Banks liable in cheque forgery cases

A Mumbai resident recently filed a case in the consumer court against a bank for negligence and deficiency in service. He alleged that his cheque book was misused and fraudulently Rs 40 lakh was withdrawn from his account when someone forged his signature on the cheque leaves.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 Mumbai consumer activist Jehangir Gai, the bank admitted that it hadn't uploaded the consumer's signature on its system. Due to this lapse, the signatures on the cheques could not be verified. Consumer organisations and bankers say that cheque frauds are not uncommon. They are most likely to happen when an individual is careless with his cheque book, or forgets to cross a cheque leaf. Then there are rising instances of drop-box cheque frauds too. "Many banks don't have the practice of listing cheques dropped in boxes,'' says a banking ombudsman official. Bejon Misra of Delhi's Consumer Voice cites another case where a cheque for Rs 10,000 bearing forged signatures was cleared by the bank staff without verification. The bank said the complainant was negligent with his cheque book, and thus, it should not be held liable. However, 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 says if a signature is found to be fraudulent, the bank is liable to recoup the losses to the account holder. "There are a number of judgements (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 the event of suspected fraud, consumers stand confused about whom to approach for redressal. They usually file a criminal case and request the particular bank's nodal officers and senior officials to investigate the case. A senior banker says such cheques are sent for signature verification to the government examiner of questioned documents (GEQD). If the bank fails to provide redressal, many now head to the banking ombudsman. However, 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, clarifies an ombudsman official. "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.'' Significantly, however, once a case is filed in the criminal or consumer court, the ombudsman or RBI cannot intervene, say bankers and consumer organisations. The ombudsman official says cases of fraud could be minimised if a certain cheque truncation project, which is being tried out in Delhi, is extended elsewhere. The RBI website says 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. Thus movement 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.'' By Ms.Bobby Aanand, Metropolitan Jury

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