When there is a dispute between a consumer and a financial institution, it becomes difficult to quantify the loss, since interest, delayed payment charges and penalties keep changing. And, there is a considerable time lag between the date of the dispute and the decision on the complaint. In such a case, the only remedy is to correct the disputed entry and make the consequential changes. This is what the consumer court ordered Standard Chartered Bank to do in a 13-year-old dispute.
Hutokshi Tata had a 'Finance Against Securities in Time' account with the foreign bank. This account entitled Hutokshi to get an overdraft facility against shares and securities deposited with the bank. The overdraft limit is a percentage of the value of the shares deposited and fluctuates according to the stock market.
When Hutokshi got her bank account statement, she noticed an unexplained debit entry of Rs 1.35 lakh, made without her knowledge/consent and without even any intimation. This debit resulted in her account going into overdraft mode, attracting heavy interest.
Hutokshi made enquiries but the bank was unable to give a proper response. Later, the bank clarified that it was a payment made to a share broker under instructions from its collection manager. As this did not make any sense, Hutokshi's husband took up the issue with the bank. It ultimately turned out that about two years ago, certain shares had been sold under the instructions of Hutokshi. To enable the purchaser to get these shares transferred to his name, the bank was required to send the transfer application with two powers of attorney (PoA) - one from Hutokshi in favour of the bank, and the other from the bank in favour of its official appointed as the authorised signatory.
When the purchaser tried to get the shares transferred to his name, the transfer was rejected. To complicate matters, the reason for rejection was not properly communicated by the share transfer agents who made an error in punching the correct data code. After this mistake was corrected, it was found the shares could not be transferred because the transfer application was not accompanied by the PoA given by Hutokshi in favour of the bank. Though the bank was asked to rectify its mistake, it ignored the letter. Ultimately, purchaser had these shares auctioned by the stock exchange. When the auction took place, the rate was much higher and the bank was asked to pay the auction price of Rs 1.35 lakh. The bank, in turn, surreptitiously debited Hutokshi's account to make this payment. To cover its own lapse, the bank filed Hutokshi's PoA a day after the shares were auctioned.
Hutokshi requested for a reversal of the debit, which had occurred due to the bank's negligence in sending the transfer form along with only one PA and omitting to send the PoA given by Hutokshi to the bank. The bank tried to pass the buck to the share transfer agent for punching the wrong rejection code. Hutokshi's pleas fell on deaf ears, and the bank started capitalising on its own negligence by imposing penalty and interest at 18.9 per cent, compounded on a daily basis. Consequently, the debit balance kept increasing rapidly. To recover its dues, the bank sold all Hutokshi's shares, but claimed dues were still outstanding, and recovered money from her husband's account.
Hutokshi filed a complaint before the district forum. After a 10-year struggle, the forum upheld the complaint and directed the bank to re-credit Rs 1.35 lakh and make the consequential corrections to rectify the interest wrongly charged. The forum also awarded a compensation of Rs 10,000 and Rs 2,000 as costs.
The bank appealed to the Maharashtra State Commission. By an order dated March 10, the Commission observed the bank could not take advantage of an error committed by the share transfer agent for punching the wrong rejection code when this mistake had subsequently been corrected. The Commission held the bank was responsible for causing loss by failing to lodge the PoA. The order of the district forum was upheld and the bank's appeal dismissed.
This order will help consumers redress their grievance when a wrong entry results in serious losses over a period of time which one cannot quantify.
The author is a consumer activist
