Case Law Details
State Bank of India Vs Pallabh Bhowmick & Ors (Supreme Court of India)
In this case, the Supreme Court upheld the High Court’s finding that a series of online transactions carried out on 18.10.2021 from the customer’s bank account were entirely unauthorized and fraudulent, and that no negligence on the part of the account holder was established. Agreeing with the High Court’s reasoning, the Court emphasized that Clauses 8 and 9 of the RBI Circular dated 06.07.2017 clearly mandate that where a customer is not negligent, the bank bears full liability for unauthorized electronic transactions. The Court noted that the customer had promptly reported the fraud within 24 hours, further supporting the conclusion that the account holder acted responsibly. It reiterated that while banks possess advanced technology and must remain vigilant to detect and prevent such fraudulent activities, customers are also expected to exercise caution, particularly by ensuring that OTPs are not shared with anyone. However, on the facts of this case, no contributory negligence could be attributed to the customer. The Supreme Court thus found no reason to interfere with the High Court’s order and confirmed that the bank was solely responsible for the financial loss arising from the fraudulent transactions. The Special Leave Petition was therefore dismissed, along with all pending applications, reinforcing the principle that in cases of unauthorized transactions where the customer is not at fault, liability cannot be shifted onto the account holder.
Read HC Judgment: Banks Cannot Rely on Assumed Negligence in Cyber Fraud Cases: HC Directs Refund to Customer
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
UPON hearing the counsel the Court made the following ORDER
1. The Division Bench of the High Court while dismissing the Intra-Court appeal filed by the Bank has observed in Para 42 as under:-
“42. Having heard and considered the submissions of the learned counsel for the parties and after going though the materials available on record, we are in full agreement with the learned Single Judge that the online transactions that took place on 18.10.2021 from the respondent No. 1/petitioner’s Bank account were unauthorized and fraudulent in nature. No negligence on the part of respondent No. 1/petitioner could be established by the Appellant. Clauses 8, 9 of the RBI Circular dated 06.07.2017 would apply. The respondent No. 1/petitioner will not have any liability.”
2. We are in complete agreement with the observations as contained in Para 42 of the impugned judgment referred to above.
3. All that the High Court has said is that the original petitioner who suffered the loss was not negligent in any manner. All transactions relating to the account of the respondent No.1 herein maintained with the petitioner – Bank were found to be unauthorized and fraudulent. It is the responsibility of the bank so far as such unauthorized and fraudulent transactions are concerned. The Bank should remain vigilant. The Bank has the best of the technology available today to detect and prevent such unauthorized and fraudulent transaction. Further, clauses 8 and 9 respectively of the RBI’s Circular dated 6-7-2017 make the position further clear.
4. We also take notice of the fact that within 24 hours of the fraudulent transaction, the customer, i.e., the respondent No.1 herein brought it to the notice of the Bank.
5. We expect the customers, i.e., the account holders also to remain extremely vigilant and see to it that the O.T.Ps. generated are not shared with any third party. In a given situation and in the facts and circumstances of some case, it is the customer also who could be held responsible for being negligent in some way or the other.
6. In view of the aforesaid, we see no good reason to disturb the impugned order passed by the High Court.
7. The Special Leave Petition is, accordingly, dismissed.
8. Pending applications, if any, also stand disposed of.
