President directs private bank to refund Rs200,000 to bank fraud victim

President Dr Arif Alvi on Sunday upheld a decision of the Banking Mohtasib (BM) and directed the Silk Bank Ltd (SBL) to refund Rs 200,000 to a victim of bank fraud along with the remaining profit till the date the amount is credited to his bank account.

The president said the private bank had committed maladministration by failing to appoint honest officials at its bank branch and unjustly withholding the profit amount.

Alvi gave these directions while rejecting a representation of Silk Bank against the BM's decision in a case where the complainant Muhammad Shafiq, a citizen of Multan, had invested Rs 200,000 in Term Deposit Receipt (TDR) with the bank.

However, he was only paid profit for six months and when he went to withdraw the remaining profit from his account, he was informed that his TDR was fake and he had been "hoodwinked" by the ex-branch operations manager.

The president in his decision held that the complainant had produced the original TDR which bore the bank’s logo, duly stamped and signed by the ex-branch operations manager.

He said the bank was "responsible for any document signed by its employee on purportedly the bank’s stationery with a stamp of the bank".

He added that there was "no litmus test" for the general public to differentiate between the original and fake stationery of the bank.

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President Alvi held that the bank’s contention that profit amounts of six months were credited to the complainant’s account through fund transfers from multiple accounts of the customers and not from the bank’s payable account as normally done, carried no weight as a customer was usually satisfied when monthly profit was credited in his account.

He remarked that it was not the duty of the customer to scrutinise the records and internal processes of a bank and to ascertain whether profit was credited to his account by the bank by routing through the bank’s books.

The president said that the bank was "shifting responsibility to the complainant" in order to cover its own internal lapses. He observed that the bank had admitted that the ex-branch manager had signed the said TDR and had committed fraud, and had been terminated from the bank’s service in a fraud case.

He added that it was a well-settled principle of “vicarious liability” that an employer is liable for the loss caused to a customer through the wrongful act of his employee in the course of the employer’s business.

Alvi concluded that the appointment of vigilant bank officials and honest and professional staff was the responsibility of the bank and not of the complainant, who had posed his trust in the bank.

He added that the bank was the custodian and trustee of the hard-earned money of the account holder. “The bank official was there in the bank duly posted by the management, and there was unimpeachable evidence of the commission of fraud by the bank official in the bank branch,” he stated.

The president, therefore, rejected the bank’s representation as the bank could not escape liability in such a case when the commission of fraud was established and admitted.

“It is a case of wrongdoing and maladministration by the bank officials. The bank is, therefore, responsible to make good the loss of the complainant without further delay,” Alvi added.