Supreme Court Holds Banks Accountable for Unauthorised Transactions, Orders SBI to Refund Customer
The Supreme Court of India has delivered a landmark judgment holding banks accountable for safeguarding their customers from unauthorised transactions, further reinforcing the rights of account holders across the country. In a recent ruling, the Court directed the State Bank of India (SBI) to refund a customer, Pallabh Bhowmick, a sum of ₹94,204.80 lost due to fraudulent transactions.
This case highlights a growing concern in the digital era where cyber fraud is on the rise. The issue began when the customer attempted to return an online purchase and received a call from someone impersonating customer care. Following instructions, he unwittingly downloaded a mobile app that facilitated access to his account, leading to the loss.
SBI denied liability, arguing that sensitive details such as OTPs and MPINs must have been shared by the customer. However, Pallabh Bhowmick claimed he had not disclosed any such information and instead pointed to a possible data breach on the retailer’s platform. Both the Single Bench and the Division Bench of the Gauhati High Court ruled in the customer’s favor, a decision that SBI sought to challenge in the Supreme Court.
The Supreme Court, in its judgment, emphasized that banks bear a significant responsibility in preventing unauthorised and fraudulent transactions. The bench of Justices JB Pardiwala and R Mahadevan highlighted that with advanced technology available, banks are well-equipped to detect and prevent such breaches. The Court noted that the customer had reported the fraudulent transactions within 24 hours, a key factor under the Reserve Bank of India’s (RBI) guidelines.
Citing clauses 8 and 9 of the RBI’s Circular dated July 6, 2017, the Court underscored that customers have “zero” liability for unauthorised transactions arising from third-party breaches if reported promptly. These provisions ensure that customers are not penalized for external vulnerabilities beyond their control. In this case, the Supreme Court upheld the High Court’s ruling and dismissed SBI’s appeal, directing the bank to compensate the customer.
At the same time, the Court issued a word of caution for account holders. It urged customers to exercise caution and avoid sharing sensitive details such as OTPs under any circumstances. The Court noted that negligence on the part of the account holder could, in some cases, lead to shared responsibility for the loss. This serves as a reminder for individuals to stay vigilant against evolving cyber fraud tactics.
The judgment is a significant step in enhancing accountability within the banking sector and providing much-needed protection for consumers navigating the digital financial ecosystem. The Supreme Court’s ruling not only ensures justice for the affected customer but also reinforces the role of banks in maintaining security against the rising threat of cybercrime.
