In an important ruling amid surging digital financial fraud attacks, the Bombay HC sided with the customer protection norms. It directed Bank of Baroda to return Rs. 1.24 crore to the victim private firm that lost money in a SIM-swap case. The court stressed that if a consumer reports fraud promptly in time, “zero liability” is ruled, and the bank must reimburse the losses.
Private company reported the incident immediately
The order was given by a division bench of the HC, which included Justices Manjusha Deshpande and Bharati Dangre, when private company PNP Polytex (based in Mumbai) submitted a petition. Polytex alleged that Rs.1.24 crore had been stolen from its bank accounts illegally and without knowledge.
About court proceedings
As per the submissions to the court, the firm informed the bank soon after finding malicious transactions and asked the accounts to be frozen. The bank could only save Rs. 47.8 lakh, the remaining money was already stolen by the hackers. After this, the firm moved to HC for help.
Later, enquiry revealed that the scam was done using a SIM-swap tactic, where hackers get control of the target’s registered contact number. This lets the hackers intercept OTPs and do banking transactions without the account owner's consent and knowledge. The high court found that the scam was done by third-parties, and showed no evidence of negligence on consumer’s end.
What is RBI’s zero liability rule?
During the proceedings, the court referred to the July 6, 2017 statement given by the RBI, which laid down the customer protection guidelines in incidents of illegal electronic banking transactions. According to the circular, the consumers are entitled to zero liability if they report fraud transactions within 72 hours (three days).
In the judgement, the high court stressed that if a customer informs the bank about a scam or fraud, it is the duty of the bank to return the disputed amount back to the victim’s account. The court also said that the burden of proving customer negligence is on the bank too.
The court rejected the bank's defenses that it had followed the due process and security measures, and the bench labelled the argument as a “lame excuse,” saying that such mechanisms become powerless when a SIM card is hacked. The court also attributed another ruling in an incident where HDFC bank was held liable under similar situations.
Bank will return stolen amount with interest
After revising the previously frozen funds, the High Court ordered the bank to return the remaining sum plus 6% interest within eight weeks.
