Failure To Reverse Fraudulent Transactions, NCDRC Holds HDFC Bank Liable For Deficiency In Service

Brief Facts:

Mr Parveen Kumar Jain (“Complainant”) owned a credit card issued by HDFC Bank (“Bank”). In 2014, the Complainant got to know that there had been certain unauthorized transactions from his credit card amounting to Rs. 24,000/-. Despite the Complainant reporting the incident promptly to the bank, including providing a police complaint, the bank didn't reverse the unauthorized transactions. Thereafter, the Complainant made several communications with the bank but didn't receive any satisfactory reply. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission, East Delhi (“District Commission”) and filed a consumer complaint against the bank.

The Complainant contended that, despite being a loyal customer for the past 10 years, the bank unjustly demanded repayment for transactions not authorized by the Complainant. Further, he argued that the bank was responsible for the security of his credit card. In response, the bank contended that the misuse of the credit card was facilitated by the Complainant's disclosure of confidential details. The District Commission, dismissed the complaint, stating that the allegations involved fraud and required proper investigation and criminal trial which was outside the scope of summary proceedings under the Consumer Protection Act.

The Complainant, aggrieved by the District Forum's decision, appealed to the State Consumer Disputes Redressal Commission, Delhi (“State Commission”). However, the State Commission upheld the District Commission's decision. It held that issues involving disputes of a criminal nature cannot be adjudicated under the summary proceedings of the Consumer Protection Act. Thereafter, the Complaint approached the National Consumer Disputes Redressal Commission (“NCDRC”) and appealed the decision of the State Commission.

Observations by the Commission:

The NCDRC disagreed with the findings of the District Commission and the State Commission. It noted that the consumer commissions established under the Consumer Protection Act, have the jurisdiction to adjudicate matters concerning deficiencies in service provided by the service provider without delving into the criminal aspects of a transaction. It also held that it was on the consumer commissions to filter out the causes of action which constitute deficiency in service. Notably, the NCDRC held that banking is explicitly classified as a "service" under Section 2 (1)(o) of the Consumer Protection Act and the primary consideration was whether the bank was deficient in service or engaged in unfair trade practices. The Complainant, being a user of the credit card issued by the bank, fell within the definition of a Consumer and retained the right to file a complaint under the Consumer Protection Act. Referring to the decision of the Supreme Court in J.J. Merchant and Ors. Vs. Shrinath Chaturvedi [(2002) SC 635], the NCDRC observed that the Act provides an exhaustive procedure for summary or speedy trials, ensuring conformity with the principles of natural justice. The legislature has deliberately furnished an alternative, effective, simple, inexpensive, and speedy remedy to consumers, and this the National Commission held should not be curtailed because summary trials may not be suitable for dealing with questions of fact involving criminal aspects.

The NCDRC noted the Complainant promptly reported the fraudulent transactions, taking reasonable measures and showing no contributory negligence. While acknowledging the criminal nature of the offence, the NCDRC upheld the Complainant's right to seek remedies under the Consumer Protection Act for deficiency in service.

The NCDRC noted that the Reserve Bank of India (RBI) issued comprehensive guidelines to address situations involving internet/online fraud, specifying the respective liabilities of customers and banks. According to these guidelines, a customer incurs zero liability in cases of unauthorized transactions due to contributory fraud or deficiency on the part of the bank. The guidelines also cover situations of third-party breaches where the deficiency lies outside the control of both the bank and the customer. Furthermore, the NCDRC noted that if a customer promptly notifies the bank of such transactions within three working days, there is zero liability for the customer. However, customers remain liable for losses resulting from unauthorized transactions if the loss is due to their negligence, such as sharing payment credentials.

In the present case, NCDRC noted that the Complainant's credit card was used fraudulently for transactions amounting to Rs. 24,000/-. The Complainant promptly received a confirmation call from the bank and he denied all the transactions and contacted customer care the next day to inquire about the disputed transactions. The NCDRC noted that the Complainant took reasonable measures and showed no contributory negligence in reporting the fraudulent transactions. Consequently, the NCDRC directed the bank to reverse the transactions related to the fraudulent transactions of Rs. 24,000/-. Additionally, the Bank was ordered to pay Rs. 10,000/- for the litigation costs incurred by the Complainant. It set aside the orders of both the State Commission and the District Commission.

Case Title: Parveen Kumar Jain vs HDFC Bank Ltd.

Case No.: Revision Petition No. 2082 of 2017

Advocate for the Complainant: Parveen Kumar Jain

Advocate for the Respondent: Nimisha Sharma

Click Here To Read/Download Order