‘Gross negligence’: HC orders bank to pay compensation of Rs 8 lakh to Haryana business owner for error in overseas deal

“It is evident that the petitioner-Bank facilitated the release of the consignment to the importer without proper authorization and the same indicates that there was gross negligence on its part,” the court said.

Export deal gone wrong

The case stems from a 2011 export deal gone wrong. The exporter, who ran a small home-based textile business called M/s VK Tex out of Panipat, Haryana, had a bank account with Federal Bank Ltd. He received an order from a buyer in the US and shipped textiles worth about $15,203 (roughly Rs 7.97 lakh at the time). As his authorised agent, the bank was supposed to handle the paperwork and ensure the payment was collected before releasing the shipping documents to the buyer.

However, things fell apart when the bank’s foreign partner, US Bancorp, handed over the documents without getting the payment first. This allowed the buyer to take the goods without paying up. The exporter approached the bank multiple times to fix the issue and credit his account, but his complaints went unresolved. Frustrated, he filed a complaint with the local consumer protection body in Panipat, claiming the bank had provided poor service.

The local consumer forum agreed with the exporter in October 2015, ruling that the bank had been careless. It ordered the bank to pay him Rs 7,97,379 (the value of the goods), plus 9 per cent interest from the date of the complaint, and an additional Rs 20,000 for the mental stress and hassle caused. The bank appealed to the state-level consumer body in Haryana, which upheld the decision in May 2016. Undeterred, the bank took the matter to the national consumer body in New Delhi, but lost again in April 2024.

Finally, the bank challenged these orders in the high court through two separate petitions. The court, in a decision delivered on September 30, sided with the exporter and threw out the bank’s claims.

Judges reject argument that exporter wasn’t a ‘consumer’

In its ruling, the court noted that the exporter had clearly told the bank to release documents “only against payment,” but the bank, acting as the exporter’s agent, did not ensure this.

The court pointed out that the exporter retained control over the goods through the bank until payment was made, and if the buyer refused to pay, the exporter could have taken legal steps against them—but the bank’s error made that impossible.

The judges also rejected the bank’s argument that the exporter wasn’t a “consumer” entitled to protection because he was running a business. Quoting from consumer protection laws, the court explained that services used to earn a living through self-employment don’t count as commercial activities.

“Respondent No.2 had stated in his complaint that he was running a ‘home textile business’ and exported textiles out of the country, to earn his livelihood,” the ruling stated. “Livelihood means securing the necessities of life for one’s survival. Self-employment is a situation where an individual works for himself rather than working for an employer that pays him a salary/wage.”

The court stressed that it is up to the service provider, like the bank, to prove if someone is using services for large-scale commercial purposes, not the other way around.

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