Banks accountable for unauthorised withdrawals: Kerala High Court

SMS alerts cannot be the basis for determining the liability of the customer and there would be account holders who may not be in the habit of checking SMS alerts at regular intervals.

Published: 06th February 2019 01:46 AM  |   Last Updated: 06th February 2019 01:46 AM   |  A+A-

Kerala High Court (File photo)

By Express News Service

KOCHI:  The Kerala High Court held that bank cannot be exonerated from the liability for the loss caused to its customer on account of the unauthorised withdrawals made from the person’s account merely on the ground he/she has not responded promptly to the bank’s SMS alerts.

“Needless to say a bank owes a duty to its customers to take necessary steps to prevent unauthorised withdrawals from their accounts. If a customer suffers a loss on account of the transactions not authorised by him, the bank is liable to the customer for the loss,” observed the court. Justice P B Suresh Kumar issued the order while dismissing the appeal filed by the State Bank of India, Pala branch chief manager, challenging the order of Sub- Court, Pala.

What the court said
It is the obligation of the banks to create a safe electronic banking environment
SMS alerts cannot be the basis for determining the liability of the customer
 Some account holders may not be in the habit of checking SMS


P V George, who is working in Brazil, is an account holder of the SBI, Pala. As he is working in an offshore rig in Brazil, he used to be in India for 28 days after every 28 working days. When he was in India, he noticed a sum of Rs 240,910 was withdrawn from his account from different places in Brazil. 
He filed a complaint to the bank.

HC: Bank’s obligation to create safe environment

The bank argued withdrawals were not possible from the account without the knowledge of the person. However, the Sub-Court held the bank was liable for the loss. Hence, the bank approached the High court. The bank submitted before the HC when amounts were withdrawn by international fraudsters from ATMs in a foreign country, it cannot be made liable for the loss caused to account holders. 

The bank said SMS alerts were given to him with regard to the withdrawal and he has not requested for blocking the account immediately. Besides, he has not responded to the SMS alerts. It was the obligation of the banks providing electronic banking services, to create a safe electronic banking environment to combat all forms of malicious conducts resulting in a loss to their customers.

SMS alerts cannot be the basis for determining the liability of the customer and there would be account holders who may not be in the habit of checking SMS alerts at regular intervals. If a customer suffers loss in connection with the transactions made without his junction by fraudsters, it has to be presumed that it was on account of the failure on the part of the bank to put in place a system which prevents such withdrawals, and the banks are, therefore, liable for the loss caused to their customer, held the court.

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