Overturning an order of the Maharashtra State Consumer Disputes Redressal Commission, the National Consumer Disputes Redressal Commission (NCDRC) last week termed the refusal of HDFC Bank to hand over cash to a bearer of a cheque, after verifying his credentials through the account holder, as “a clear case of deficiency in service”.

The order from NCDRC, issued on 15 March 2017, states, “No doubt the complainant had not furnished his ID, but the fact remains that admittedly not only the cashier but also the Bank Manager separately rang up the account holder on his mobile number, who verified having issued the subject cheque and gave clearance for encashment. The bank officials, however, declined to encash the cheque. This, in our view, is a clear deficiency in service.”

The order relates to a consumer complaint filed by Mumbai resident Prakash Sheth against HDFC Bank. Sheth required Rs3 lakh to be deposited in the hospital for treatment of his ailing mother, in 2010. He requested his nephew, Chirag, for the money. Chirag gave a bearer cheque to Sheth, who then presented the bearer cheque on 7 May 2010 at HDFC Bank. The cashier in the bank asked him to come back at 4pm because of insufficiency of funds. When he returned at 4pm, the cashier asked for his photo ID, which Sheth was not carrying. The cashier then called up Chirag to seek verification of issuance of the bearer cheque. Chirag confirmed it, but the cashier refused to honour the cheque and Sheth was asked to meet the branch manager. The branch manager too checked with Chirag to confirm that he indeed had issued the cheque. Despite that, the manger insisted that Chirag should personally come to the bank, which the latter was unable to. The branch manager then refused to honour the cheque.

Claiming this to be deficiency in customer service, Sheth filed a complaint in the Consumer Forum at South Mumbai District, seeking compensation to the tune of Rs1 lakh towards mental agony and physical harassment. Sheth also appealed for a directive to the bank to stop this practice. The bank was served a notice, but it claimed that it had rightly not honoured the cheque as per guidelines from the Reserve Bank of India (RBI). The District Forum therefore dismissed the complaint. Subsequently, the Maharashtra State Commission too dismissed Sheth’s petition, stating that the bank had rightfully adhered to RBI guidelines.

As per RBI guidelines, banks have been advised that “in case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs50,000, whether conducted as a single transaction or several transactions that appear to be connected, the customer’s identity and address should be verified”.

However, Sheth’s contention was that two officials of HDFC Bank had personally cross-checked with the account holder, which proved that it was a clear case of harassment.

In this case, while the State Commission dismissed Sheth’s petition, it upheld that although Sheth was not an account holder of HDFC Bank, he still was a consumer. The Commission observed “…the consumer is not only the person who hires or avails the services of the service provider but the beneficiary also. It is argued that once the account holder had issued a cheque in favour of someone, he automatically becomes the beneficiary and therefore he is a consumer”.

Sheth then approached the National Commission. In its order on 15 March 2017, the Commission stated “…from the affidavits of Chirag Natvarlal Sheth and Prakash Sheth (the complainant), it is amply proved that the bank telephonically contacted Chirag Sheth twice to verify whether or not he has given bearer cheque to the complainant and the account holder Chirag Sheth confirmed the said fact. From the above, it is clear that the bank officials were categorically informed by the account holder that he had issued the cheque and given it to Prakash Sheth. Therefore, he, in our view, was the beneficiary of the cheque and as such he is covered under the definition of consumer, which includes the beneficiary of the service hired or availed. Thus, the complaint is maintained.”

The NCDRC also pointed out that in response to an application under Right to Information (RTI) filed by the bank, a part of the response clearly states that, “the bank should not ordinarily insist on the presence of account holder for making cash withdrawals in case of ‘self’ or ‘bearer’ cheques unless the circumstances so warrant. The banks should pay self or bearer cheques taking usual precautions.”

“From this it is evident that Reserve Bank has cautioned banks in the country to be careful while encashing the bearer cheques if the amount exceeds Rs50,000 and insist on the verification of ID, as also the address. No doubt, the complainant had not furnished his ID, but the fact remains that admittedly not only the cashier but also the bank manager separately rang up the account holder on his mobile number, who verified having issued the subject cheque and gave clearance for encashment. The bank officials, however, declined to encash the cheque. This, in our view, is a clear deficiency in service.”

Another rule from RBI states, “In the event the individual tendering the instrument is not carrying the identity, and there is urgency to pay, the transaction to be referred to the branch manager. The branch manager shall make appropriate enquiries as deemed fit and shall use his discretion to allow the transaction. Such discretion to be used judiciously as strict one- off cases, only upon satisfactory confirmation of the bonafides of the transactions.”

The National Commission declared HDFC Bank’s stance in not honouring Sheth’s cheque as ‘deficiency of service’ and asked it to pay compensation of Rs10,000 to him for harassment and humiliation.

Prakash Sheth says, “Most banks harass such non-account holders who come with bearer cheques. Mine was perhaps the first challenge before a legal forum. This case will spread literacy amongst consumers or bearer cheque holders, and will hopefully be a lesson to similar banks who adopt this malpractice.”