Customer wins fight against erring bank

Subject: Standard Chartered Bank makes customer pay for its own negligence. Customer wins case after 10-year battle.
Backdrop: In this case, the bank siphoned off its customer’s money to cover up the negligence of its own officials.
Case Study 1: Hutoxi Tata had a ‘FAST’ (Finance Against Securities in Time) account with Standard Chartered. In this type of account, shares owned by the accountholder are placed with the bank against which overdraft facility is granted up to a certain percentage calculated according to the market value of the investments.
In April 2000, Hutoxi found an unexplained debit entry of Rs 1,35,525.She wrote to the bank to reverse this entry, but no action was taken. Enquiries with the bank and Tata Consultancy Services (TCS), who were the share transfer agents at that time, revealed that in June 1998, she had instructed the bank to sell 100 DEIL shares. The sale proceeds were credited to her account.
When an application for share transfer is made by the bank on behalf of its customer, it has to be accompanied by two powers of attorney – one from the customer in favour of the bank, and the other from the bank empowering a particular officer to sign on its behalf. In Hutoxi’s case, the bank had lodged only one power of attorney, empowering its officer Anil Kaul to sign on its behalf. The other power of attorney from the customer to the bank was not lodged with TCS. So, TCS rejected the transfer application.
TCS had a number coding system for listing the reason for rejection. Inadvertently, the wrong code was keyed in, so an incorrect reason was given to the purchaser. Once the matter was sorted out, TCS generated a fresh rejection letter in which the correct reason was stated. Though this letter was sent to the Standard Chartered Bank, the bank failed to submit the requisite power of attorney. The frustrated purchaser then approached the Bombay Stock Exchange for auction of shares. During the intervening period, the share prices had considerably risen. At the time of auction, the value of 100 DEIL shares was Rs 1,35,525, which was recovered from the bank. The bank debited Hutoxi’s account on March 29, 2000, without her knowledge. Then, in a bid to cover up its negligence, the bank lodged the other power of attorney with TCS on April 7, 2000.
Following the debit, Hutoxi was charged penal interest at 18.9% compounded on a daily basis, though the agreement provided that interest would be compounded on quarterly basis. The bank thus enriched itself by recovering interest from Hutoxi for its own negligence. Hutoxi filed a complaint before the South Mumbai District Consumer Forum. TCS filed its reply, blaming the bank for negligence of not filing both the powers. The bank blamed TCS for the initial mistake of generating a wrong reason for refusal to transfer. It also blamed Hutoxi for contributory negligence. The bank said it had lodged both powers of attorney, suppressing that one was lodged after the auction of shares to cover up its own negligence.
S B Dhumal, forum president, indicted Standard Chartered Bank of deficiency in service. The forum ordered a refund of Rs 1,35,525 and reversal of all charges of penalty and interest. The bank and TCS were individually ordered to pay Hutoxi a compensation of Rs 10,000 and costs of Rs 2,000 [Order dated 3.8.2011 in Complaint No. 61 of 2001].
Impact: Banks should not create false documentary evidence to cover up their faults.
(The author is a consumer activist and has won the Govt. of India's National Youth Award for Consumer Protection. His email is jehangir_gai@indiatimes.com)