Liabilty of the financial institution to the frauds and prin
Patanjali Dhar
(Querist) 04 April 2018
This query is : Resolved
An Employee in a Bank fradulently sells the property of the Bank to a third person. The third person without due diligence makes the payment and asks the .Bank to hand over the possession of the property? As per the property laws, Corporate laws etc., is it incumbent on the Bank to hand over the possession of the property to the third person? If RBI advises the Bank to honour the transaction made fradulently by an Employee and accepted by third person without due diligence.What is the legal position?
ii) In case of PNB Nirav Modi fraud, a few Employees of the Bank fradulently issue LOU worth thosands of Crores. The Indian Banks in foreign countries honour these LOUs without due diligence, when they knew that LOUs in India are issued for 3 months and they have been issued for 1 year. RBI is reportedly said to have advised Bank to honour these fradulent LOUs. Whether it is incumbent on the Bank to honour all the fradulent documents/ transactions, when it is clear that with due diligence such fraud would have been detected by the Indian Banks located in foreign countries? What is the legal position? If a precedent is created in PNB, then all the financial Institutes would be liable to honour transactions made fradulently?
iii) I am a minority share holder in PNB. If they honour fradulent transactions worth thousands of crores, they are intentionally causing huge losses to the Bank and consequently causing loss to all the shareholders. Can I file a case against Bank for wilfully causing loss by honouring fradulent transactions and claim compensation?
iv) Can any Advocate file my case de bono?
Guest
(Expert) 05 April 2018
Ms. patanjali Dhar,
Although yours seems to be purely an academic query and does not deserve any response, but still for your awareness, I would like to respond to your query.
Why worry, it is the job of the bank management or the Government to manage their affairs even if fraudulent transactions have happened. Police, Special Police Establishments, CBI and NIA, are already at the beck and call of the Government. Besides, the public elected representatives also can often be found wasting their precious time in discussing such matters in the Parliament House. So, why strike your head on this issue.
However, if you can't pose any trust any more on the Bank, you may better sell your minority share holding prtfolio in the open market to get yourself worry free. Several risk taking people would be ready to buy your shares. If you file any case on the bank, you may have to lose more money in litigation than the value of your shares of PNB. Moreover by suing the bank may not curb frauds in financial institutions. You can always find frauds, where money transactions with vested authority are involved.
So, that filing any case on your part will not be the act of prudence on your part in any way. You can only draw flak in your case, as you do not have any concern with any such transaction of the bank.
rajeev sharma
(Expert) 05 April 2018
No legal advise may be given on the basis of hearsay. Put all relevant document for examination and seek advise.
Patanjali Dhar
(Querist) 05 April 2018
At the outset I want to inform Sir Dhingra Ji that I am Mr. Patanjali Dhar and not Ms. Patanjali (The name is after Yoga Founder Maharishi Patanjali who was a man.).
An expert has to give an opinion and not rebuke the person asking a query. If the Expert is not well versed with the legal issues involved, it is better for the expert to keep silent and not give any opinion. The issues involved on which the query is raised are legal and not political. The issues involved are master servant relationship, liability of a master for the frauds committed by the servant for the benefit of third party and own self, liability of the principal for the frauds of the Agent committed for personal gains. If the Expert is not well versed in such laws, it is better not to comment and use rebuke as reply. A few years back some of the Employees of Post Office had illegally stolen NSC Certificates and sold them to unsuspecting customers outside the Post Office. the claim was rejected/ Why/
The issues involved are legal, some of them are as enumerated below:
i) Whether acts of fraud committed by the servant for his own benefit or third party benefit are binding on the master.
ii) Whether due diligence is required by the third party? For example,as per the law of the land and RBI Guidelines, LOUs were to be issued for 90 days and not for 1 year. The Bank Officers of the Banks accepting such defective LOUs are supposed to know such basic Rules.
iii) Whether the master can dispose off the assets which actually belong to a large number of shareholders?
iv) What are the implications as per the Company Laws?
v) Whether shareholders can call for the compensation for the loss and whether class suits can be filed for the compensations for the loss.
Only a real expert in the Banking Laws, Company laws, Corporate laws, natural justice laws can give a convincing reply and I do not expect Mr Dhingra to delve on such important legal issues. Any expert on the relevant matters may kindly give an opinion.
Guest
(Expert) 05 April 2018
Thanks for your advice, Mr. patanjali. You could better have put the title 'MR.' to make people understand in the absence of your pic, as to who you are, a man or a woman. It is not necessary that only men can be named as Patanjali, women can also be named as Patanjali. if you want to be recognized as a man, you should post your picture in your LCI profile. Nobody can automatically dream that you are not a woman.
Secondly, you should not have been the judge of your own case. When you pretend to know more than any expert at the LCI, you should not have posed your vague academic question here. Instead, either you could have filed the case yourself or you could have directly gone to some local lawyer to make him ready to file the case on your behalf.
Thirdly, in order to fetch solution to your hypothetical academical query, you should not have pretended that you are a minority shareholder in PNB. As a shareholder, you can take up your grievance or give suggestions in the AGM of the PNB. Probably you may get chance to become the chairman of the PNB, as an expert on due diligence, as the PNB Board has already failed to discharge its responsibilities towards the stake holders of the company.
Best of luck !
Guest
(Expert) 05 April 2018
As Per the SEBI,BSE and NSE Regulations Only a Share Holder of More than Minimum 4% of the shares could raise any objection if the management it self does any such transaction.
Guest
(Expert) 05 April 2018
In your case the Board of Directors the Management it self had conducted the Offence
Guest
(Expert) 05 April 2018
The Majority of the Fraud Money is Public Money and not that of Share holders of the Company // Bank alone.
Guest
(Expert) 05 April 2018
You could Refer the Case Of Satyam Computers few years back and the Share Price had fallen heavily when Fake FD Fraud was exposed.
Guest
(Expert) 05 April 2018
"Subject to Market Risk" is the wordings you could find in the last post of all Offer documents of any Company'
Guest
(Expert) 05 April 2018
Sorry to Say Obviously the Share Holders would be the sufferers in such cases. You Could Plead this openly in Next Annual General Meeting AGM where each and every share holder has the Right to question Please.
Guest
(Expert) 05 April 2018
To Others --- the question of Mr Or Madam or Posting as Anonymous would be irrelevant please
Guest
(Expert) 05 April 2018
The Auctions done by court to Recover the Money can not be Legally Objected by the share Holder. Obviously the Auction is only to recover the bad debts please.
Guest
(Expert) 05 April 2018
Falling of Share Price in the Market is Not Legally Objectable / Questionable please
Guest
(Expert) 05 April 2018
Could you get answer to any of your questions out of the last 9 posts in continuation by a single expert? Anyway, good job by seemingly a jobless expert.
Guest
(Expert) 05 April 2018
The Innocent child should not stop her/his Counting assignments please. appreciated.
Guest
(Expert) 05 April 2018
Multiple idiotic posts have no relevance. However, good pass time for a jobless person.
