Rajasthan HC Directs IDBI Bank To Refund ₹58 Lakh To Victim Of Cyber Crime, Directs Action Against Those Selling Customer's Data

Granting relief to a victim of digital fraud who lost Rs. 58 Lakh from his IDBI bank account due to unauthorized electronic transactions, the Rajasthan High Court directed the bank to refund the entire amount with interest in view of the “Zero Liability” direction by RBI in its July 6, 2017 circular.

As per the Circular, in the event of any unauthorized transactions in anyone's bank account, if the complaint is made regarding the fraud within a period of three working days, there would be “zero liability” of such customer.

Expressing pain at the rise of digital scams, Justice Anoop Kumar Dhand said that in the age of rapid change of digital evolution, digital scams had emerged as one of the most insidious form of cyber-crime. It was observed that more serious steps were required to curb the dangerous situation.

The court observed that digital scams pose a significant threat to our interconnected world, and thus there is a necessity for a multi-faceted approach to combat them effectively. 

The court observed that Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 have been enacted by the Government to control the activities of social media platforms, over the top platform and digital news portals. It observed that it had been found that data is being sold by some of the social media companies and the same are misused by the accused involved in committing such cyber crimes with the innocent public at large.

“Let strict action be taken against all those delinquents including Companies, who are selling the data of each individuals, which is misused by the accused persons by way of different means and committing cyber crimes. Let strong mechanism be prepared to save the innocent persons from losing their hard earned money. It is right and high time to launch a public campaign through print, electronic, social media, television, and FM radio, ensuring that awareness is spread every hour, every day, to reach the general public.”

The court further observed that in case a report is made regarding unauthorized transaction in an account, it is for the banks to ensure that no further unauthorized transaction takes place in the account. It thereafter directed that a copy of the court's order be sent to Department of Finance and Reserve Bank of India for making necessary compliance and to take more suitable measures to protect customers and their hard-earned money.

Background

The petitioner had an overdraft facility in the IDBI bank when he faced an unauthorized transaction of Rs. 58,93,000 which was transferred to third parties. Report was lodged with the bank within 48 hours of the incident along with an application to RBI Banking Ombudsman seeking return of the stolen amount.

IDBI was directed to pay around Rs. 15 Lakhs by the Ombudsan, but the balance amount was not granted to the petitioner. Against this the petitioner moved the high court. 

Further, it was argued that the amount was transferred in different accounts by way of 16 transactions, and once the complaint was made, the bank was duty bound to stop the payment of the amount.

On the contrary, it was argued on behalf of the bank that firstly, the Banking Ombudsman was not impleaded as party, hence, the petition was not maintainable. Further, it was argued that several alert messages were sent to the petitioner on which he failed to respond.

Findings

After hearing the contentions, the Court referred to the circular quoted by the petitioner, as well as multiple precedents of various high-courts on the situation, and opined that,

“This circular was the result of a review of criteria for determining the customers liability in the cases of unauthorized transactions and considering the increased thrust on financial inclusion and consumer protection and the surge in grievances pertaining to unauthorized debits from customers account. The object of the circular is to put the banks in a place fraud detection and prevention mechanism, a mechanism to access and mitigate risks, as well as a system of continuously advising customers on how to safeguard themselves against banking and payments related frauds.”

Furthermore, the Court highlighted that as per the petitioner, his mobile SIM was removed from the phone due to which he did not receive any alerts. It was held that in this light there was no fault or negligence of the petitioner in not responding to the alert messages, since he had no means of receiving information about the fraudulent transactions.

Despite not receiving the messages, he acted without any delay in reporting the matter to the bank.

The Court further opined that there was glaring deficiency on part of the bank since it failed to demonstrate any urgency in the matter even after receiving intimation from the petitioner about the transaction.

“This reflects a clear negligence on their part, in discharge of their duty to act swiftly upon receiving notice of the fraud. No immediate steps were taken by the respondent to initiate a chargeback, retrieve the funds, or freeze the suspicious accounts, thereby failing to prevent the petitioner's money from being illegal and unauthorizedly transferred to unknown accounts.”

In this light, the Court stated that the bank could not walk away from its responsibility to safeguard the petitioner from unauthorized transactions. If the account was maintained by the bank, it was liable for its safety.

The Court further rejected the argument raised on behalf of the bank to the effect of banking ombudsman not being impleaded as a party, and held that banking ombudsman was merely a persona designata who passed the order, but had no authority to support or defend it.

In this light, the banking ombudsman's order was set aside and the bank was directed to refund the entire money to the petitioner.

Title: Rakesh Totuka v State of Rajasthan & Ors.

Citation: 2025 LiveLaw (Raj) 174

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