KOCHI: The Kerala High Court on Wednesday said banks cannot recover the money withdrawn through fraudulent online transactions from cash credit and overdraft accounts of customers if it cannot be unequivocally proved that the customer was responsible for such transaction.
In cases where frauds are established, banks will have to approach a civil court to recover the money from the persons responsible, the High Court said.
However, if the loss is due to the customer’s negligence, she/he would have to bear the entire loss. To what extent the customer can be made responsible for such negligence is a matter of probe and adjudication through a civil suit, the HC added.
The court issued the order on a petition filed by two businessmen from Kochi who lost `16.25 lakh and `23 lakh from their cash credit and overdraft accounts through fraudulent online transactions. The online thefts were committed by the fraudsters after obtaining a duplicate SIM card of the businessmen’s mobile phones, using their fake identity cards.
They had challenged the action of the bank in withdrawing the amount from their accounts and sought a declaration that they have zero liability of the fraudulent transactions in their bank accounts.
High court observation
It is for the bank to secure the safety of online banking transactions. The bank can identify fraud risk and also devise mechanisms to protect customers. There are counter technologies to identify location behaviour of operators. The bank, therefore, is bound to protect the interest of the customer in all circumstances.
The court observed that the transactions could be treated as ‘disputed transactions’. These transactions would fall within the sweep of zero liability as mentioned in a circular issued by the Reserve Bank of India.
The bank could not claim any amount from the customer when a transaction was shown to be a ‘disputed transaction’. The remedy for the bank in such circumstances was to approach the civil court and recover the amount from the persons who were responsible for such transactions.
The court added that the petitioners could not be held responsible for such debit without establishing through the civil court that they are indeed responsible for such withdrawal from the loan account.