Bank's vengeful conduct can invite punishment

The award of compensation is governed by Sec 73 of the Indian Contract Act, which says a party who suffers due to breach of contract is entitled to compensation for the natural loss

ML Marwah, a senior citizen, had held a savings account with Canara Bank, Patparganj Branch, Delhi for over 10 years. Both his wife Kiran and he had also invested in a number of fixed deposits with the bank.

When the deposits matured and the amount was credited to the bank account, Marwah found a shortfall in interest paid. He complained to the branch manager that his wife had received Rs 11,138 less on her deposit. Since the grievance was not redressed, he approached the zonal manager, Delhi Circle. This infuriated SK Bahera, the branch manager, who prematurely closed all the other fixed deposits on September 6, 2014 at 7.27 pm, and even levied a 2 per cent penalty for premature closure.

Since Marwah’s money was blocked by the branch and the zonal manager, too, did not resolve his grievance, he complained to the bank's head office at Bangalore, whi­ch also failed to take any action.

Meanwhile, his money continued to remain blocked. Marwah then approached the banking ombudsman in New Delhi, who directed the bank to either give 30 days’ notice for closing the accounts, or pay interest in lieu of the notice.

Canara Bank took the latter option of paying interest. It paid Rs 1,943,611.02 as proceeds on all the deposits. It also paid Rs 15,936 as interest in lieu of 30 days’ notice. The cheques for these amounts were handed over to Marwah on February 4, 2015. Marwah deposited the cheques in his account with the Oriental Bank of Commerce, Patparganj Branch, in Delhi.

Marwah then noticed that the proceeds of the fixed deposits were not computed at 10.5 per cent interest, as mentioned on the receipts, but at 8.5 per cent interest, resulting in a short payment of Rs 247,457. Besides, interest was computed till September 6, 2014 even though the money had remained with the bank till February 6, 2015.

Marwah then approached the District Consumer Forum. The bank did not even care to contest the complaint even though the Forum’s notice was served to it. The complaint was decided exparte. The bank was held guilty of deficient service and unfair trade practice. The District Consumer Forum ordered the bank to calculate the proceeds of the fixed deposits at 10.5 per cent without imposing the 2 per cent premature closure penalty. It also awarded Rs 45,000 as compensation and Rs 5,000 as litigation costs.

Since the computation of the fixed deposit proceeds was not extended from September 6, 2014 to February 6, 2015 even though the amount remained with the bank, Marwah filed an appeal. The Delhi State Commission directed the bank to compute the amount payable till February 6, 2015. However, it set aside the cost of Rs 5,000.

Marwah filed a revision petition against this order, seeking enhancement of compensation. The National Commission observed that the award of compensation for breach of contract is governed by Section 73 of the Indian Contract Act. This provision lays down that a party which suffers due to breach of contract is entitled to compensation for the natural loss, but cannot make a claim for remote or indirect loss.

In the revision petition, Marwah came up with a new claim. He stated that if the fixed deposits had not been prematurely closed, he would have continued to earn 10.5 per cent interest till the deposits matured in 2021, but now he would suffer a loss of 3.5 per cent as the interest rate had plummeted to 7 per cent. The National Commission refused to entertain this claim, firstly, because it had not been sought in the original complaint, and secondly, because it was made after the limitation period had expired.

Accordingly, by its order of October 27, 2017, the Bench of C Viswanath and Ram Surat Ram Maurya dismissed the revision.

The writer is a consumer activist