Seven Banks Penalised in Relationship Manager Fraud Case

Seven banks penalised after relationship manager fraud, IT court orders ₹2.5 crore compensation

Bhopal: An Information Technology court in Madhya Pradesh has ordered seven banks and one finance company to jointly pay ₹2.5 crore in compensation to a family defrauded through a sophisticated banking scam, marking a significant shift in how liability is assigned in cyber-enabled financial fraud cases.

The ruling follows a five-year legal battle that began with the disappearance of crores of rupees from the accounts of a senior citizen family in Bhopal and culminated in a finding that institutional failures - not just individual misconduct - enabled the crime.

Trust-based banking relationship quietly unravelled

The case traces back to Arera Colony in Bhopal, where the late Kedarnath Sharma, a retired engineer, consolidated his family’s finances at a single branch of a private bank after retirement. Accounts were also opened for his wife, Indira Sharma, and daughter, Archana Sharma, who has been living in Dubai for several years.

A relationship manager, Sanjay Thakur, was assigned to the family and gradually became a trusted intermediary. He offered home visits, assisted with paperwork and provided investment advice, particularly as Kedarnath Sharma’s memory declined after an accident. From overseas, Archana Sharma relied on him to manage routine banking matters.

In 2020, Thakur suggested moving more than ₹2 crore from savings accounts into mutual fund investments. The family agreed. Transaction alerts initially appeared, then stopped altogether. When questioned, Thakur attributed the issue to technical glitches and assured the family the funds were intact.

Funds vanish as ghost accounts surface

The first clear sign of trouble came when a cheque issued by the family bounced. Alarmed, Archana Sharma travelled to India in early 2023. What investigators later uncovered was a coordinated manipulation of banking systems across multiple institutions.

While Archana was abroad and her mother was staying with relatives in Pune, new accounts were opened in the family’s names at branches of different banks in Bhopal. Mobile numbers linked to genuine accounts were changed without consent, cutting off transaction alerts. Net banking access was activated, mutual fund holdings were liquidated and funds were rapidly transferred into newly created accounts before disappearing.

Police arrested the relationship manager, but investigators acknowledged that a criminal case alone would not restore the lost savings. Acting on legal advice, the family approached the Court of Adjudicating Officer under the Information Technology Act.

IT court shifts focus to systemic negligence

Before the IT court, the case moved beyond individual fraud to examine whether the scam could have occurred without widespread violations of KYC norms and internal safeguards. The family argued that banks, as custodians of sensitive personal data, had failed in their duty to verify identities and protect account integrity.

Section 43(A) of the IT Act became central to the proceedings. The court examined account-opening records, transaction logs and internal processes, concluding that employees across multiple institutions had either acted in collusion or with gross negligence.

In its order, the court held seven banks and one finance company jointly liable and directed them to pay ₹2.5 crore in compensation - the largest award of its kind issued by an IT court in Madhya Pradesh.

Personal loss behind a legal milestone

For Archana Sharma, the judgment brought partial closure. During the prolonged legal process, her father passed away in July 2025. Her mother, now 85, has spent years without access to savings intended to support her old age. Legal expenses and repeated travel from abroad added to the strain.

The ruling does not end the criminal proceedings against the relationship manager, nor does it guarantee immediate recovery of all funds. However, it establishes a clear precedent: banks cannot distance themselves from fraud by attributing blame solely to rogue employees.

From a governance perspective, the judgment reinforces the importance of rigorous oversight, data protection and internal accountability. Failures of this scale often surface where controls are weak or inconsistently applied, underscoring why independent scrutiny mechanisms - such as those typically associated with auditing services in india - are critical in identifying institutional risks before they translate into irreversible personal losses.