Bank of Maharashtra ordered to pay ₹54 crore to PHFI | Mumbai news - Hindustan Times

Bank of Maharashtra ordered to pay 54 crore to PHFI

Jul 07, 2024 06:28 AM IST

Eleven years after ₹27 crore of the Public Health Foundation of India (PHFI) was misappropriated, the Bank of Maharashtra has been directed by the National Consumer Disputes Redressal Commission (NCDRC) to pay nearly double the amount to the non-profit organization

Mumbai: Eleven years after 27 crore of the Public Health Foundation of India (PHFI) was misappropriated, the Bank of Maharashtra has been directed by the National Consumer Disputes Redressal Commission (NCDRC) to pay nearly double the amount to the non-profit organization. The public sector bank must refund PHFI 27 crore along with interest at the rate of 9% per annum, amounting to approximately 54 crore after 11 years.

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HT Image

PHFI filed a complaint with the NCDRC in 2016, detailing that in 2013, Devendra Bhogale, claiming to be a manager with the Bank of Maharashtra, solicited fixed deposits from them. The complainant transferred 27 crore in four tranches to a “Non-Customer Inter Branch Fund Transfer Account” of the bank in September and October 2013, with instructions to keep the amounts in fixed deposits.

In April 2014, an amount of 17.85 lakh was paid to the complainant by a Demand Draft, ostensibly towards interest and the said manager Bhogale even renewed one of the fixed deposit receipts of 4 crore after it matured the same year. In the meanwhile, the Economic Offences Wing (EOW) of the Mumbai police got wind of some fraudulent transactions and siphoning of funds from Bank of Maharashtra and informed the complainant to be alert.

When the complainant’s authorized representative applied to the bank to check the balance in the fixed deposit accounts, the bank denied the information stating the signature on the plea did not match with the signatures on the account opening form. The complainant was then told that their fixed deposit receipts were fabricated.

The complainant body wrote to the bank on July 12, 2014, requesting the bank to close the fixed deposits and remit the amount of 27 crore along with accrued interest to its bank account.

A fortnight later, the complainant organisation approached the EOW and the CBI with a complaint, but eventually on October 31, 2015, the bank refused to remit the amounts, stating that it was not liable to do so, prompting PHFI to approach the NCDRC, through Karanjwala and Company.

Before the national commission, the bank took a stand that the complainant was responsible for the loss, as they transacted with Bhogale and other purported frauds with whom the bank had no concern. The bank further claimed that none of their employees were involved in the misappropriation of the complainant’s funds and there was no negligence nor was there any material to establish any attributable fault on the part of the bank in siphoning of the funds.

Counsel for the complainant, however, pointed out how an internal inquiry report of the bank itself exposed several lapses on the part of bank officials. It revealed that the current account to which funds were transferred by the complainant body was a “fraud account” which was opened by the frauds in the name of PHFI and the bank had allowed to open the account without checking original documents.

NCDRC president AP Sahi accepted the argument after noticing that the internal inquiry report categorically stated that the documents were not verified, the current account opening form was not signed by the authorised official, the name of the operator and the signature of the person who had opened the account was not available in the account opening form.

The Commission also noted that transactions of a huge amount of around 145 crore had taken place from the account and none of those transactions were known to or authorised by PHFI thus, the glaring loopholes “pointed towards deficiency and negligence on the part of the Bank in allowing the opening of a fake current account and then its operations in a dubious manner.”

The Commission further noticed that the bank had nowhere disputed the receipt of 27 crore from the complainant and therefore the bank was deficient in not verifying the customer identity and information from the complainants before allowing the opening of the fraud account and huge transactions from it and therefore clearly liable for the acts and omissions of its employees directly as well as vicariously.

“The misappropriation and embezzlement is only a consequence of this deficient functioning of the Bank,” it said while holding the bank liable to refund the amount with interest. It has directed the bank to refund the amount of 27 crore along with interest at the rate of 9% per annum from September 2013 to PHFI in two months.

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