Complaints Involving Allegations Of Fraud Are Outside Consumer Forum's Jurisdiction: Delhi State Commission

Brief Facts:

The Complainants experienced deficiencies in banking services provided by Kotak Mahindra Bank. They reported that their account was subject to unauthorized deductions totaling Rs. 1,20,000/-. This amount was deducted during a period when the Complainants were asked to update their Know Your Customer (KYC) details. Despite their immediate complaint to the bank, further transactions occurred which eventually led to the total loss of Rs. 1,20,000/-. The bank did not take timely action to freeze the account or provide necessary details about the transactions. Feeling aggrieved, the Complainants filed a consumer complaint in the District Consumer Disputes Redressal Commission, Central Delhi (“District Commission”) against the bank.

The bank argued that there was no negligence on its part. It claimed that the Complainants were careless by sharing their account details and passwords with unknown individuals. It also argued that it requested fund recall from other banks and payment platforms.

The District Commission held that the bank failed to adequately secure the Complainants' funds and didn't provide necessary information or timely action to prevent the fraudulent transactions. Consequently, the District Commission allowed the complaint and ordered the bank to refund Rs. 1,20,000/- with interest and pay Rs. 20,000/- in compensation along with litigation costs of Rs. 5,000/-.

Feeling aggrieved, the bank challenged the decision of the District Commission in the State Consumer Disputes Redressal Commission, Delhi (“State Commission”).

Observations by the State Commission:

The State Commission referred to the decision of the NCDRC in Capital Charitable and Education Society Vs. Axis Bank Limited [Consumer case no. 269/2017], where it was held that cases involving allegations of fraud and forgery fall outside the jurisdiction of consumer forums due to their summary nature. It noted that such matters are unsuitable for resolution through consumer protection proceedings which are designed for quicker adjudication and do not accommodate the complexity of fraud and forgery cases.

The State Commission held that the consumer fora, which operate under a summary procedure, are not equipped to handle such complex cases that require detailed scrutiny and comprehensive evidence. It noted that the complaint involved a fundamental issue of fraud. Further, it noted that substantial evidence was presented which requires a thorough examination and cannot be properly adjudicated under the summary procedure of the Consumer Protection Act, 1986. Therefore, the decision of the District Commission was set aside.

Case Title: Kotak Mahindra Bank Ltd. vs Mrs. Pramila Bhatia and Anr.

Case No.: FA No. 692/2023

Date of Decision: 25.07.2024