Bengaluru: Karnataka High Court on Tuesday directed State Bank of India to refund Rs 1,99,000 to a 71-year-old Bengaluru man who lost the money in a cyber fraud, holding that the bank cannot escape liability for losses caused by unauthorised transactions in his account.
A bench of Justices D K Singh and T M Nadaf also directed SBI to pay compensation of Rs 25,000 for “deficiency in service”. The court upheld an April 15 order of the National Consumer Disputes Redressal Commission, which had also directed the bank to refund the amount and pay compensation.
“Bank cannot be absolved of liability towards the losses suffered by the customer on account of unauthorised electronic transactions and also in view of the Reserve Bank of India circular and since information of unauthorised transactions was shared with the bank within a stipulated period of time,” the court said.
SBI’s C V Raman Nagar branch challenged the consumer forum’s order, contending that the two alleged unauthorised debit transactions—of Rs 1,99,000 and Rs 25,000—in Pradosh Kumar Banerjee’s account in July 2022 could not have taken place had he not negligently shared OTPs.
The bank also submitted in the high court that Banerjee downloaded a fraudulent app from a link sent to his phone by a fraudster. Also, there was a delay of eight days in informing the bank about the transactions, the court heard.
Septuagenarian says he never shared OTPs
Banerjee, appearing in person in the high court, countered the claims and said he had never shared any OTP with anyone. Further, he alleged that the fraudster had broken into the bank’s software and caused loss to him by unauthorisedly debiting his hard-earned money.
Banerjee said he had informed SBI of the unauthorised transactions immediately after noticing them and that he also spoke to the bank manager the next day. Although he wrote several emails to the bank requesting refunds, only Rs 25,000 was reversed to his account, he submitted.
The court noted that Banerjee had initiated a payment of just Rs 20 from his account, but lost a much bigger amount without sharing any further OTPs.
“Any failure would not only affect the particular customer of the bank, but also the entire economy of the country and trust of the people with the bank,” it added.
In its order, the court emphasised that the amounts were debited because a third party could control the bank’s software and said, “The complicity of the customer cannot be presumed merely on account of downloading the application. In case of third party fraud, a customer cannot be held liable for allegedly sharing OTP for transactions, when the transactions were not initiated by him.”
As per a July 6, 2017, RBI circular, banks are liable to refund customers for unauthorised electronic transactions if they report the fraud within the required time and follow the prescribed conditions.
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.