North Delhi District Commission Holds Indian Bank Liable For Failure To Reverse Unauthorized Transactions As Per RBI Guidelines

Brief Facts:

Mr. Harish Chander (“Complainant”) received an email from Indian Bank (“Bank”) that Rs. 10 lakhs had been transferred from his salary account to an unknown account. The Complainant, upon visiting the bank, learned about three unauthorized transactions. Disturbed by the incident, the Complainant promptly requested the bank to freeze his account and notified them about the online transfer to an unknown ICICI Bank account. Despite the complaint and the freezing of the Complainant's ATM card, the bank did not take immediate action to refund the amount. Furthermore, the bank officials, in response to his plea for assistance, were uncooperative and insisted on adhering to their rules and regulations. Subsequently, the Complainant discovered that a JIO bill for changing a SIM card was associated with the unauthorized transactions. The Complainant visited the JIO office and was informed that the new SIM card had been issued without proper verification of the same number.

In an effort to address the situation, the Complainant registered a complaint with the Cyber Crime Portal and filed a second complaint with the bank for the reimbursement of his funds. Despite making several complaints, the Complainant didn't receive any satisfactory response. Thereafter, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission-I, North Delhi (“District Commission”). The bank and JIO didn't appear before the District Commission for proceedings. Hence, they were proceeded against ex-parte.

Observations by the Commission:

The District Commission noted that the Complainant promptly notified both the bank and the police on the day of the reported fraudulent transactions. Further, it noted that the bank did not take any action to reverse the fraudulently withdrawn amount, nor did it provide the Complainant with a shadow balance or an investigation report. The District Commission referred to the instructions issued by the Reserve Bank of India (RBI) regarding "Consumer Protection- Limiting Liability of Customers in Unauthorized Electronic Banking Transactions," dated 06.07.2017. According to the RBI instructions, the burden of proving customer liability in unauthorized electronic banking transactions lies with the bank.

Further, the District Commission noted that the RBI instructions outline scenarios of zero and limited liability for the customer in cases of unauthorized transactions. In the present case, where the Complainant promptly reported the fraudulent transactions, the bank's failure to take necessary actions placed it under zero liability as per the RBI guidelines. Therefore, the District Commission concluded that the bank was liable to compensate the Complainant, as specified in the instructions.

The District Commission noted that the bank was expected to initiate action, including obtaining CCTV footage, conducting an inquiry, and providing a suitable reply to the Complainant. The District Commission observed that the bank failed to comply with these obligations, thereby making it liable to compensate the Complainant as per the RBI instructions. Regarding JIO's liability, the District Commission held that the Complainant suffered the loss directly due to JIO's deficient service. However, the Complainant did not seek any relief against JIO. Therefore, the District Commission did not quantify the compensation against JIO.

Consequently, it directed the bank to pay Rs. 10,00,000/- within thirty days from the date of the order, with interest at the rate of 9% p.a. from the date of the fraudulent transaction till the payment date. Additionally, it was instructed to pay Rs. 1,00,000/- as compensation for the mental pain, agony, and harassment suffered by the Complainant.