Consumer court says banks are liable in cheque forgery cases

A Mumbai resident Jehangir Gai filed a case in the consumer court against a bank for negligence and deficiency in service. In his complaint he alleged that his cheque book was misused and fraudulently Rs 40 lakh was withdrawn from his account when someone forged his signature on the cheque leaves.

According to Gai, the bank acknowledges that it hadn’t uploaded the consumer’s signature on its system. Due to this drift from their side the signatures on the cheques could not be verified.

Consumer organizations and bankers say that now day’s cheque frauds are very common and these happen when an individual is careless with his cheque book, or forget to cross a cheque leaf. Similarly there are rising instances of drop box cheque frauds too. Banking ombudsman official said, “Many banks don’t have the practice of listing cheques dropped in boxes’’.

Bejon Misra of Delhi’s Consumer Voice quoted another case where a cheque for Rs 10,000 bearing forged signatures was cleared by the bank staff without verification. The bank in a statement given in favor of its action said the complainant was negligent with his cheque book, and thus, it should not be held liable. But, says Misra, “the district forum held that the bank’s act constituted deficiency in service under the Consumer Protection Act.

The state commission concurred with the district forum’s views and dismissed the bank’s appeal with costs’’. Kirti Bhatt of Ahmedabad’s Consumer Education and Research Centre said if a signature is found to be fraudulent; it is banks liability to recoup the losses to the account holder. “There are a number of judgments (in such cases). Banks have argued that since a consumer has left the cheque book carelessly around, 50% of the losses should be borne by him. But courts have ruled that this doesn’t absolve the bank from the liability of verifying signatures.’’ In such cases consumers do not know whom to approach for redressal. Usually a criminal case is filed and requests the particular bank’s nodal officers and senior officials to investigate the case.

A senior banker explained that such cheques are sent for signature verification to the government examiner of questioned documents (GEQD). If the bank fails to provide redressal, the case is referred to the banking ombudsman. Ombudsman official clarified that consumers may note that cases where fraud is established are passed on the RBI’s department of banking supervision. They no longer come under the ombudsman’s purview.

“Otherwise, if there has been negligence on the part of the collecting bank, it is asked to do the needful, and the amount has to be made good.’’ Bankers and consumer organizations said, however, once a case has been filed in the criminal or consumer court, the ombudsman or RBI cannot intervene.

The ombudsman official explained cases of fraud can be minimized if a certain cheque truncation project, which is being tried out in Delhi, is extended elsewhere.

However the RBI website carries the explanation of this process it states that in this process, the physical instrument is truncated and an electronic image of the cheque is sent to the drawee branch along with the relevant information. Therefore extension of the physical instruments across branches would not be required, except in exceptional circumstances.

“Cheque truncation speeds up collection of cheques and therefore enhances customer service, reduces the scope for clearing related frauds, minimises cost of collection of cheques, reduces reconciliation problems, eliminates logistics problems etc.’’