Axis Bank Faces Major Penalty for 2016 Demonetisation Cash Refusal
In a landmark ruling, the National Consumer Disputes Redressal Commission has ordered Axis Bank to pay Rs 3.2 crore with 6% annual interest to a Delhi-based company, Procure Logistics Services Private Limited. This decision comes after the bank refused to accept a cash deposit of Rs 3.2 crore during the critical demonetisation period in 2016, rendering the company's cash holdings "worthless paper" when the government's deadline passed.
Bank's Defense Rejected by Consumer Commission
Axis Bank had defended its refusal by claiming the deposit was suspicious. However, the commission, comprising members J Rajendra and A K Mendiratta, strongly rejected this argument. The bench stated that the bank unilaterally labeled the complainant as a high-risk account without proper justification. This action violated both government policies and Reserve Bank of India (RBI) notifications issued during demonetisation.
The commission emphasized: "Even assuming that the OP Bank entertained any doubt or suspicion, the lawful course open to it was to accept the deposits, bring the funds within the formal banking channel and thereafter facilitate post-transaction reporting and investigation by the designated authorities."
Details of the Case and Company's Efforts
Procure Logistics Services Private Limited had successfully deposited bank notes worth Rs 1.3 crore on various dates during the demonetisation period. However, the bank subsequently barred the company from making further deposits, leaving it with Rs 3.2 crore in unaccepted notes. The commission noted that the company had disclosed its cash-in-hand availability as reflected in audited accounts and furnished balance sheets to bank officials, repeatedly seeking to deposit the amounts.
The order highlighted: "Correspondence shows that during the notified time window, the complainant had disclosed the availability of cash-in-hand with the firm as reflected in its audited accounts, furnished audited balance sheets of the preceding years to the officials of OP Bank and repeatedly sought to deposit the amounts. Evidently, this refusal was not based on any specific RBI or Govt Notifications, or any communicated deficiency in KYC or other statutory/procedural non-compliance."
Commission's Ruling on Compensation
The commission ruled that the bank's refusal caused an "irreversible loss" to the company. It stated: "This deprivation was not the result of any adjudication by a competent authority but flowed solely from the unilateral action of the Bank, despite the complainant's readiness and willingness to comply with all regulatory requirements. In view of the above, the bank is liable to compensate for the loss it caused to the complainant to the extent of the specified bank notes worth Rs.3,19,58,500."
The order mandates Axis Bank to pay the principal amount of Rs 3,19,58,500 along with 6% interest per annum from November 11, 2016, until the date of payment. This case underscores the importance of banks adhering to regulatory frameworks during financial crises and highlights the legal recourse available to consumers when institutions fail to comply.
