The Supreme Court has agreed to hear the ICICI Bank’s appeal against a consumer court’s order that asked it to refund Rs 10 crore with interest to Mumbai District Central Co-operative (MDCC) Bank which had invested in fixed deposits. The amount was purportedly embezzled by a branch manager of the private bank using forged documents, causing a wrongful loss to MDCC Bank.
A Bench led by justice Madan B Lokur sought response from MDCC Bank after ICICI Bank challenged the National Consumer Disputes Redressal Commission’s March order asking the bank to pay an additional interest on its investment at the rate of 8% per annum by way of compensation and also Rs 25,000 towards the litigation cost.
Senior counsel Shayam Divan, appearing for ICICI Bank, argued that the Real Time Gross Settlement (RTGS) transactions were carried out in the overdraft loan account on the basis of written instructions on a letterhead duly signed and stamped by the authorised signatories of MDCC Bank and the transactions were processed in the course of ordinary business. He contended that the complainant was not a consumer under the Consumer Protection Act as the investments made by MDCC Bank is in accordance with its bylaws for making profit amounts to commercial purpose.
Senior counsel Ashok Gupta, appearing for MDCC Bank, told the judges that there was no negligence on its part and the money should come back to it.
MDCC Bank had invested Rs 10 crore in 2014 in two fixed deposits with the Vasai branch of ICICI Bank. In February 2015, the ICICI Bank informed the investor bank that the amount invested had been allegedly embezzled by the manager of its Vasai branch. It had lodged a FIR against its own manager and his associates alleging forgery, embezzlement of funds and siphoning off the FDs to the account of a private firm, Prakash Trading Company, held with Baroda Gujarat Gramin Bank and ING Vyasya Bank. The branch manager was also arrested.
However, ICICI Bank refused to refund the money with accrued interest to MDCC Bank on the ground that the amount had been liquidated and paid in terms of instructions issued by the complainant bank.
The NCDRC rejected the ICICI Bank’s objections, saying the main objectives of MDCC Bank were to supervise and assist co-operative banks and as the term deposit was incidental to it, it could not be termed as commercial transaction. It also held that ICICI Bank was “vicariously liable for the acts of misconduct committed by its employee(s) and the siphoning of the funds of the complainant constitutes gross deficiency in service rendered to the complainant”.
