SC held Vijaya bank liable to compensate for payment without verification of signature

Dec 12, 2009

The Supreme Court has held that banks are liable
to compensate a customer whose money is wrongly paid
 to another person without verifying the original
signature of the account-holder as it amounted to
deficiency of service.

A bench of Justices D K Jain and T S Thakur
said the bank was guilty of honouring
 the cheque presented by the fraudster by releasing
an amount over and above the amount in the account even
though the customer Gurnam Singh had no overdraft facility.

“On a query by the Court how in the absence of any overdraft
facility being enjoyed by the complainant, a cheque for the
amount which was in excess of the balance amount in the
account of the complainant could be honoured, learned counsel
is unable to furnish any satisfactory explanation.
“In our opinion, this fact, highlighted by the State
(Consumer) Commission, by itself is a glaring example
of negligence/deficiency in the service ofthe bank,” the bench said.

The bench made the remarks while dismissing the appeal of public
 sector Vijaya Bank which had challenged the concurrent findings
of district consumer forum, Chandigarh, State Consumer Commission
 and the National Consumer Commission which had heldthe bank
guility of deficiency in service for releasing an amount of
over Rs 3.5 lakh to a fraudster who had presented stolen
cheques of Gurnam Singh.