Kerala High Court Orders SBI To Refund ₹3.73L To Cybercrime Victim, Says Bank Did Not Prove 'Negligence' By Her

Justice Harisankar V. Menon observed that the bank did not prove that she was privy to the fraudulent transaction and that she is entitled to be found to have 'zero liability' when she reported the fraud to the bank as well as the police promptly.

The petitioner was an account holder at SBI and also had an ATM card. She got information that non-chip-based debit cards would be blocked by SBI from April 29, 2019. Thereafter, she received an SMS informing her that her debit card would be blocked but the same could be reactivated online.

Following this, she received a call from the same number that sent her the SMS that her ATM card is blocked and for its reactivation, her participation is required. She was directed to provide details like OTP for registration of the “State Bank Secure App”, which she shared. Immediately, an amount of Rs. 3.75 lakhs was debited from her account. She straightaway informed the bank through its customer care service and the bank blocked her internet banking account.

The petitioner also filed a complaint before the branch manager as well as a police complaint. The police investigation found that one Sandip Bauri from West Bengal siphoned off the amounts. However, the petitioner was not given any refunds and she approached the Banking Ombudsman, which rejected her complaint after finding that she was privy to the entire fraudulent transaction. Aggrieved, the petitioner approached the High Court challenging the Ombudsman's order.

The petitioner relied on a Master Circular issued by the RBI and contended that she had 'zero liability' since there was third party breach where there was no deficiency on the part on the customer or the bank. It was pointed out that as per clause 6(ii), if the customer notifies the bank within 3 working days of receiving the communication from the bank regarding the unauthorized transaction, there would be zero liability and she would be entitled for refund of the amount from the bank.

She pointed out that the floating of State Bank Secure App was not given wide publicity and because of that, she was under the belief that even if the OTP was shared, further OTPs would be required to debit money through the app. However, in present case, the fraudster used the OTP given by the petitioner to join the app and siphoned off the amounts.

The bank, however, contended that the situation falls under that contemplated under clause 7(i) regarding lost due to negligence by customer who shared payment credentials. It was pointed out that as per the clause, the customer has to bear the entire loss until the reporting of the unauthorized transaction and bank will be responsible only for any loss after such reporting.

After hearing the parties, the Court referred to a 2024 judgment of the Gauhati High Court Division Bench in WA No. 364 of 2022 wherein the bank was directed to refund the customer, who was also subjected to cybercrime in a similar manner. It then noted that the Apex Court dismissed a Special Leave Petition challenging the Division Bench decision.

The Court further noted that the contentions raised by the petitioner regarding the app and the manner of siphoning off the amounts were not disputed by the bank and therefore, not need be disbelieved. It also took note of the fact that the petitioner was prompt in reporting the fraud but the bank did not take steps to recredit the amount.

“Though the complaint was lodged on the very same day, the bank has not taken any steps for ensuring that the amounts debited are recredited to the petitioner's account. Similarly, even after the police identified the fraudster, the bank has not taken any further steps in the matter. The fact that the petitioner was not privy to the fraud is also clear from the report filed by the police authorities. When that be so, the petitioner's case would definitely fall under the provisions of clause 6(ii) of…circular of the RBI. That being the position, the petitioner's case is covered by the judgment of the Division Bench of the Gauhati High Court, as has been confirmed in the order dated 03.01.2025 passed by the Apex Court in the Special Leave Petition,” the Court added.

The Court then set aside the Ombudsman's order and directed the bank to make good the loss of Rs. 3.73 lakhs expeditiously within 4 weeks.

Counsel for the petitioner: Kandampully Rahul, Raaga R. Ramalakshmi, Balamurali Krishna M.

Counsel for the respondents: Deepa Narayanan, T. Sethumadhavan (Sr.)