The Jammu & Kashmir State Consumer Disputes Redressal Commission ruled against Jammu & Kashmir Bank for wrongly transferring the maturity amount of Fixed Deposit Receipts (FDRs) to a third-party account without proper permission. The Commission stated that the bank failed to follow banking rules and was guilty of deficiency in service.
The Commission consisted of President (O) Smt. Nighat Sultana and Member Sh. Maheep Gupta.
Case Background
S.C. Associates, Engineers & Contractors had invested ₹12.25 lakh in two Fixed Deposit Receipts (FDRs) at the Gujjar Mandi Branch of Jammu & Kashmir Bank in Rajouri. The FDRs matured on 16 September 2007, and their total maturity value became ₹13,76,917.
When the company approached the bank in May 2008 to receive the maturity amount, it was informed that the entire amount had already been credited to the account of another company, M/s Fazal Rehman Dar & Sons Construction Corporation.
The complainant said it had never given any permission or written instruction to transfer the FDR money to any third party.
Allegations Against the Bank
The complainant claimed that the bank relied on a forged authorisation letter and endorsements on certain cheques to justify the transfer. It argued that the bank violated normal banking procedures by releasing the maturity amount without obtaining a valid mandate from the FDR holder.
Because of this, the complainant suffered financial loss and filed a complaint before the Consumer Commission seeking the FDR amount, interest, compensation, litigation costs, and other relief.
Bank’s Defence
Jammu & Kashmir Bank argued that the FDRs had been created using funds provided by M/s Fazal Rehman Dar & Sons Construction Corporation. According to the bank, the complainant had authorised the transfer through a letter dated 16 June 2005 and endorsements made on certain cheques. Based on these documents, the bank credited the maturity amount to the third party after the related bank guarantees expired.
The bank also stated that the Banking Ombudsman had earlier upheld its actions and therefore there was no deficiency in service.
Third Party’s Arguments
M/s Fazal Rehman Dar & Sons Construction Corporation argued that the complaint should not be heard by the Consumer Commission because the banking services were used for a commercial purpose. It also claimed that the dispute involved allegations of forgery, which required detailed evidence and should be decided by a civil court instead of a consumer forum.
Commission’s Findings
The Commission first held that the complaint was maintainable under the Jammu & Kashmir Consumer Protection Act, 1987. It noted that this law did not exclude complaints relating to services used for commercial purposes. The Commission also rejected the argument that the matter was too complex to be decided by a Consumer Commission.
While examining the evidence, the Commission found that the bank did not have a valid mandate from the complainant to transfer the FDR maturity amount to a third party.
The Commission observed that once an FDR is issued in a person’s or company’s name, that person or company becomes the legal owner of the deposit, regardless of who originally provided the money. Therefore, the maturity amount can only be transferred to another account if there is a valid authorisation from the FDR holder.
The Commission relied on the report of the Government Forensic Laboratory, which concluded that the authorisation letter dated 16 June 2005 was forged. Since the letter was forged, it could not legally authorise the bank to transfer the FDR proceeds.
As a result, the Commission held that Jammu & Kashmir Bank had violated established banking norms and was guilty of deficiency in service.
Final Order
The Consumer Commission allowed the complaint and directed Jammu & Kashmir Bank to pay a total of ₹34,02,629 to the complainant. This amount included the FDR maturity value, compensation for financial loss and lost opportunities, and litigation expenses.
The Commission ordered the bank to make the payment within 30 days. If the bank fails to pay within the specified period, the amount will carry interest at the rate of 8% per annum until the payment is made.
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