a mere "personal observation" of the investigating officer, the Opposite party bank has not explained on what basis, under whose authority and with what verification and/or observance of KYC norms (Clause 2.2-KYC Policy, @Page 431 of Complaint, Clause 2.3 Customer Acceptance Policy @Page no. 432, Clause 2.4-Customer Identification Procedure @ Page 435, Clause 2.5 Customer Identification Requirement @ Page 439), the alleged current account was opened and operated to siphon off the above amounts deposited by the Complainant specifically for the Fixed Deposits.

4. On the contrary, it is clear from the First Information Report lodged on behalf of the Opposite party bank on 26.07.2014 (pages 116 to 120 of the reply of the Opposite Party) that the non-observance of KYC norms led to the fraudster committing of fraud as confirmed by the subsequent enquiries of the Opposite party bank.

5. It is submitted at this stage that the questions as to who committed the fraud, how these amounts were siphoned off and who benefited from these frauds are all beside the point on which the competent criminal court shall adjudicate in due course. Suffice for the present that non-observance of the KYC norms by itself is an act of wanton negligence and deficiency in services mandated on part of any bank which is receiving and/or handling money of any depositor. For this purpose, whether such fraud is internal, external or caused by third party is also of no relevance as a bank like the Opposite Party bank is supposed to exercise due care and caution in all its banking operations as mandated by the Reserve Bank of India and own KYC norms.

6. The plea on behalf of the Opposite party bank that the Complainant as depositors were negligent and/or not particular in following the KYC norms appears pervert, if not laughable, on part of a nationalized bank like opposite party bank. In other words, for any bank to say that because a customer appears casual or negligent at the time of making deposits, it gives a kind of free license to a bank to deal with the money in any manner it likes is absolutely scandalous and destructive of the faith and trust expected in a banking system.

7. In the same vein, is the highly objectionable effort on part of the opposite party bank to blame the alleged fraudster, Mr. Devender Bhogle to absolve itself of obligations arising out of its deficiencies in non-observance of the KYC norms. On the contrary, there is a clear admission on part of the opposite party bank that it dealt with unauthorized person purported to be acting on behalf of complainant whereas the complainant was given impression that said Mr. Devender Bhogle was acting on behalf of the Bank. In either case, in gross dereliction of the sacred and mandated duty of the opposite party bank to have observance of KYC norms, proper scrutiny as to authority of the depositors/account operators having purported authority for withdrawals and/or sanction of loans within a day or two of creation of fixed deposits and all the suspicious activities of Crores of transactions in the alleged current account were not even scrutinized by the opposite party bank at any stage till the Economic Offence Wing (EOW) brought it out in the notice.

8. Point of limitation

That the cause of action preferring the present complaint arose for the first time on 05.07.2014 when the complainant visited the premises of Opposite Party no.1 for the first time and got suspicious that the funds remitted to OP No.1 for the purpose of opening fixed deposits may be in danger as the officials of OP No.1 were not willing to confirm the fixed deposits balances of complainant with OP No.1 and were scuttling the issue. The cause of action arose once again in the month of October, 2015 when the Opposite party refused to remit the amounts transferred to it by the Complainant and denied its responsibility for mis-appropriation of the funds of the Complainant. That the present complaint is being preferred within a period of 2 years from the date of the cause of action first accruing and therefore the present complaint has been filed within the prescribed period of limitation under Section 24(a) of the Consumer Protection Act.

9. Point of disputed fact

The plea of complicated facts, as held by this Hon'ble Commission in the case of PHFI Vs. Central Bank of India, Case No. 1185/2016 is "always raised by Opposite party for harassing the consumer". At no stage the opposite party bank complained of any wrongdoing by any of the employee of the Complainant. The Opposite Party bank appears to allow the frauds to take place by sheer negligence and deficiency in KYC norms and as held by this Hon'ble Commission in abovementioned case of Central Bank of India "the subsequent version in the written reply is an afterthought is not liable to be accepted".

10. Point of no consumer dispute

The Opposite party bank has raised somewhat strange and contradictory plea by taking a stand on that the complainant is not a consumer as the Complainant does not have any relationship with the Opposite party bank. It is beyond comprehension as to how a depositor who has admittedly made huge deposits as aforesaid can be said to have no relationship with the opposite party bank. At the same time, a stand is taken that the deposits are in the nature of commercial transactions. This aspect is dealt with by the earlier judgments of this Hon'ble Commission that any depositor who deposits surplus funds in fixed deposits or any other deposits is consumer for the services of the bank. Attention invited to para 6 of MTDC judgment the relevant part whereof reads as follows;

“…

6. If a Corporation or an Undertaking of the Government has surplus funds available with it for a short period, it would not like to keep such funds idle and would like to invest them, in such a manner that it is able to get adequate return on such investment. Earning interest by temporary deployment the surplus funds in a bank is altogether different from business activities such as manufacturing, trading or rendering services Therefore, it would be difficult to say that the said deployment of funds was made for a commercial purpose."

11. It is submitted that the written submissions made by the Complainant on 07.03.2023 as well as the summary of arguments as per the order sheet of 01.03.2024 are not being repeated for the sake of brevity but the same may be taken as part of present note of submissions.

Hence, the present complaint be allowed with direction to the opposite party bank to refund the sum of Rs.27 Crores With interest due thereon and costs.

12. List of judgments relied upon:

(a) Maharashtra Tourism Development Corporation v. Dena Bank, 2016 SCC OnLine NCDRC 249.

(b) Public Health Foundation of India v. Central Bank of India, 2024 SCC OnLine NCDRC 77

(c) Public Health Foundation of India v. Punjab & Sind Bank, 2024 SCC OnLine NCDRC 82.

19.    Learned counsel for the opposite party has also filed his written arguments as noted above and apart from the merits, the main contention is with regard to the maintainability of the complaint for which the written notes on the arguments advanced are extracted herein below:

1. Complaint deserves to be dismissed as the complaint raises disputed questions of facts which cannot be decided in a summary procedure followed by the Hon'ble Commission.

That the present complaint deserves to be dismissed in view of the fact that the all the 4 fixed deposit receipts filed by Complainant are forged and fabricated to the knowledge of the Complainant. (refer to para 23 of complaint & page 333 of Final Report under section 173 CrPC) and certain other documents. No prayer can be granted by court/tribunal on the basis of forged and fabricated FD receipts. It is submitted that the complainant be directed to approach Civil Court or any other Forum as the questions arising for decision in the light of the pleadings of the parties requires a detailed and complicated investigation into facts which is not capable of being undertaken in a summary and speedy manner as provided under section 13 (3-A) of the Consumer Protection Act, 1986 as held in a catena of judgments by the Hon'ble Commission and the Hon'ble Supreme Court.

Refer judgment in M/s Safe Home Developers and Contractors Vs. Samata Sahakari Bank Ltd. New Link Road, Oshiwara Branch; 2012 SCC online NCDRC 742 passed by the Hon'ble Commission and the judgment of the Hon'ble Supreme Court in the case of Oriental Insurance Co. Ltd. Vs. Muni Mahesh Patel: 2006 (7) SCC 655 annexed with the Written Synopsis for the IA No. 18013/2018 filed by OP.

2. Complainant is not a "Consumer" hence no relief can be granted by the Hon'ble Commission.

That the Complainant is not a "Consumer" under the Consumer Protection Act, 2019 as the Current Account No 60146702654 that is held by the OP Bank is not an account held by the the Complainant although the Account is in the name of the Complainant, however the registered address is of Mumbai which is not the Complainant who has office in Delhi therefore the Current Account No 60146702654 is not of the present Complainant. That it is the case of the Complainant that the Current Account No 60146702654 is fake current account and therefore he himself states that it is not the Complainant's account. The fact is that the said Current Account was never operated by the Complainant nor the Complainant had any control over the said account. That the Complainant calls the Current Account No 60146702654 as fake from which account Mr Bhogle siphoned of the funds, thus it is established that account is not of the complainant and in that situation he is not a consumer of Bank availing the services of the bank. That the FDs that were to be opened upon transfer of monies by the Complainant could be done only after filing up the requisite FD opening form, and thus the stand of the Complainant that monies were transferred through RTGS to the said fake Current Account with the instructions that FD was to be opened which had to be done by the account holder which was not the Complainant and instead it was Harsha Bhogle and Co. the fraudsters who were the actual owners of the said Current Account opened in the name of the Complainant. Hence the Complainant cannot be said to be a "consumer" of the OP Bank therefore the complaint is not maintainable and ought to be dismissed on this count alone.

3. Monies transferred to the Current Account No 60146702654 (fake account) were on the instructions of Harsha Bhogle and Co. That the monies were transferred to the said Current Account by the Complainant on the instructions of the said Harsha Bhogle and Co. where the OP Bank had no role to play in the monies deposited by the Complainant to the said Current Account therefore the OP Bank cannot be held liable for any monies transferred to the said Current Account.

4. Judgements filed by the Complainant have fixed liability of the bank on the basis of vicarious liability as an employee of the Bank was involved in the Fraud which is not the case here hence no liability can be fixed on the OPs

Refer MDCC Bank Ltd. Vs ICICI Bank & MTDC vs Dena Bank annexed with the Written Synopsis on behalf of the Complainant. That in Final Report u/s 173 CrPC at page 365 Vol. II

5. Complainant has utilised the services of the OP Bank for commercial purposes and therefore is not a consumer hence the Complainant deserves to be dismissed

That the Complainant by seeking to open FDs has used the services of the OP Bank for commercial purposes and which is not 'exclusively for the purpose of earning his livelihood, by means of self-employment the present Complaint deserves to be dismissed. Commercial purpose as held by the Supreme Court in Shrikant G Mantri case at para 41 has been stated to be something about earning profit, which by investing in FDs with a Bank is a obvious sequel.

That in the case of MTDC vs Dena Bank cited by the Complainant although tacitly accepts at para 6 that opening of FD will a commercial purpose but does not accept the argument that it is commercial purposes stating that if a Government Corporation or Undertaking has surplus funds and invests them with a Bank is different from business activities such as manufacturing, trading or rendering services is obviously not in consonance with the statutory provisions under section 2(7) of Consumer Protection Act, 2019.

6. Complaint is time barred

That at para 59 the complainant claims that the cause of action arose on 05.07.2014 when the complainant first time visited OP Is office in Mumbai. It is submitted that the cause of action for calculating the time limit has to be cause of action first arose ie. When the complainant transferred through RTGS to account held by the OPI which has to be on 21.09.2013 on the Complaint's own statement at para 29 (pg 15) of Complaint it is stated that "Moreover, the transfer of Rs. 5 crores to the fake current account on 21.09.2013 ie. after a day of remittance of the said amount to the intermediary account of OP I was also in violation of RTGS Regulations, 2013 which mandate that funds should be transferred to the beneficiary's account within 30 minutes of receipt of payment, and a case transfer to the beneficiary's account is not possible funds have to be returned to the originating member within one hour of receipt of payment."

That to say, when the Rs. 5 crores, sent by the Complainant did not go into the actual account, as desired by the Complainant then the alarm bells should have begun to ring, which has to be the cause of action for calculating the limitation as provided in section 69 of the Consumer Protection Act. 2019.

20.    Certain preliminary facts need to be noted before entering into the merits as stated hereinabove.  The complaint was admitted on 26.07.2016 with notice to the bank to file its response. The reply/written version was filed alongwith IA/12507/2016 requesting for condoning the delay of 114 days in filing of the written version.  This Commission, rejected the said request on 05.01.2017 against which the bank went up in appeal before the Apex Court that was allowed on 24.03.2017 and the written version was directed to be accepted on payment of Rs.50000/- as cost.  Accordingly, the written version was taken on record and the complainant filed rejoinder to the same.  The parties exchanged their affidavits of evidence and also their written submissions noted hereinabove. 

21.    The bank also moved IA/18013/2016 raising the issue of maintainability of the complaint.  This application dated 05.09.2018, has yet not been disposed of and since the issues raised therein relate directly to the merits of the matter as well, the said application is also being dealt with finally in respect whereof, arguments have been advanced. 

22.    There is one more fact which needs mention as urged on behalf of the complainant regarding similar such matters having been dealt with by this Commission, and the complaints having been allowed regarding deficiencies against banks and financial institutions at the behest of complainants who had made similar investments and also at the behest of the present complainant.  The decisions rendered by this Commission and relied upon by the learned counsel for the complainants, are (i) CC/259/2014 Maharashtra Tourism Development Corporation vs. Dena Bank & Ors. decided on 03.06.2016; (ii) CC/947/2015 Mumbai Metropolitan Region Development Authority vs. Dena Bank & Ors. also decided on 03.06.2016; (iii) CC/1363/2015 Mumbai District Central Cooperative Bank Ltd. Vs. ICICI Bank Ltd. decided on 21.03.2018; (iv) CC/759/2016 PHFI Vs. Dena Bank decided on 01.06.2023 and (v) CC/1185/2016 PHFI Vs. Central Bank of India decided on 16.05.2024.  In all these five cases, similar nature of deficiencies were alleged and the complaints were allowed where also the same preliminary objections had been raised by the learned counsel for the banks and the financial institutions.  It is also relevant to point out that the involvement of Mr. Devendra Suresh Bhogale was also found in the case of Mumbai District Cooperative Bank (supra) alongwith Mr. Rahul Mukesh Gohil who are also mentioned as accused involved in the present case where a chargesheet has been filed.

23.    Two of these complaints namely CC/759/2016 against Dena Bank and CC/1185/2016 against the Central Bank of India were complaints of a similar nature filed by the present complainant itself.  The complaints have been allowed with a direction to refund the entire siphoned amount. 

24.    There is a third complaint filed on behalf of the complainant namely CC/1024/2016 which is pending adjudication and it is informed that it is in the process of hearing. 

25.    It is in the said background that the preliminary objections coupled with the main argument advanced on behalf of the bank has to be considered. 

26.    Coming to the preliminary objections raised by the learned counsel for the bank, all instructions of the complainant society, its functions as well as its transactions are stated clearly in the complaint as well as the written submissions and have been noted hereinabove.  The question as to whether the investments made are of a commercial nature or not, has been canvassed on the same level in the decisions of this Commission regarding similar disputes raised and decided in the five complaints as indicated above.  Two of these complaints were filed by the complainant, against two different banks namely Dena Bank and Central Bank of India being CC No.759 and 1185 of 2016 that were allowed on 01.06.2023 and 16.05.2024 respectively.  The aforesaid two judgments are available and have been cited where the same argument was considered and it was held that the complainants have not invested into a commercial venture for a commercial purpose and the investments are short terms investments for securing the safe deposit of the money of the society. They have been held to be ‘business to consumer’ transactions.  The reasons given in the aforesaid judgments and the conclusions drawn are based on logic and sound legal principles and there is no reason to differ from the same.  The orders of this Commission holding that the transactions are not commercial, therefore, can be safely applied on the facts of the present case as well, where also the investments were made in fixed deposits for a short tenure and any proceed thereof, are to be applied for the benefit of the projects of the society by the complainant which is a charitable institution.  The complainant is not earning any profit for itself and consequently, this is not a case where any inference of a commercial purpose can be drawn on the facts regarding the status of the complainant and the transactions carried out by it.  The second objection is that the complainant should be relegated to a civil suit.  This issue has also been raised and thrashed out in the decisions relied on by the learned counsel for the complainant and referred to hereinabove.  Relying on judgments and also on the various provisions, it was held in CC/759/2016 as follows:

7. …. A person is a ‘consumer’ who buys any goods paying consideration or avails service paying consideration, for his own uses and not for commercial purpose. The nature of the dispute which can be raised before consumer commission are defects in good, deficiency in service and unfair trade practice. Section-13(2)(b) of the old Act and Section-38 (6) of new Act requires to decide the complaint on the basis of affidavit and documentary evidence, which means that the Commission has to decide the complaint in summary manner. But at the same time, Section 13 (4) of the old Act and Section-38 (9) of the new Act, confers same powers upon the authorities under the Act, for trial of a consumer dispute, which are vested in Civil Court under Code of Civil Procedure, 1908, while trying a suit in respect of (i) the summoning and enforcing the attendance of any defendant or witness and examining the witness on oath, (ii) requiring the discovery and production of any document or other material object, producible as evidence, (iii) the reception of evidence on affidavits, (iv) the requisitioning of the report of the concerned analysis or test the appropriate laboratory or from other relevant source, (v) issuing of commission for the examination of any witness or document and (vi) any other matter which may be prescribed by Central Government. From these provisions it is clear that although under the Act, the jurisdiction of the authorities is limited to consumer dispute, but while deciding such dispute no limit has been fixed on adjudicatory power. The authorities are conferred jurisdiction to decide the issue of “unfair trade practice” which has been defined under Section 2 (r) of the old Act and Section 2 (47) of new Act. This definition is similar to the definition of “fraud” as given under Section 17 of Indian Contract Act, 1872. From these provisions it is clear that this Commission can hold a full trail like a civil court or adopt summary procedure for decision of any complaint. A three Judges Bench of Supreme Court in Dr. J.J. Merchant Vs. Shrinath Chaturvedi, (2002) 6 SCC 635, (paragraph-7) held that the object and purpose of the Act is to render simple, inexpensive and speedy remedy to the consumer with complaint against defective goods and deficient services, it being a benevolent piece of legislation, intended to protect a large body of consumer from exploitation. Consumer Forum is an alternate Forum, established under the Act, to discharge the function of Civil Court. The argument that the complicated question of fact cannot be decided by the Forum, has been specifically rejected (in paragraph-12). Similar view has been taken in Amar Jwala Paper Mills Vs. State Bank of India, (1998) 8 SCC 387, CCI Chambers Coop. Hsg. Society Ltd. Development Credit Bank Ltd. (2003) 7 SCC 233. This view has been reaffirmed by three Judges Bench of Supreme Court, in IFFCO TOKIYO General Insurance Company Ltd. Vs. Pearl Beverages Ltd., 2021 SCC OnLine SC 309.

8. The plea that complicated issues of fact are involved, which requires trial by Civil Court is always raised by the opposite party for harassing a consumer. In the present case, the opposite parties did lengthy cross-examination of the witness of the complainant. So far as the argument that the complainant has produced fake documents along with the complaint, is concerned, whichever documents were supplied by the PHFI to Dena Bank as well as the certificates, which were received from Dena Bank to the PHFI, were filed. If same documents are not available in the record of Dena Bank then Pritam Vidyadhan Nagarkar, Chief Manager of Dena Bank and his associate Vimal Barot are responsible for it and not the PHFI. Similarly, if these persons handed over fabricated “Samruddhi Deposit Receipts” to the PHFI, which are available in its office, same was filed in the complaint. It has been argued that consumer complaint has not been signed and verified by any person (except last page, which was signed by the advocate) but Jayanto Narayan Choudhury, Vice-President of the PHFI has filed his affidavit along with the complaint, in which, all the paragraphs of the complaint is verified by him. Preliminary objections raised by the opposite parties have no merit.

9. The counsel for the opposite parties argued that Amit Chaturvedi-Head Finance, Narayan Chatterjee- Special Advisor and Nirmal Pathak- Finance Officer of the PHFI, who were involved in transfer of money to Dena Bank and had allegedly discharged the functions for investing the amount in ‘fixed deposit’ have not been produced as the witness. The complainant has withheld best evidence as such adverse inference is liable to be drawn. In this case, the opposite parties have also not filed any application for summoning of Amit Chaturvedi-Head Finance, Narayan Chatterjee- Special Advisor and Nirmal Pathak- Finance Officer of the PHFI. This argument is not liable to be accepted. Supreme Court in Sunita Vs. Rajasthan SRTC, (2020) 13 SCC 486, held that in civil proceedings the court is required record findings on the basis of evidence on record and rule of adducing best evidence is not applicable.

27.    Considering the aforesaid decision which has been reiterated in CC/1185/2016, decided on 16.05.2024 (supra), there is no reason to take a different view from that taken therein.  The said decision has also taken notice of the judgment of the Apex Court in the case of City Union Bank Ltd. v. R. Chandramohan, (2023) 7 SCC 775.  The opinion of the Commission is recorded in paragraph 13 which is extracted hereinbelow:

13. We have considered the arguments of the counsel for the parties and examined the record. Relying upon the judgment of Supreme Court in Civil Appeal No.7289 of 2009, The Chairman & Managing Director, City Union Bank Limited Vs. R. Chandramohan (decided on 27.03.2023), the counsel for the OPs raised preliminary objection, relating to the maintainability of the complaints. The Consumer Protection Act, 1986 was enacted with an object to provide for better protection of the interests of the consumers. For that purpose, consumer council and other authorities have been established. Consumer markets for goods and services have undergone drastic transformation since the enactment of the Consumer Protection Act, 1986. The modern market place contains a plethora of products and services. The emergence of global supply chains rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services and have provided new options and opportunities for the consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices. Misleading advertisements, tele-marketing, multi-level marketing, direct selling and e-commerce pose new challenges to consumer protection and . will require appropriate and swift executive interventions to prevent consumer detriment. The Consumer Protection Act, 2019, has been enacted, repealing the earlier Act to meet out new challenges, in which, false and misleading advertisement and manufacture and sale of spurious and 'adulterant have been declared as an offence. Section-3 of the old Act and Section 100 of the new Act provide that the provisions of the Act are in addition to and not in derogation to the provisions of any other law. A consumer can avail remedy before civil court, Arbitrator (if contract so provides) or any other tribunal/court constituted under the law. In the absence of any provision barring the jurisdiction of consumer foras, the question as to whether remedy available under 'consumer law’ is barred specifically or impliedly does not arise. A person is a 'consumer' who buys any goods or avails service paying consideration, for his own uses and not for commercial purpose. The nature of the dispute which can be raised before consumer foras are defects in goods, deficiency in service and unfair trade practice. Banking facilities are not free of charge as the banks earn on it. Section-13(2)(b) of the old Act and Section-38 (6) of new Act requires to decide the complaint on the basis of affidavit and documentary evidence, which means that the Commission has to decide the complaint in summary manner: But at the same , time, Section 13 (4) of the old Act and Section-38 (9) of the new Act, confers same powers upon the Commission, for trial of a consumer dispute, which are vested in Civil Court under Code of Civil Procedure, 1908, while trying a suit in respect of (i) the summoning and enforcing the attendance of any defendant or witness and examining the witness on oath, (ii) requiring the discovery and production of any document or other material object, producible as evidence, (iii) the reception of evidence on affidavits, (iv) the requisitioning of-the report of the concerned analysis or test the appropriate laboratory or from other relevant source, (v) issuing of commission for the examination of any witness or document and (vi) any other matter which may be prescribed by Central Government. From these provisions it is clear that although under the Act, the jurisdiction of the authorities is limited to consumer dispute, but while deciding such dispute no limit, has been fixed on adjudicatory power. The authorities are conferred jurisdiction to decide the issue of '"unfair trade practice" which has been defined under Section 2 (r) of the old‘ Act and Section 2 (47.) of new Act. This definition is similar to the definition of “fraud" as given under Section 17 of Indian Contract Act, 1872. From these provisions - it is clear . that this Commission can hold a full trail, like a civil court or adopt summary procedure for decision of any. complaint: A three Judges Bench of Supreme Court in Dr. J.J. Merchant Vs. Shrinath Chaturvedi, (2002) 6 SCC 635, (paragraph:7) held that the object and purpose of the Act is to render simple, inexpensive and speedy; remedy to the consumer with complaint against defective goods and deficient services, it being a benevolent piece of legislation; intended to protect a large body-of consumer from exploitation. Consumer Forum is an alternate Forum, established under the Act, to discharge the function of Civil Court. The, argument that the complicated , question of fact cannot be decided by the Forum, has been specifically rejected (in paragraph12). Similar view has been taken in Amar Jwala Paper Mills. Vs. State Bank of India, (1988) 8 SCC 387, CCI Chambers Coop. Hsg. Society Ltd. Development Credit Bank Ltd. (2003)7 SCC 233. This view has been reaffirmed by three Judges Bench of Supreme Court, in Nizam Institute of Medical Sciences Vs. Prasanth S. Dhananka, (2009) 6 SCC 1 and IFFCO TOKIYO General Insurance Company Ltd. Vs. Pearl Beverages Ltd., (2021) 7 SCC 704.

28.    The issue of limitation was upheld in the same order:

14. The OPs submitted that last transaction was done in May 2014, while the complaint was filed on 15.07.2016. Section 24-A of the Act provides two years limitation for filing the complaint. As the complainant did not file any application for condonation of delay as such the complaint is liable to be dismissed as time barred. The complainant has stated that fraud by the OP bank came in the knowledge of the complainant in October, 2014, then criminal complaint with Superintendent of Police, Economic Offence Wing, Crime Branch, Mumbai was filed on 14.10.2014. The complaint is filed within two years from the date of knowledge of fraud. Section 17 of Limitation Act, 1963, provides that in case fraud and mistake, limitation starts running from the date on which fraud or mistake came in the knowledge of the plaintiff. Supreme Court in V.N. Shrikhande (Dr) Vs. Anita Sena Fernandes, (2011) 1 SCC 53, held that where effect of medical negligence was manifest, cause of action arises on the date, when negligence was committed. However, where effect is latent, cause of arises when harm or injury is discovered. In Hyundai Motors India Limited Vs. Shailendra Bhatnagar, 2022 SCC OnLine SC 483, held that limitation would start running from the date, the defect was surfaced. In Jay Laxmi Salt Works (P) Ltd. Vs. State of Gujarat, (1994) 4 SCC 1, held that in cases of malfeasance, misfeasance and non-feasance, limitation can be computed from the date of occurrence the damage or the date when the claim is rejected.

29.    Consequently, the complainant for all the reasons given above is a consumer and the facts which are on record are sufficient to assess and decide the issue of deficiency as raised in the present case in the light of the observations indicated hereinabove. The issue of limitation  also stands answered in favour of the complainants, in as much as the discovery of the alleged fraud was made in 2013-2014, whereafter the internal enquiry report of the Bank dated 11.07.2014 also disclosed the alleged deficiencies. This was followed by a written complaint on 28.07.20214.  The ultimate refusal to indemnify came from the Bank on 31.10.2015. Thus, this continuity of events as well as the refusal of the Bank as noted above gave rise to the cause of action of filing of this complaint which was done well within two years of limitation. Consequently, all the preliminary objections raised by Mr. Singh, in view of the discussions and the reasons given hereinabove are rejected.

30.    Having heard the learned counsel for the parties and having considered their submissions and upon having perused the records, the main contest on merits raised by the complainant is based on the allegation of lack of due care and deficiency by not observing the KYC norms that need to be followed according to the learned counsel for the complainant.  For this, learned counsel for the complainant has invited the attention of the bench to the KYC norms that have been promulgated by the Reserve Bank of India through its circular dated 01.07.2013 that has been filed on record.  Reliance is also placed on the KYC norms which were existing and were re-promulgated by the opposite party bank itself in terms of the earlier RBI directory dated 16.08.2002 that were approved by the Board in its Meeting dated 04.03.2005.  A copy of this guidelines referring to the earlier norms and its future implementation according to the Reserve Bank of India guidelines has also been filed on record.  The four relevant ingredients required for framing the KYC policies as mentioned therein require the following four key elements:

1. Customer Acceptance Policy
2. Customer Identification Procedures
3. Monitoring of transactions and
4. Risk Management

31.    Learned counsel urged that out of these, customer acceptance policy and the parameters for the customer identification procedure and its requirements require that the Bank should proceed on receipt of satisfactory evidence of the identification of the intermediaries and all the persons on whose behalf they are acting and also obtain details of the nature of the trust or any other arrangement in place.  The legal status of the person and its identity should be verified through proper and relevant documents and also verify the status of the person purporting to be acting on behalf of the person opening an account.  Sufficient identification data to verify the identity of the customer, the address/location and the recent photograph should also be necessarily taken.  The data obtained should be reliable and should be independent source of documents so that due diligence is observed based on the risk profile of the customer in compliance of the extant guidelines in place. 

32.    Learned counsel submits that these RBI guidelines as well as the norms which were existing were violated by the bank itself. It is the Bank that facilitated the opening of a fake current account in the name of the complainant which was neither opened on the basis of correct documents and the account was allowed to be operated whimsically for which learned counsel has relied upon the report dated 11.07.2014 of the Chief Manager of OP-1 bank, submitted to the Zonal Manager, and is extracted hereinbelow:

Chandravilas A Bhamare

Chief Manager

Mumbai Suburb Zone

Date 11.07.2014

To,

The Zonal Manager,

Mumbai Suburb Zone

Dear Sir

Re: Reported irregularities at Malad West Branch.

With reference to the letter no. AX59/Staff/MSZ/2014 dated 10 July, 2014, I had visited Malad West Branch on 10^th July, 2014. I submit herewith preliminary investigation report.

33.    Learned counsel submits that this entire report clearly reflects on the internal deficient functioning of the bank and he has invited the attention of the bench to item no.28 of the said report regarding the lapses in account opening.  He further submits that the said fake account has been transacted with credits amounting to Rs.144.97 crores which includes a variety of amounts and proceeds from sources with which the complainant is nowhere concerned.  The complainant had transferred through RTGS and NEFT only a total of Rs.27 crores and therefore, it is not understood as to how the bank allowed other different transactions worth more than Rs.144 crores which obviously were fake transactions, neither authorized by the Complainant nor operated by it.  The contention is that this could not have been done without either the involvement of a bank official or their negligence and lack of attention who did not take due care to verify the correctness of the status of the KYC documents and allowed the account to be opened with huge transactions unconcerned with the complainant that had been discovered by the bank itself. 

34.    Mr. Sisodia, learned senior counsel submits that this is the first evidence of deficiency which is the foundation of this complaint. Secondly, THE fraud which has been committed, is also complained of by the bank itself and therefore, this may be a matter of criminal investigation which is going on where the chargesheet also reflects on the negligence part.  He however, submits that the civil liability of the bank arising out of negligence and the vicarious liability on account of the loss suffered by the complainant, is the scope of consideration in this complaint. 

35.    He therefore, submits that the facts which stand undisputed namely the receipt of the amount of Rs.27 crores through RTGS and NEFT from the complainant and its investment into fixed deposit, being siphoned off by the fraudsters, establishes that the deficiency was on account of non-observance of due diligence by the bank. 

36.    The fact remains that the investment by the complainants remained undisputed.  There is no complaint of the bank nor is it their case that the complainant or its officials were involved in these dubious transactions even though it has been orally argued by the learned counsel for the opposite party that this possibility cannot be ruled out.  Simply on a mere suspicious or doubtful argument, there is nothing on record to indicate that there was any deliberate contribution of the complainant towards the opening of a fake account and the siphoning of the money.  Nonetheless it was the duty and legal obligation of the Bank to take due care for verifying documents before allowing the opening of the current account found to be fake. The complainants are not even the accused in the case where the chargesheet has been filed. 

37.  It is therefore, submitted that the complainants cannot be non-suited for having offered their money as investment and their request to refund the same.  The amount deposited by the complainant therefore, is admitted to the opposite parties and in the absence of any proof of deficiency on the part of the complainant, the opposite parties cannot get over their obligations, responsibilities and liabilities to repay the amount to the complainant. 

38.    The moot question is of the process of the opening of the alleged current account based on the documents which the Bank alleges to have been tendered by the Complainant. The said documents that have been relied upon by the Bank have been denied by the complainant. It is these very documents which were made subject matter of investigation by the Bank itself. The same is highlighted at item no. 28 of the report dated 11.07.2014 extracted hereinabove. The said report has been replied to by the Bank in paragraph 31 of their written version stating that the preliminary investigation report is a personal observation of the investigating officer. This reply in the written version is absolutely unconvincing, in as much as, the report categorically states that no verification of the said documents by any authorised official by comparing it with the originals was made. It has also been observed in the report that current account opening form has not been signed by any authorised official. The name of the operator and the signature of the person who has opened the account are not available in the account opening form. The date of opening of the account and then a transaction of a huge amount of Rs.144 crores that are admittedly not in connection with the complainant’s deposits, further confirms the fact that the complainant had nowhere authorised said transactions to be carried out or the Complainants were in any way connected with the transactions of the said current account. Thus, no confirmation of the KYC documents as per the norms prescribed of the RBI as well as the conduct of the officials of the Bank clearly points out towards the preponderant probability of deficiency and negligence on the part of the Bank in allowing the opening of a fake current account and then its operations in a dubious manner about which the complainants came to know as indicated hereinabove later on. It is not the case of the Bank that any official or representative of the complainant was involved in it. If Mr. Devendra Suresh Bhogale had attempted such fraud or was responsible for the same, which is prima facie evident from the investigation carried out by the police, then such negligence or default cannot be attributed to the complainant and rather it is the officials of the Bank who allowed this illegality to perpetuate  without taking diligent steps to check these transactions including the opening of a fake current account. Needless to mention that Mr. Bhogale, is the same person who was found to be involved in other cases that have been cited on behalf of the learned counsel for the complainant. Nonetheless, the Bank itself on its own ought to have independently taken all precautionary steps for proper verification in respect of the high risk bank transactions, where the complainant had requested for fixed deposits worth Rs.27 crores. The handling procedure as prescribed by the Reserve Bank of India and as explained above was not carried out nor any explanation has been given as to why the customer identification procedure and the customer identification requirements were not observed strictly as per norms.

39.    This is further confirmed by the allegation made in the First Information Report dated 26.07.2014 by the Bank itself that it is the non-observance of KYC norms that led to the intervention by a fraudster which is not denied by the  Bank. The contention of Mr. Singh is that the Bank has been the victim of the said fraud. This argument is only about the consequences that resulted due to a fraud. The foundation of the commission of this fraud was the deficient conduct of the Bank in not scrutinising the KYC papers in accordance with the prescribed norms. The duty and obligation to take due care has been breached and violated by the Bank. The question as to whether the fraud was committed by an outsider or not may be examined in the criminal case but the fact remains that the complainant’s genuine deposits of Rs.27 crores were siphoned off  due to the negligence  of the Bank officials by not observing KYC norms that is clearly established.  The complainant’s counsel has therefore rightly relied on the orders of this Commission in the case of Maharashtra Tourism Development Corporation Vs. Dena Bank (Supra), Public Health Foundation of India Vs. Central Bank of India (Supra) and Public Health Foundation of India Vs. Punjab & Sind Bank (Supra). The ratio of the said orders of this Commission are clearly applicable on the facts of the present case as well.

40.    The fact of the deficiency relating to the opening of the account and also the fake migration of the deposits made by the complainant through that account could have been prevented by taking appropriate steps and applying the checks regarding KYC norms, when the said current account was allowed to be opened and transacted. Even assuming for the sake of argument that Mr. Bhogale had given any instruction for the said transfer, there is no evidence that the complainant had authorised Mr. Bhogale for the opening of a fake current account or providing any KYC norms through him.

41.    The Bank has nowhere disputed the receipt of Rs.27 crores by them from the complainant, consequently the Bank was clearly deficient in not verifying the customer identity and information from the complainants or by adopting measures that were required to be observed by the them, hence the Bank is clearly liable for the acts and omissions of its employees directly as well as vicariously. The misappropriation and embezzlement is only a consequence of this deficient functioning of the Bank and the defence taken by it is unacceptable. It has been held by the Apex Court in Canara Bank Vs. Canara Sales Corporation, (1987) 2 SCC 666 and Pradeep Kumar Vs. Post Master General, (2022) 6 SSC 351 that vicarious liability for the act of the employees of an organisation is made out. The recent decision of the Apex Court in the case of Leelawati Devi & Anr. Vs. District Cooperative Bank Limited, Civil Appeal No. 6564 of 2023  dated 15.04.2024,  has also reiterated the same position.

42.    In view of the aforesaid discussions, reasons and the authorities that support the contention of the complainant, the complaint is allowed to the extent of refund. The amount of Rs.27 crores with interest @ 9% per annum from the date of respective deposits till the date of refund shall be remitted to the Complainant by the Opposite Parties within a period of 2 months from the date of this order after adjusting any such amount which may have been paid as interest on the deposits made by the complainants.