Bank Liable to Compensate If it Fails to Establish That Customer Negligently Shared Password, OTP, MPIN, Card Number Resuming into Fraudulent Transaction: Gauhati High Court

Recently the Gauahti HC ruled that, if a customer discloses sensitive information resulting in a fraudulent transaction, Bank cannot held liable for loss, if any suffered by the customer.

The bench of Justice Suman Shyam  was dealing with the petition challenging the order issued by the Ombudsman, Reserve bank of India, Guahati, rejecting the complaint made by the petitioner pertaining to the claim of refund of the fraudulent transaction of Rs.92,204/- made from his bank account on 18.10.2021.The bench opined that “It is no doubt correct that if a customer is negligent in handling his or her account and discloses sensitive information such as, password, OTP, MPIN, Card Number etc. resulting into fraudulent transaction, the Bank cannot be held liable for loss, if any suffered by the customer. However, in such cases negligence on the part of the customer must be cogently established by the bank by bringing reliable materials on record. The Banks cannot absolve themselves of the liability towards losses suffered by the customers on account of unauthorized electronics transactions based on perceived negligence of the customer. Having regard to the facts and circumstances of this case as well as the materials available on record this court is of the opinion that the respondent No. 2 has failed to establish negligence on the part of the petitioner leading to the fraudulent transcation.”

Judgment: Pallabh Bhowmick v. The Ombudsman, RBI & 3 others. 2022