Bank is responsible for refund of amount siphoned out by illegal net banking transaction

Supreme Court in the case of DAV Public School vs The Senior Manager, Indian Bank, Midnapur Branch & Ors. (Civil Appeal No. 9352 of 2019 arising out of SLP(C) No. 3738 of 2019) decided on 18.12.2019 directed Bank to refund a sum of Rs. 25 Lakhs to a bank customer from whose account the said money was transferred through the process of net banking. The primary reason for Court to pass this order was that the customer had not availed of the net banking facility despite which the money was transferred.

Facts :

This appeal was filed against the judgment of NCDRC dated 24.04.2018 where the appeal of the appellant was dismissed and the order passed by the State Commission, West Bengal was upheld. Under the impugned judgment, the liability of the bank was only limited to Rs. 1,00,000/- where the appellate suffered a loss of Rs. 30,00,000/- from their bank account.

On 9.9.2014, the appellant went to the bank for updating the passbook and it was then detected that Rs. 25,00,000/- was unauthorizedly transferred from the school’s account. It is relevant to point out that the customer had not asked for net banking facilities, but on account of negligence of the bank, inadvertently accounts of the principal of school were tagged with those of school.

This was brought to the notice of the Bank’s manager on the very same day, but the Bank Manager advised the concerned school staff to visit the Bank on the next day morning. But by the time the account could be blocked, another sum of Rs. 5,00,000/- got transferred from the school’s account.

Held:

The bench observed that the only reason why the State Commission as well as the NCDRC had

limited the compensation sum to Rs. 1,00,000/- was because of the perceived complicity of the Principal. But the charge sheet filed by the police revealed how the fraudulent transaction was made by the two charge sheeted accused and more importantly the police did not find complicity of the Principal of the school with those fraudulent transactions. The Banking Ombudsman too declared that the Bank was at fault which facilitated the loss to the School but declined to order refund as the demanded sum (Rs 30,00,000/-) was beyond the pecuniary jurisdiction of the Banking Ombudsman.

It may be noticed that when the siphoning of a large sum of Rs. 25,00,000/- was first detected by the school staff, the official complaint was not lodged immediately and only on the next date, the complaint was filed with the Bank authorities. Whether the Bank Manager was verbally informed on the very date of detection or on the next day is an aspect which is difficult to conclude conclusively and therefore the subsequent siphoning of Rs. 5,00,000/- by the next day, may have been occasioned by the contributory negligence of the school authorities.

But, insofar as the loss of Rs. 25,00,000/- is concerned, the complainant cannot be held responsible directly or even vicariously, either as an institution or the Principal as an individual. We are therefore of the view that the respondent Bank should be directed to compensate the School to the tune of Rs. 25,00,000/- transferred until 9.9.2014, when the misappropriation was first detected but not for the additional sum siphoned on the next date from the School’s account.