ABN Amro penalised for faulty payment

19 November 2007

ABN Amro Bank has been taken to court for making a payment to an individual against a drop box cheque drawn in favour of a "Hindu undivided family with diverse business interests", the Times of India reports.

The court has ordered ABN Amro to credit $5,784 to Bhogilal Mehta Associates' account, plus interest at eight per cent for 42 months, as well as having to pay court costs following the mistake.

Toolsidas Jewraj drew a cheque for $5,784 in favour of Bhogilal Mehta Associates, using a drop box at the bank's Brabourne Road branch. However, Bhogilal Mehta later realised the money had not been paid.

ABN Amro Bank argued that the cheque was uncrossed, so was considered a bearer cheque and cashed in that way.

Bhogilal Mehta told the newspaper: "The bank's argument was unacceptable on several counts. The cheque was drawn in favour of a Hindu undivided family, and not against an individual. The bank did not cross-check with the deposit-holder while making a payment of over $5,000."

"Generally, banks in India make enquiries before paying a large value cheque across the counter. The bank failed to exercise this caution. It is a deficiency in service," the consumer court decided, while confirming professional negligence and ordering ABN Amro to pay compensation.

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