Kerala High Court Directs Bank To Refund Money To Fraud-Struck Customers

In a recent judgment upholding consumer right, the Kerala High Court has directed the Bank of Baroda to return deposits of customers whose savings were lost in a cheque fraud case and an interest of 6 per cent per annum. The matter dates back to 2012 and concerns several customers who had deposited cheques with the bank's branch in Ernakulam. The cheques did not get credited to their accounts, so they approached the court.

The court order comes on the heels of serious charges that cheques deposited by these clients were manipulated and credited to other accounts. The bank was lenient in preventing the fraud encashing of cheques, which resulted in financial loss to the victims.

Court Reprimands Bank for Negligence

Justice Devan Ramachandran, in delivering the verdict, asserted that it was the responsibility of the bank to check the validity of the cheques and take reasonable measures to keep customer money secure. The court established that banks cannot escape liability where their in-house measures fail to block fraud.

The ruling emphasised that the victims did not need to establish how the fraud was perpetrated, as they had used all standard practices when they deposited the cheques. Rather, it was the bank's responsibility to deal with such instruments securely and process them properly.

Basis of the Judgement

The court ruling was accompanied by a vigilance report that indicated serious failures in the internal functioning of the bank. According to the report, the fraud would have been detected if the bank had taken action upon signs of red flags and transactional record discrepancies.

In upholding his decision, Justice Ramachandran also drew on a past Supreme Court ruling which acknowledged a bank's liability when a customer is financially harmed even after following proper procedures. The court reiterated that banks should exercise a better standard of care with public money.

Refund Annual Interest Ordered

The court directed the Bank of Baroda to return the misplaced money to the petitioners with 6 per cent interest per annum from the date of misappropriation of the amounts. The compensation for interest, the court added, was intended to cover the loss of money used and the mental tension of the customers over the long period of litigation.

Many of the petitioners had lost substantial amounts—in some instances, more than Rs 90,000—and waited more than ten years for justice. The judgment is a relief for most of the senior citizens in the group which lost money in this manner, who had submitted their savings by cheques believing in safety and security from a public sector bank.

A Wake-Up Call for Banks

This ruling acts as a reminder to banks, particularly public sector banks, to tighten internal controls, provide adequate staff training, and respond promptly to customer complaints. While online fraud receives broad coverage these days, the case highlights that sloppiness in dealing with physical instruments such as cheques can also cause serious financial and reputational loss.