DAV PUBLIC SCHOOLversusTHE SENIOR MANAGER, INDIAN BANK, MIDNAPUR BRANCH & ORS.

                         [2019] 15 S.C.R. 333                          333


                     DAV PUBLIC SCHOOL                                 A
                                 v.
           THE SENIOR MANAGER, INDIAN BANK,
                MIDNAPUR BRANCH & ORS.
                  (Civil Appeal No. 9352 of 2019)                      B
                       DECEMBER 18, 2019
           [DR. DHANANJAYA Y CHANDRACHUD
                AND HRISHIKESH ROY, JJ.]
      Consumer Protection – Deficiency of service – The complaint
                                                                       C
of the principal of the school alleged deficiency of service against
the respondent-bank inasmuch as the school’s bank accounts
without net banking facility was linked with personal Customer
Information File (CIF) of the principal of the school, facilitating
online transaction which led to siphoning of Rs.30,00,000/- from
school’s account – Siphoning of Rs.25,00,000/- was detected on         D
09.09.2014 and then Rs.5,00,000/- was unauthorizedly transferred
from the school’s account the very next day before it was blocked
– The State Commission concluded that there was gross error on
the part of the bank as admittedly the complainant-school did not
opt for net banking facility in respect of school’s accounts – The
                                                                       E
State Commission suspected involvement of the then principal of
the school in the said fraudulent transactions and also observed
that the complainant school cannot avoid their vicarious liability
for acts and deeds of their employee – Accordingly, the respondent-
bank was directed to pay Rs.1,00,000/- as compensation – The
Banking Ombudsman too declared that the Bank was at fault –            F
NCDRC concurred with the relief granted by the State Commission
– On appeal, held: It was not possible to siphon out any money
from the school’s accounts without accounts being linked with net
banking facility – As concurrently found by the State Commission,
the Banking Ombudsman and also by the NCDRC, the bank has
                                                                       G
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       H
                                333
334            SUPREME COURT REPORTS                    [2019] 15 S.C.R.


A     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
      – 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 – The
B
      respondent Bank 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.
            Allowing the appeal, the Court
C
            HELD: 1. 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
D     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
E     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
F     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. [Para 11] [340-F-H; 341-A]
           2.Considering the above, the denial of the compensation
G     corresponding to the extent of the School’s loss, by the State
      Commission as well as by the NCDRC would not 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
H     when the siphoning of a large sum of Rs. 25,00,000/- was first
    DAV PUBLIC SCHOOL v. THE SENIOR MANAGER, INDIAN                       335
            BANK, MIDNAPUR BRANCH & ORS.

detected by the school staff, the official complaint was not lodged       A
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
                                                                          B
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. This Court is therefore of the
view that the respondent Bank should be directed to compensate            C
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. [Para 12] [341-B-E]
      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9352                D
of 2019.
      From the Judgment and Order dated 24.04.2018 of the National
Consumer Disputes Redressal Commission, New Delhi in First Appeal
No. 386 of 2018.
                                                                          E
     Surendra Nath, Sr. Adv., Subhasish Bhowmick, Ms. Manisha
Pandey, Kunal Mallick, Aditya Rajeshwar, Advs. for the Appellants.
      Dhruv Mehta, Sr. Adv., Himanshu Munshi, Avinash Kumar
Bharti, Manish Garani, Amit Kumar Chourasia, Anmol Mehta, Advs.
the Respondents.
                                                                          F
       The Judgment of the Court was delivered by
       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      G
and upheld the order passed by the State Consumer Disputes Redressal
Commission, West Bengal3.. Under the impugned judgment, the liability
1
  First Appeal No. 386 of 2018
2
  “NCDRC”
3
  The State Commission                                                    H
336               SUPREME COURT REPORTS                     [2019] 15 S.C.R.


A     of the respondent Indian Bank was limited 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
B     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,
C     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
D     the Principal, DAV Public School, Midnapore and Managers/Principal,
      DAV Model 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
E
      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
F     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
G     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 morning. But by the time the account could be blocked, another

H     4
          The School
DAV PUBLIC SCHOOL v. THE SENIOR MANAGER, INDIAN                               337
BANK, MIDNAPUR BRANCH & ORS. [HRISHIKESH ROY, J.]

sum of Rs. 5,00,000/- (Rupees Five Lakhs) got transferred from the            A
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             B
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      C
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             D
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. 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                    E
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.                                                          F
       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          G
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          H
338            SUPREME COURT REPORTS                         [2019] 15 S.C.R.


A     Time 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.
B
      5,00,000/-, from the school’s account.
             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
C     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
D     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 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
E     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
F     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
G
      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 10.9.2014, the subscriber assumed it
      was a network issue without suspicion of any wrong doing and did not
H     inform the matter to the service provider. The fact that duplicate sim
DAV PUBLIC SCHOOL v. THE SENIOR MANAGER, INDIAN                            339
BANK, MIDNAPUR BRANCH & ORS. [HRISHIKESH ROY, J.]

was issued by the BSNL authorities on compliance of necessary              A
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.       B
The appeal accordingly came to be dismissed on 24.4.2018 by NCDRC.
       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
                                                                           C
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/-.
       8. On the other hand, Mr. Dhruv Mehta, learned senior counsel
appearing on behalf of the Bank submits that a formal complaint with       D
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.
                                                                           E
       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      F
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
                                                                           G
      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
      Ombudsman Scheme (BOS), 2006. I am not in a position to
      instruct the bank to pay the amount of Rs. 30 lakh. Hence, the       H
340             SUPREME COURT REPORTS                         [2019] 15 S.C.R.


A           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
B     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,
C     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
D     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 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
E     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
F
      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
G     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
H     Banking Ombudsman too declared that the Bank was at fault which
DAV PUBLIC SCHOOL v. THE SENIOR MANAGER, INDIAN                                 341
BANK, MIDNAPUR BRANCH & ORS. [HRISHIKESH ROY, J.]

facilitated the loss to the School but declined to order refund as the          A
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                    B
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
                                                                                C
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              D
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.         E
It is ordered so accordingly. The impugned orders are interfered to this
extent. The appeal is allowed in these terms.


Ankit Gyan                                                    Appeal allowed.
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