Denying liability
04/05/2004 The Star Articles of Law with
Bhag Singh
IT is common to read newspaper reports of people who are sued by
banks or financial institutions for not repaying car or housing
loans that they did not apply for. In some cases such people may be
unaware of court proceedings and realise their problems only when
they find that judgment in default has been obtained. Sometimes
bankruptcy proceedings may even have been started against him or
her.
A reader asks whether this can happen. The answer is that it
obviously can. But how does this come about? Broadly this can be
said to arise through the victim being careless or too trusting or
through fraudulent or criminal acts by third parties. There are
occasions when a person signs blank documents trusting a friend or a
relative not knowing or caring to ask what those documents are for.
In such a case the individual may have absolute trust in the
relative or friend.
Where a person does not care to find out what he or she is signing
and does so in blind faith it can be said that such a person is
indifferent and reckless. In such a case when the person is called
to make payment there is hardly any justification for denying
liability. However there are situations where a person is physically
or mentally disabled and relies on another person to assist him in
his daily life. In the process of such assistance the third party
takes advantage to mislead the person who signs the documents
unaware of their true nature.
In such a case the person who has in effect applied for the
facilities and unwittingly given instruction for their utilisation
has in a manner been deceived and is not as culpable as in the case
in the earlier example. Even here much would depend as to whether
the person who has been misled into signing the documents is to be
liable.
The surrounding circumstances would have to be considered. It would
also be relevant to consider whether the intermediary was acting on
behalf of the bank or the deceived “borrower”.
This is because if the deceiving intermediary was acting on behalf
of the “deceived borrower” then the responsibility for the use of
such a person cannot be placed on the shoulder of the bank. This is
because the bank is not in anyway involved in initiating the
application.
On the other hand if the deceived borrower is already a customer of
the bank and the bank is aware of his condition then there is a
greater burden borne by the bank in discharging its obligations in
ensuring that the customer's interest has been adequately considered
so that the bank has not been negligent .
Another situation is where a person is neither aware nor involved in
applying for a loan . There are cases where a person's identity card
is either stolen or a doctored identity card has been used.
Here it is clearly a criminal act by the person who committed the
act. If it is alleged that the documents are signed by the person
whose name appears, it is clearly a forgery.
When a person's signature is forged, such a person is not at all
liable. But the person who forged the signature can be held liable
if he/she can be identified. But this would usually be an exercise
in futility.
In some cases, the signature is attested by a witness. Such a
witness could be a professional person or a government officer or it
could be a bank officer . In such a situation the witness would be
able to throw light on whether the person in question did indeed
sign the document .
When the witness is unrelated to the person who signed the document,
he may not be able to remember the person who actually appeared
before him.
On the other hand there could be cases where the witness could
confirm that a person was indeed the “borrower” who signed the
document. Yet the “borrower” may deny that he signed the document or
that he even ever met the witness.
In the event of such a conflict the court will have to decide who is
telling the truth. It could suggest that the “borrower” is not
telling the truth to avoid meeting his obligation or the witness is
negligent in verifying the identity of the “borrower” or is in
collusion with an unknown party,
This situation will also show why a witness is important and in
signing as a witness, every effort should be made to ensure that the
identity of the person whose signature is being witnessed is
adequately determined.
