Prior Notice Mandatory For Penalising HUF For Conducting Business Activity Via Savings Account, Ludhiana District Commission Holds SBI Liable

Brief Facts:

Mr. Nirdosh Kumar Singla (“Complainant”) maintained a savings account with the State Bank of India (“SBI”). On June 10, 2019, the SBI allegedly deducted Rs. 7183/- from the Complainant's account without prior approval, labelling it as other miscellaneous services and transferring the amount to another account number. Despite multiple representations seeking clarification on the deduction, SBI remained unresponsive. Subsequently, a legal notice was sent by the Complainant, to which SBI replied falsely, denying knowledge of the debited amount. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission, Ludhiana (“District Commission”) and filed a consumer complaint against SBI.

Upon receiving notice, SBI challenged the complaint on grounds of maintainability, suppression of material facts, and lack of jurisdiction. It argued that the savings account in question belonged to the Complainant as a Hindu Undivided Family (HUF), asserting that such accounts can be opened as per the bank's master circular dated October 3, 2017. It claimed that the Complainant opened the HUF account for business purposes. It argued that business activity in a HUF savings account is not permitted, and any interest wrongly credited is subject to deduction as per banking norms. It maintained that its actions were in accordance with the guidelines of the RBI and the Government of India.

Observations by the District Commission:

The District Commission noted that Clause No.29 of the Master Circular dated 03.10.2017, explicitly stated that savings bank accounts can be opened in the name of HUF, but if the HUF is engaged in any business activity, only a current account will be opened. The District Commission held that the Master Circular did not prescribe any penalty, such as the reversal of benefits or interest, when business activities are detected in a savings account.

Further, the District Commission held that the Complainant disclosed the HUF business at the time of opening the account with the erstwhile State Bank of Patiala, which later merged with the SBI. It held that there was a lack of prior notice to the Complainant before deducting Rs. 7183/- and the absence of an Audit Report provided to him before the deduction. Therefore, the District Commission held SBI liable for deficiency in services, violating principles of equity and natural justice.

Consequently, the District Commission directed the bank to refund the amount of Rs. 7183/- to the Complainant. Additionally, the bank was directed to pay a composite compensation of Rs. 10,000/- to the Complainant.