Why PNB must refund UP man Rs 6.6 lakh payout for ‘fraud’ done by own employee
The commission was hearing an appeal filed by the PNB against a district commission order that had granted relief to a Lucknow resident in a dispute involving fraudulent withdrawals of Rs 6.6 lakh from his savings account.
The commission directed the PNB to pay Rs 6.6 lakh to Quarasi within 45 days, together with interest at 7 per cent per annum and Rs 5,000 as litigation costs, said the UP state consumer commission. (Image generated using AI) PNB news: Holding that banks cannot evade responsibility for fraud committed by their own employees, the Uttar Pradesh State Consumer Disputes Redressal Commission has directed Punjab National Bank (PNB) to refund Rs 6.6 lakh to a customer whose savings were siphoned off through unauthorised withdrawals allegedly carried out by a branch manager.
A bench comprising Justice Ajai Kumar Srivastava (President) and Sudha Upadhyay (Member) was hearing an appeal filed by the PNB against a district consumer commission order that had granted relief to Lucknow resident Mohammad Laiq Quarasi in a dispute involving fraudulent withdrawals from his savings account.
“…the post office/bank can be held liable for the fraud or wrongs committed by its employees,” said the state consumer commission, citing the Supreme Court’s ruling on May 25.
The commission further clarified that if the PNB failed to make payment within the stipulated period, the amount would carry interest at 9 per cent per annum. (Image generated using AI)
Relief modified, liability upheld
- While upholding the finding of liability against the PNB, the commission modified the rate of interest awarded by the district commission.
- The commission directed the bank to pay Rs 6.6 lakh to Quarasi within 45 days, together with interest at 7 per cent per annum and Rs 5,000 as litigation costs.
- The commission further clarified that if the bank failed to make payment within the stipulated period, the amount would thereafter carry interest at 9 per cent per annum.
- Consequently, the appeal was disposed of with a limited modification in the interest component, while the substantive relief granted to the consumer was affirmed.
Can a bank escape liability for fraud by its own employee? Courts say no
- Fraud committed by individual, not institution
- Bank unaware of employee's wrongdoing
- Customer should pursue the employee directly
- No systemic failure on bank's part
- Bank is liable for acts of employees in course of service
- Trust relationship requires institutional accountability
- Consumer cannot be denied relief for internal fraud
- Bank must maintain effective internal controls
Appeal against 2019 consumer forum order
The dispute traces back to a consumer complaint filed by Quarasi, who alleged that substantial sums deposited in his PNB account were withdrawn without his authorisation.
According to the records, Quarasi had deposited money in multiple transactions between 2010 and 2011, including deposits of Rs 25,000, Rs 1 lakh and Rs 4 lakh, resulting in a total disputed amount of Rs 6.6 lakh.
He later discovered that the money had been withdrawn from his PNB account and alleged that the transactions were facilitated by the then-branch manager, Sunil Kumar Chaturvedi.
Claiming that the PNB failed to restore the money despite repeated representations, Quarasi approached the consumer forum seeking compensation and recovery of the amount.
After examining the evidence, the district consumer commission, Lucknow, on April 22, 2019, allowed the complaint and directed the bank to refund Rs 6.6 lakh with interest at 9 per cent per annum, along with Rs 5,000 towards litigation expenses.
The bank challenged that decision before the state commission.
Bank challenged findings
In its appeal, PNB argued that the district commission had erred in appreciating the facts and evidence and sought reversal of the order.
The bank contended that it was not liable in the manner held by the consumer forum and questioned the findings regarding the deficiency in service.
However, after hearing the parties and examining the record, the state commission found no reason to interfere with the conclusion that the customer had suffered financial loss due to actions attributable to the bank’s employee.
Commission cites Supreme Court ruling
- The commission relied on the Supreme Court’s ruling in Pradeep Kumar & Another v Post Master General & Others.
- In this verdict, the Supreme Court held that banks and post offices can be held responsible for fraud or wrongdoing committed by their employees during the course of service.
- The state commission observed that consumers cannot be denied relief merely because the wrongful act was carried out by an individual employee rather than the institution itself.
- The relationship of trust between a bank and its customer requires the institution to answer for the conduct of officials acting within its system.
- Observing that financial institutions remain accountable for wrongdoing by their staff, the commission relied on a Supreme Court precedent.
- The commission reiterated that banks can be held liable for fraud or wrongful acts committed by their employees.
Why this ruling matters
The decision is a significant reminder that banks cannot distance themselves from fraud committed by their employees.
Consumer courts have repeatedly emphasised that financial institutions are expected to safeguard customers’ deposits and maintain effective internal controls.
For consumers, the ruling reinforces an important principle: when losses occur because of wrongdoing within a bank’s own system, the institution itself can be held accountable and required to compensate the affected customer.
Share
