Due diligence failure facilitated fraud

In a case of fraud, the National Commission found that a postal department had handed over a cheque meant for a couple to another person without an authorisation letter

Pritam Singh Narang and his wife Mahendra Kaur had placed a total amount of Rs 11 lakh through four investments made in the Postal Department's Saving Scheme during the period May 19, 2003 to June 10, 2003. When the deposits matured after three years in 2006, the returns were reinvested for another period of three years through four deposits totalling Rs 13.45 lakh.

When Pritam Singh approached the post office, he learnt that all the passbooks were forged and the investments had been repaid in 2007. His inquiries revealed the money had been siphoned off by issuing cheques to a third party who had a fictitious account with Kotak Mahindra Bank in the name of Mahendra Kumar Narang. The cheques were credited to his account.

The Narang couple filed a complaint before the Jaipur District Forum against the postal autho­rities, the agent Ranjana Bakliwal, as well as Kotak Bank. They attributed negligence on the part of the bank in opening an account without proper verification, resulting in a third party depositing the cheques in that account. 

The Postal Department contested the case. While the initial deposits made in 2003 were admitted, it was denied that the amounts were reinvested in 2006. The postal authorities stated that each time the amount is reinvested, a new account with a different number is allocated. The Postal Department argued  the agent must have committed a fraud by issuing a fake passbook, and contended it could not be held liable as the culprit was a person named Rakesh Bakliwal who had collected the cheques and fraudulently opened an account with Kotak Bank.

The Forum allowed the complaint and held all the parities jointly and severally liable to pay the couple the entire amount of Rs 13,45,000 along with 12 per cent interest from July 1, 2006 onwards. In addition, compensation was awarded by directing the postal department to pay Rs 2,50,000, the agent to pay Rs 1,00,000, the bank to pay Rs 2,50,000, and its branch manager to pay Rs 55,000, totalling Rs 6,55,000, out of which Rs 4,55,000 would go to the Narang couple and Rs 2,00,000 to the Consumer Welfare Fund.

In appeal, the Rajasthan State Commission modified the order by setting aside the compensation payable to the Consumer Welfare Fund. Also, instead of individual liability, the Commission held that all the parties would be jointly and severally liable to pay Rs 13,45,000 with 12 per cent interest together with compensation of Rs 4,55,000.

The opposite parties then challenged the orders through a revision petition. The National Comm­ission found that the postal department had handed over the cheque mea­nt for the Narang couple to Rakesh Bakliwal without an authorisation letter. So it confirmed that the postal department and its agent had been rightly held negligent and liable.

On the basis of the investigation report, the Comm­i­ssion noted that the bank had opened the account in the name of Mahendra Kaur Narang by using the driving licence of Lokesh Kaur Jangid, while for Pritam Singh Narang, the driving li­ce­nce of Rakesh Bakliwal was used, and the photographs were those of Vijay Garg and Tarun Gupta. The bank was also held liable for having violated the KYC procedure.

By its order of September 13, 2019 delivered by M. Shreesha for the Bench headed by Justice R.K. Agrawal, the National Commission concluded that the finding of negligence was correct and that the compensation awarded was reasonable. The revisions were, therefore, dismissed.

The writer is a consumer activist