18 December 2019
Supreme Court


Case number: C.A. No.-009352-009352 / 2019
Diary number: 28537 / 2018




CIVIL APPEAL NO. 9352 OF 2019 (Arising out of SLP(C) No.3738 of 2019)

DAV Public School Appellant (s)


The Senior Manager, Indian Bank,  Midnapur Branch & Ors. Respondent (s)


Hrishikesh Roy, J.

1. The challenge in this appeal is to the final judgment

and order dated 24.4.2018 in the First Appeal1 whereunder

the  National  Consumer  Disputes  Redressal  Commission2

dismissed  the  appeal  of  the  appellant  and  upheld  the

order  passed  by  the  State  Consumer  Disputes  Redressal

Commission,  West  Bengal3..  Under  the  impugned  judgment,

the liability of the respondent Indian Bank  was  limited

1 First Appeal No. 386 of 2018 2 “NCDRC” 3 The State Commission

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to Rs 1,00,000/- although the complainant suffered total

loss  of  Rs  30,00,000/-,  from  their  Bank  Accounts  and

sought return of the lost sum.  

2.1 The  complaint  of  the  Principal  of  the  DAV  Public

School4 alleged  deficiency  of  service  against  the

respondent Bank inasmuch as the School’s bank accounts

without  net  banking  facility,  was  linked  with  the

personal Customer Information File (CIF) of the Principal

of the School, facilitating online transaction which led

to  siphoning  of  Rs  30,00,000/-  (Rupees  Thirty  Lakhs),

from the school’s account.  

2.2 The complaint mentioned that the DAV Public School,

Paschim  Medinipur  maintained  three  accounts  with  the

Indian  Bank,  Midnapur  Branch  in  District  Paschim

Medinipur, West Bengal namely, i) the School General Fund

Account  –  A/c  No.  553624984;  ii)  School  Pupils  Fund

Account  –  A/c  No.  553625423  and  iii)  School  Interest

Account – A/c No. 933045930. While the Withdrawal from

the  first  two  accounts  could  be  made  through  cheques

under  joint  signature  of  the  Principal,  DAV  Public

School,  Midnapore  and  Managers/Principal,   DAV  Model

4  The School Page 2 of 13


School,  IIT  Kharagpur,  the  third  referred  account  was

authorised to be operated by the Principal of the DAV

Public  School,  under  his  own  signature.  It  was  the

specific case of the complainant that the school never

approached  the Bank for net banking facility for any of

their three accounts, but on 2.9.2014 when the Principal

opened his personal savings account (distinct from the

school accounts) for the purpose of transferring money

through net banking, he learnt that the three accounts of

the school got tagged with his personal savings account.

As the school Principal was required to go on an urgent

official tour, he decided to report the matter to  the

Bank after his return from the official tour.  

2.3 On 7.9.2014, one of the school employees was sent to

the  Bank for  updating  the  passbook  but  the  passbook

couldn’t be updated for technical reason as informed by

the bank’s staff. Again on 9.9.2014 the School employee

went to the bank for updating the passbook and it was

then detected that Rs. 25,00,000/- (Rupees Twenty Five

Lakhs) was unauthorizedly transferred from the school’s

account.  This was brought to the notice of  the Bank’s

manager  on  9.9.2014,  but  the Bank Manager advised the

concerned school staff to visit the Bank on the next day

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morning. But by the time the account could be blocked,

another  sum  of  Rs.  5,00,000/-  (Rupees  Five  Lakhs)  got

transferred from the school’s account.    

2.4 It was also mentioned by the complainant that the

mobile  phone  sim  of  the  complainant  was  blocked  on

5.9.2014 and subsequently the complainant learnt that a

duplicate sim card was issued against his mobile number

and his phone bill was paid by somebody even before the

normal bill could be generated on 8.9.2014.  With this

information,  the  complainant  demanded  return  of  the

siphoned sum with interest in the school’s bank account.

3. The  Bank contested  the  case  before  the  State

Commission.  They  acknowledged  that  the  school  did  not

apply  for  net  banking  facility  but  inadvertently  the

personal  CIF  of  the  then  Principal  of  the  School  got

tagged with the school’s accounts which facilitated the

online transfer of school’s money.   

4. The BSNL Authorities who were arrayed as respondent

Nos. 4 and 5 in the Complaint before the State Commission

pleaded  that  the  then  Principal  on  his  way  back  from

Howrah to Kharagpur lost his mobile phone with the BSNL

post paid sim No. 9434340725 for which, diary was lodged

on  4.9.2014  at  the  Kharagpur  GRP  as  GRPs  No.  1091.

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Thereafter, the Principal applied for duplicate sim which

was  issued  after  completion  of  necessary  formalities.

Subsequently, request was made to the BSNL to port out

the said phone number and accordingly, the sim card was

ported  out  from  BSNL  to  another  service  provider  i.e.

Bharti Airtel. But most curiously, the transfer was made

not  in  the  name  of  the  registered  phone  subscriber

Sanjiva Kumar Sinha, but in the name of one Sanjay Kumar

Sinha who purportedly resided in the same address.   

5.1 The  State  Commission after  noting  the  rival

contentions  recorded  that  admittedly  the  complainant

school did not opt for net banking facility in respect of

any of their three accounts.  Thus, gross error on the

part of the Bank was found in the siphoning of the money

from  the  school’s  account  and  accordingly,  it  was

concluded that “it was a clear case of gross deficiency

on  the  part  of  the  OP  Bank”.  The  Commission then

considered whether the OP Bank should be made liable to

make good the loss suffered by the Complainant. It was

then  observed  that  mere  tagging  of  bank  accounts  with

online banking facility is not enough to transfer fund

through  RTGS/NEFT,  since  access  to  the  concerned  bank

accounts is through User ID, Login, Password, One Time

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Password etc.  Thus, complicity of the then Principal of

the School in those internet transactions was suspected.

The  Commission also  noted  that  the  school  Principal

failed to inform the BSNL authorities and the Bank in due

time and thus despite detecting the illegal transfer of

the large sum i.e. Rs 25,00,000/-, the official complaint

was not lodged on 9.9.2014 itself and this facilitated

the transfer of another Rs. 5,00,000/-, from the school’s


5.2 Thus,  inference  was  drawn  by  the State Commission

that either the then Principal of the complainant school

was the mastermind behind all the fraudulent withdrawals

or he compromised the user ID and login Password with

others but, in either case, the School Principal cannot

escape his personal liability and as a corollary thereof,

the  complainant  cannot  avoid  their  vicarious  liability

for  acts  and  deeds  of  their  employee.    With  these

observations, while gross deficiency in service on the

part of the OP Bank in safeguarding the money of the

complainant school was noticed and they were held liable

to  pay  compensation  to  the  complainant,  only  partial

relief was allowed by declaring that the Bank authorities

(OP Nos. 1,2,3 and 6) shall be jointly and/or severally

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be  responsible  for  payment  of  Rs  1,00,000/-  as

compensation together with cost of Rs. 10,000/-, to the

complainant. Aggrieved by the limited relief granted by

the  State  Commission by its order dated 4.1.2018, the

complainant approached the NCDRC through First Appeal No.

386 of 2018.    

6. The Appellate forum referred to the facts noted by

the  State  Commission and  observed  that  it  is  not  in

dispute that the complainant school had not applied to

the  Bank for  providing  internet  banking  facility  for

their accounts and therefore, it was a mistake on the

part of  the Bank to tag the school’s account with the

personal account of Sanjiva Kumar Sinha the Principal of

the School.  The NCDRC also adverted as to whether the

transactions  could  have  taken  place  either  with

connivance  or  gross  negligence  on  the  part  of  Sanjiva

Kumar Sinha.  It refused to accept the contention that

some unscrupulous person obtained the duplicate sim of

the mobile phone of Sanjiva Kumar Sinha and then obtained

user ID, login and the transaction password, using the

duplicate sim.  The appellate forum also found it hard to

accept that when the mobile phone of Sanjiva Kumar Sinha

remained  inactive  for  six  days  between  5.9.2014  to

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10.9.2014, the subscriber assumed it was a network issue

without suspicion of any wrong doing and did not inform

the  matter  to  the  service  provider.  The  fact  that

duplicate  sim  was  issued  by  the  BSNL  authorities  on

compliance of necessary formalities and eventually mobile

connection  was  transferred  in  the  name  of  one  Sanjay

(Kumar  Sinha)  was  treated  to  be  another  circumstance

which  allegedly  indicated  the  involvement  of  Sanjiva

Kumar  Sinha  in  the  fraudulent  transaction.  With  these

observations, the NCDRC concurred with the partial relief

granted  by  the  State  Commission determining  Rs.

1,00,000/-, as the compensation payable by the Bank. The

appeal accordingly came to be dismissed on 24.4.2018 by


7. Assailing  the  above  decision  of  the  NCDRC,  Mr.

Surendra Nath, learned senior counsel appearing on behalf

of  the  appellant  would  submit  that  when  deficiency  in

service  by  the  Bank was  found  by  both  the  State

Commission as  also  by  the  NCDRC,  there  is  little

justification  for  limiting  the  compensation  to  Rs.

1,00,000/- when  the  School  suffered  total  loss of

Rs. 30,00,000/-.

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8. On the other hand, Mr. Dhruv Mehta, learned senior

counsel appearing on behalf of  the Bank submits that a

formal complaint with  the Bank was lodged only on the

next  day  even  after  learning  of  the  siphoning  of  Rs.

25,00,000/- from the school’s account and this should be

considered  to  be  a  contributory  factor  in  the  loss

occasioned to the complainant. The learned senior counsel

accordingly tries to justify the limiting of compensation

to Rs. 1,00,000/-, by the forum.

9. Before proceeding any further with the matter, it is

necessary for us to refer to the proceeding before the

Banking  Ombudsman  on  the  complaint  No.  201415005002580

lodged by S.K. Sinha, Principal, on behalf of DAV Public

School against the respondent Bank. The Banking Ombudsman

in their decision on 4.2.2015 (Annexure P-11) also noted

that  the  Bank  was  at  fault  in  linking  the  School’s

account  with  internet  banking  facility  without  request

from the account holder and recorded as follows:-

“From  the  contentions  of  both  the parties, I observe that there is fault of  the  bank  as  they  have  linked  the school’s  account  with  internet  banking facility  without  any  request  from  the school  authorities  which  caused  the fraud. The case is under investigation by  police  whoso  outcome  is  not  known. But as there is a limit of Rs.10 lakh for  giving  an  award  under  the  Banking

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Ombudsman Scheme (BOS), 2006.   I am not in a position to instruct the bank to pay the amount of Rs. 30 lakh.   Hence, the  complaint  is  closed  under  clause 13(b) of BOS, 2006 as it is outside the pecuniary limit of the BOS.”

10. That apart, on the basis of the School’s FIR, the

Kotwali  PS  case  No.  995/14  corresponding  to  GR  No.

3246/14  was  registered  within  the  jurisdiction  of  the

Chief Judicial Magistrate, Paschim Medinipur.  The case

was investigated by the police and chargesheet (Annexure

P-20) was filed.   The police referred to the allegations

in the FIR and noted that the Senior Branch Manager of

the  concerned  Branch  of  Indian  Bank  was  requested  to

clarify how an account with only cheque facility can be

operated with net  banking  process;  secondly,  how  any

institutional  account  can  be  linked  with  any  personal

account, without the request of the account holder and

thirdly whether it is possible to make net transaction of

the account, in such situation. The police noted that the

Bank authority failed to convey their response until the

filing of the charge sheet on 29.4.2018.   The charge

sheet  also  disclosed  that  charges  have  been  framed

against two persons i.e. i) Akash Saha @ Niraj Sharma @

Boby  Dutta  and  ii)  Aditya  Narayan  Kundu  @  Rahul

Bhattacharjee who siphoned of the money through a series

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of illegal transactions. The charge sheet also revealed

that there was no complicity on the part of the School

Principal  Sanjiva  Kumar  Sinha  in  the  fraudulent

transaction from the bank through the criminal acts of

the two chargesheeted accused.  

11. In  the  above  backdrop,  the  key  question  to  be

considered here is whether, without the school’s account

being linked with net banking facility, any money from

the  bank  account  could  have  been  siphoned  out  by  the

miscreants. The obvious answer to this question has to be

in  the  negative.  As  concurrently  found  by  the  State

Commission, the Banking Ombudsman and also by the NCDRC,

the bank has rendered themselves liable by enabling net

banking facility by linking the individual account of the

school’s  Principal,  to  the  school’s  account.  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  reveals  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

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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.

12. Considering the above, the denial of the compensation

corresponding to the extent of the School’s loss, by the

State Commission as well as by the NCDRC would not in our

view, be justified. The question then is whether the Bank

should be asked to compensate the school for the entire

loss  through  such  fraudulent  transaction.   In  this

context, 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

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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. It is ordered so

accordingly. The impugned orders are interfered to this

extent.  The appeal is allowed in these terms.

.…………………….………………………………………………J.      [Dr Dhananjaya Y Chandrachud]

.….…………………………………………………………………J. [Hrishikesh Roy]

New Delhi December 18, 2019

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