Bombay High Court on Bank’s Negligence and Fraudulent Withdrawal from Joint Account of Illiterate Widow.

The Bombay High Court set aside the order of the National Consumer Disputes Redressal Commission (NCDRC) and restored the ruling of the State Consumer Disputes Redressal Commission, Maharashtra, which had directed the Central Bank of India to refund ₹25,28,515 with 9% interest to an illiterate widow whose compensation amount was fraudulently withdrawn by her relative in connivance with bank officials. The Court held that the Bank’s conduct amounted to gross negligence and violation of RBI and Indian Banks’ Association (IBA) guidelines, particularly as operation by cheque and “Either or Survivor” facility is impermissible in joint accounts involving illiterate persons.

1. The petitioner, an illiterate widow, received USD 55,000 (₹25,28,515) as compensation from her deceased husband’s employer in China. She approached the Central Bank of India, Wadala Branch, to open an individual savings account.
2. Her relative, Respondent No.3, fraudulently added her as a joint holder in his pre-existing account with “Either or Survivor” operation, without witness or proper authorization.
3. Believing the joint account to be hers, the petitioner deposited the cheque and returned to her village, during which Respondent No.3 withdrew the entire amount using cheques and withdrawal slips.
4. Respondent No.3 was later convicted under Sections 406, 420, 467, 468, and 471 IPC. The State Commission held the Bank and others liable and directed refund with 6% interest and compensation of ₹2 lakh.
5. The NCDRC set aside the State Commission’s order in 2022, prompting the petitioner to approach the High Court.

1. The Court found that the Bank acted negligently in allowing an “Either or Survivor” facility in a joint account involving an illiterate person, violating RBI and IBA operational norms.
2. It held that the Bank’s defense—claiming the petitioner’s consent and familiarity with the account operation—was untenable, given her illiteracy and the fraudulent circumstances.
3. The National Commission had failed to appreciate the factual findings of fraud and procedural lapses established by the State Commission.
4. The Court observed that the Bank’s conduct facilitated the fraudulent withdrawal, constituting deficiency in service and unfair trade practice.
5. The High Court enhanced the interest rate to 9% per annum to adequately compensate the petitioner for the long delay and distress caused.

1. Sections 406, 420, 467, 468 & 471, Indian Penal Code, 1860 – Criminal breach of trust, cheating, and forgery.
2. Consumer Protection Act, 1986 – Jurisdiction and powers of State and National Commissions.
3. RBI & Indian Banks’ Association Guidelines – Restrictions on operation of joint accounts involving illiterate persons and mandatory KYC norms.
4. Article 226, Constitution of India – Power of High Courts to issue writs for enforcement of legal rights.

The Bombay High Court allowed the writ petition, quashed the NCDRC’s orders dated 03.01.2022 and 12.04.2022, and restored the State Commission’s order dated 14.09.2016 with modification—enhancing the interest rate from 6% to 9% per annum. The Court directed the Central Bank of India to refund the entire amount with interest and compensation to the petitioner within a stipulated period.

Citation: 2025:BHC-AS:44970

Case: Buniya Devi Chauhan through Power of Attorney Holder Dharmendra Shambhunath Chauhan v. The General Manager, Central Bank of India & Ors.

Court: High Court of Judicature at Bombay

Coram: Justice Milind N. Jadhav

Writ Petition No.: 9743 of 2024