Bank liable if an employee dupes customers

When a bank employee colludes with a dealer or service provider, resulting in consumers getting duped, the aggrieved customers can take the bank to task under the Consumer Protection Act.

When Khushal Rambhia wanted to purchase a car he approached Diwakar Shetty, proprietor of Hello India Motors, to arrange a loan for him. Shetty took him to the Shamrao Vithal Co op. Bank to obtain the loan. Shetty was a member of the bank and Khushal was told by a bank official that he too would have to become a member and pay the margin money to Hello India Motors for the loan to be sanctioned. Accordingly, Khushal enrolled for the bank’s membership and paid Rs. 53,095 as margin money. The bank instantly sanctioned a loan of Rs. 2 lakh and paid this amount directly to Hello India Motors.

The vehicle was supposed to be delivered within three months, but this did not happen. Meanwhile, the bank started collecting the EMIs. Khushal started paying the instalments but stopped as the vehicle was not delivered to him.

Khushal filed a complaint before the District Forum, Mumbai. He alleged that the bank was responsible for inducing him to pay the margin money to Hello India Motors and that the collusion between Shetty and the bank was clearly evident as the loan had been disbursed on the very same day.

The Forum directed the bank to repay the margin money and refund the EMIs collected, totalling Rs. 82,726. The bank appealed to the Maharashtra State Commission.

In its order dated 25 August 2014, the Commission said the bank’s role was not as innocuous as it tried to project, since it had advanced loans to several people brought by Shetty. Besides, the bank had also obtained a mortgage of Shetty’s house to cover the loans sanctioned and could recover its money that way. It dismissed the bank’s appeal and also directed it to pay costs of Rs. 20,000 to Khushal.

Source: The column ‘Consumer As King’ by Jehangir B. Gai in The Times of India
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