DAV PUBLIC SCHOOL versus THE SENIOR MANAGER, INDIAN BANK, MIDNAPUR BRANCH & ORS.

Citation: [2019] 15 S.C.R. 333 · Decided: 18-12-2019 · Supreme Court of India · Bench: D.Y. CHANDRACHUD, HRISHIKESH ROY · Disposal: Appeal(s) allowed

Judgment (excerpt)

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DAV PUBLIC SCHOOL
v.
THE SENIOR MANAGER, INDIAN BANK,
MIDNAPUR BRANCH & ORS.
(Civil Appeal No. 9352 of 2019)
DECEMBER 18, 2019
[DR. DHANANJAYA Y CHANDRACHUD
AND HRISHIKESH ROY, JJ.]
Consumer Protection – Deficiency of service – The complaint
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
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
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 –
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
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
   [2019] 15 S.C.R. 333
333
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SUPREME COURT REPORTS
[2019] 15 S.C.R.
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
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
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
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
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
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
when the siphoning of a large sum of Rs. 25,00,000/- was first
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detected by the school staff, the official complaint was not lodged

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