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Judgment
The Complaint has been filed by a Cooperative Bank for the relief that the Respondent IDBI Bank is jointly and severally responsible and liable for an alleged fraudulent and illegal transfer of Rs.14,46,05,347/- in the current bank account of the Complainant with the IDBI Bank, and therefore this deficiency in service and unfair trade practice needs to be remedied and the loss deserves to be compensated. Damages and costs have also been prayed for.
It appears that when the matter was entertained, on one of the dates, a query was raised vide order dated 11.04.2023 that the relief prayed for at Page 27 of the Paper Book could not be correlated with the Parties. The Amendment Application was accordingly filed and it was taken on record vide order dated 18.07.2023 but on that date the Bench again called upon the learned Counsel to file an affidavit showing as to in what manner does the Complainant fall within the definition of a “Consumer” to maintain this Complaint.
An affidavit has been filed dated 28.07.2023 bringing on record the RBI Circular dated 01.07.2010 and the Application on which the Settlement Accounts procedure for the purpose of Central Payment System Sub-membership was requested. Learned Counsel for the Complainant relied on the definition of the word ‘Customer’ in the Circular of Reserve Bank of India referred to above to urge that there was a business relationship associated for the ultimate benefit of protecting the interests of it’s customers. An account was maintained with the Opposite Party by the Complainant under the aforesaid arrangement that had to be necessarily made for the purpose of routing all transactions in order to maintain standards for combating financial frauds.
The said definition relied on as contained in Clause 1.2 of the RBI Circular is extracted here as under:
1.2 Definition of Customer
For the purpose of KYC policy, a ‘Customer’ is defined as:
· A person or entity that maintains an account and/or has a business relationship with the bank;
· One on whose behalf the account is maintained (i.e. the beneficial owner). [Ref: Government of India Notification dated February 12, 2010 – Rule 9, sub-rule (1A) of PMLA Rules – ‘Beneficial Owner’ means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercise ultimate effective control over a juridical person]
· Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc. as permitted under the law, and
· Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.
Learned counsel then invited the attention of the Bench to the table of contents which is at Page 53 indicating the heads under which the transactions have to be understood under the Settlement Sub-membership RTGS system. The heads are extracted here as under:
Chapter No.
Chapter
Page
Chapter – 1
Scope and Objective
1
Chapter – 2
Definition of Terminology
2
Chapter – 3
Management of the RTGS System
4
Chapter – 4
Membership
6
Chapter – 5
RTGS Transaction Typed and Message Formats
9
Chapter – 6
Components, Communication and Settlement
10
Chapter – 7
RTGS Business Day and Operating Sessions
12
Chapter – 8
Intra-day Liquidity (IDL) Facility
15
Chapter – 9
Other Features of RTGS System
17
Chapter – 10
Rights of Members / Participants
18
Chapter – 11
Customer Transactions – Obligations and Rights of Members / Participants
19
Chapter – 12
MNSB Settlement and Clearing House Particiants
21
Chapter – 13
Obligations and Duties of Members / Participants
23
Chapter – 14
Sub-Membership in RTGS System
25
Chapter – 15
Dispute Resolution and Miscellaneous
27
Chapter – 16
Disclosures
28
Annex – 1
Transaction Type, Message Formats and Major Rules
29
Annex – 2
Channel Codes for UTR / Transaction identifications
30
Annex – 3
Codes on Message Validation (rtgS)
31
Annex – 4
List of TTC Values and Priority for RTGS System
32
Annex – 5
Cut-off Times in the RTGS System at RBI
33
Annex – 6
RTGS threshold Value and Maximum Service Charges for Customers
34
Annex – 7
RTGS Service Charges for Members
35
Learned counsel for the complainant then invited the attention of the Bench to the agreement dated 02.07.2020 entered into between the Complainant and the Opposite Party described as Agreement for Sub-Membership In Payment And Settlement Systems.
This agreement, learned Counsel submits, was to facilitate all banking transactions through IDBI which are automatically generated through the RTGS system to secure the interests of the customers of the Complainant Bank and prevent any fraud from happening.
The agreement has been read in detail to contend that it was meant for handling transactions without any profit or any commercial enhancement of the business of the Complainant, hence the services are neither for any commercial purpose or any other purpose so as to exclude the jurisdiction of this Commission. Learned Counsel invited the attention of the Bench to the heading of the purpose of agreement and then to Clause 4 and thereafter to Clause 7 G, H and M along with other sub-paragraphs to urge that this was an arrangement for streamlining the financial transactions and at the same time securing the interest of the customers of the Complainant Bank, hence any loss or damage suffered on account of misappropriation or faulty transaction in the account maintained by the Complainant Bank with the IDBI Bank amounts to a service as understood under the Consumer Protection Act, 1986 and which is neither a commercial or a private transaction but is rather governed by the circulars of the Reserve Bank of India.
In such a situation the services rendered for maintaining the account and transacting business through it by the Opposite Party cannot be in any way construed to denude the complainant of its status as a Consumer. It is therefore submitted that the complaint should be entertained treating the Complainant to be a Consumer within the Consumer Protection Act, 2019.
Having considered the submissions raised and having perused the definition of the word ‘Consumer’ and ‘Service’ as contained in Section 2 (7) read with the definition of the word ‘Consumer Rights’ contained in Section 2(9) and the meaning of the word ‘Service’ used in Section 2(42), it is evident that the word service is widely understood to mean as follows:
Definitions.—In this Act, unless the context otherwise requires –
(7) “consumer" means any person who—
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for 6 consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.
(9) "consumer rights" includes
(i) the right to be protected against the marketing of goods, products or services which are hazardous to life and property;
(ii) the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices;
(iii) the right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices;
(iv) the right to be heard and to be assured that consumer's interests will receive due consideration at appropriate fora;
(v) the right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and
(vi) the right to consumer awareness;
(42) "service" means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, telecom, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;
A perusal thereof indicates that the said service has to be in relation to any consumer and Section 2(7)(ii) read with the explanation has to be taken into consideration which is extracted here as under:
“2. Definitions.—In this Act, unless the context otherwise requires,—
(7) "consumer" means any person who—
(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.
Explanation. —For the purposes of this clause, —
(a) the expression "commercial purpose" does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;
(b) the expressions "buys any goods" and "hires or avails any services" includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing;”
In the light of the aforesaid definitions, what has been urged by the learned Counsel is that, the services of opening of a current bank account availed from the Opposite Party is itself an indicator of the relationship between the Complainant as a consumer and the Opposite Party as a service provider. Learned Counsel relied on the Apex Court judgment in the case of Arun Bhatia Vs HDFC Bank and Ors. reported in IV (2022) CPJ 1 (SC) decided on 08.08.2022 where the judgment in the case of Vodafone Idea Cellular Limited Vs Ajay Kumar Agarwal (2002) 6 SCC 496 was interpreted with a wide meaning rendering of any services except service free of charge contracts of personal service. The parliament has confined the exclusion only to two specified categories. Paragraphs 17, 18 and 19 are extracted here as under:
“17. The expression ‘service has been defined in Section 2(1)(o) of the 1986 Act as follows:
(o) “service” means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;
A Bench of this Court in Vodafone Idea Cellular Limited V. Ajay Kumar Agarwal (of which one of us, Dr. Justice DY Chandrachud, was part) explained that service of every description will fall within the ambit of the definition of ‘services’ under section 2(1)(o) of the 1986 Act. The relevant extract reads as follows:
“12. The definition of the expression “service” is couched in wide terms. The width of statutory language emerges from the manner in which the definition is cast. Parliament has used the expression “service of any description which is made available to potential users”. The definition employs the “means and includes formula”. The means part of the definition incorporates service of “any” description. The inclusive part incorporates services by way of illustration, such as facilities in connection with banking, finance, insurance, transport, processing, supply of electrical and other energy, board or lodging and housing construction. The inclusive part is prefaced by the clarification that the services which are specified are not exhaustive. This is apparent from the expression “but not limited to”. The last part of the definition excludes (i) the rendering of any service free of charge; and (ii) services under a contract of personal service. Parliament has confined the exclusion only to two specified categories. The initial part of the definition however makes it abundantly clear that the expression “service” is defined to mean service f any description. In other words, a service of every description would fall within the ambit of the statutory provision.”
The respondent bank does not dispute that the appellant, along with his father, opened a joint FD with the bank. A person who avails of any service from a bank will fall under the purview of the definition of a ‘consumer’ under the 1986 Act. As a consequence, it would be open to such a consumer to seek recourse to the remedies provided under the 1986 Act.”
Learned Counsel submits that there is a clear deficiency in service on the part of the Opposite Party that has resulted in a huge loss and withdrawals from the current account which was opened with the Opposite Party that directly affects the customers of the Complainant Bank.
The allegation against the opposite party is that the IDBI Bank failed to comply with the rules and regulations of the RTGS System that resulted in a huge financial loss which is a clear negligence and deficiency in service hence the present Complaint deserves to be entertained.
It has also been stated that the Complainant Bank has already lodged an FIR at Wazirabad Police Station Nanded, Maharashtra with information to the Governor of the Reserve Bank of India, Mumbai. The negligence is being attributed to the Opposite Party / Bank alleging that the Respondent has contributed to the fraudulent transactions which are unethical and amounts to an unfair trade practice and, having failed to provide safe and secure banking service to the Complainant, a clear case is made out for indemnification which deserves to be entertained through this complaint.
In order to understand this allegation the nature of the agreement between the Complainant and the Opposite Party needs to be taken into consideration. Learned Counsel referred to some of the Clauses but in the opinion of the Bench the following clauses of the agreement particularly Clause (AA) to (AE), (AH), (AI), (AJ) are extracted here as under for ready reference:
“AA. That the Sub-Member shall be solely responsible for resolving the disputes between the Sub-Member and its customers (including but not limited to disputes arising out of late / delayed payment, collection of instruments, credit of electronic fund receipts, etc.) or any other constituent and the bank shall not be in any manner responsible or liable for the same. The Sub-Member shall be solely responsible for resolving the disputes between the Sub-Member and its customers including disputes on account of mentioning of wrong account number / IFS Code etc. by the Sub-Member and the Bank shall not be in any manner responsible or liable for the same. Further, Sub-Member shall be solely responsible for any wrong credit / debits to the account of Sub-Member / customer and such entries shall be immediately rectified by the Sub-Member, by taking all possible and appropriate methods, as if the Sub-Member is a direct, by taking all possible and appropriate methods, as if the Sub-Member is a direct member of the Clearing House.
AB. That the Sub-Member shall provide dispute management services to its customers as per guidelines provided and standards laid-down by RBI / NPCI and / or any other competent authorities in this regard.
AC. That the Sub-Member shall provide query resolution services to its customers as per the guidelines and regulations issued by RBI / NPCI and / or any other competent authorities in this regard.
AD. That the Sub-Member agrees that the bank shall not be responsible for the loss, if any, that may be caused to the Sub-Member or its customers or any person, arising out of any action taken in good faith by the bank’s staff.
AE. That the Sub-Member agrees that the bank shall be at liberty to review the Sub-Member’s continuance as a Sub-Member of the payment and settlement system / Clearing House every year and if, in the opinion of the bank any action in required on the part of the Sub-Member with regard to the effective functioning of the Payment of Settlement Systems then the decision of the bank in this regard shall be final and binding on the Sub-Member and the Sub-Member shall take such action immediately failing which the Bank may terminate this Agreement.
AH. That the Sub-Member shall ensure that the instruments / data files / transactions submitted are genuine, valid and are eligible under Payment and Settlement System according to the circulars. The Sub-member unconditionally and irrevocably agrees that any instrument / data file / transaction submitted by it through the payment and settlement system shall be binding on it. The Sub-Member shall not repudiate the instrument(s) / data file(s) / transaction(s) subsequently for any reason whatsoever and the Bank may act on such submission / instructions and put through the transactions, at the sole risk and responsibility of the Sub-Member. The Sub-Member will be solely liable for the consequences arising from duplicate messages / transactions. The Sub-Member hereby undertakes that, in case of bank having received any notices(s) from the clearing house or paying bank or collecting bank or any third party, challenging / disputing the payment / collection of the instruments / transactions / data file mentioned therein, it shall, within a period of ….. days, deposit a sum to the extent of the amount of such instrument(s) / transaction(s) with the bank and the said sum shall be under the lien of the bank till resolution of such dispute to the satisfaction of the Bank. Further, in the case of fraud, the Sub-Member shall file suspicious transaction report / cash transaction report with the RBI, in addition to any other steps required to be taken by Sub-Member in this regard.
AI. That, without prejudice to other rights and remedies available to the bank, the Sub-Member hereby agrees to indemnify and keep the bank indemnified against any loss or damage, cost or expenses suffered by the Bank. Whether directly or indirectly arising out of any default, misconduct or negligence on the part of the Sub-Member or any employee, agent, servant or representative of the Sub-Member while performing its roles and responsibilities in connection with the payment and settlement system and shall also keep the bank, its affiliates, subsidiaries, successors, assigns, officers, directors and employees, indemnity at all times, from and against all claims, losses, damages, costs, actions, suits, compensation or expenses or otherwise, if any, that the bank may incur by reason of any action, proceedings which may be brought by or against or taken against the bank by anybody including the customers of Sub-Member for anything of any nature whatsoever. This clause shall survive the termination of the contract for any reason whatsoever.
AJ. That the Sub-Member agrees that the liabilities, responsibilities / obligations, if any, arising out of the use of payment and settlement system under this Agreement for various activities under these system shall rest solely on the Sub-Member.”
It is under the said agreement that the transaction was to function. A perusal of the above clauses therefore absolves the Opposite Party of any liability and on the other hand if any loss is caused to the Opposite Party it is the Complainant Bank which has to indemnify against any such loss or damage. Apart from this in the event of any differences or disputes Clause (av) and (ay) reads as under:
AV. In the event of any differences or disputes arising between the Bank and the Sub-Member under this Agreement, the same shall be mutually discussed and decided between them. In case the differences / disputes is not resolved mutually, then each of the parties have right to approach the competent Court(s) in Mumbai for its resolution.
AY. This Agreement and all assignments undertaken hereunder or in relation thereto or in connection therewith shall be subject to the jurisdiction of the Courts in Mumbai, India. The governing law shall be Indian Law.
Thus the Complainant is not availing of any such services and rather is functioning for facilitating transaction of accounts on the basis of an agreement referred to above. Thus it is a pure contractual arrangement between the Complainant Bank and the IDBI Bank, which also appears to be free of charges.
None of the account holders or their identity has been disclosed nor have they come forward as consumers to stake any claim or register any Complaint. The Complainant does not automatically step into the shoes of its customers so as to become a consumer complaining of deficiency in service by the IDBI Bank. The customers of the Complainant herein are not the customers of IDBI Bank. It is only the facility of digital transfer through the said Bank which has been arranged under the agreement and is only to facilitate financial transactions of the bank.
Thus the nature of the services availed of by the Complainant is not that of the consumer or of a service as understood in terms of the Consumer Protection Act 2019.
Learned Counsel attempted to explain the transaction through a computerized chart indicating the manner in which the RTGS System is operated. This chart does not take things further and therefore the present complaint cannot be entertained without prejudice to the rights of any customer who may fall within the definition of the word consumer to approach the appropriate forum for his grievances.
The present complaint is dismissed only in so far as to the nature of the relief sought that is to be enforced by the Complainant Bank before this forum which is not found to be maintainable. It is open to the Complainant to seek any other remedies that may be available in law.
The complaint is accordingly rejected.