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In a significant judgment, the Rajasthan High Court has directed IDBI Bank to refund ₹58 Lakh to a victim of cyber fraud, in compliance with the Reserve Bank of India’s (RBI) “Zero Liability” policy outlined in the RBI’s 2017 circular. This ruling highlights the growing concern over digital frauds and the need for stronger protections for consumers.
Court’s Ruling and Zero Liability Policy
The court’s decision came after the victim, who had an overdraft facility with IDBI Bank, reported an unauthorized transaction of ₹58.93 Lakh, which was transferred to third-party accounts without his knowledge. The fraud occurred despite the victim lodging a complaint within 48 hours. The Rajasthan High Court emphasized that the RBI’s July 6, 2017 circular clearly states that if a customer reports fraudulent transactions within three working days, they should face “zero liability.”
Justice Anoop Kumar Dhand, who presided over the case, expressed concern over the increasing number of digital scams and their impact on consumers. He stressed that these scams have become one of the most harmful forms of cybercrime, and more decisive action is required to combat them.
Court’s Observations on Digital Scams
Justice Dhand noted that the rise in digital frauds requires a comprehensive approach to protect consumers. He highlighted the importance of regulations like the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which aim to curb the activities of social media platforms and digital media entities. The court also pointed out that some companies have been found selling customer data, which is then misused in cyber crimes.
The court called for strict action against these companies and emphasized the need for public awareness campaigns to educate people about the risks of digital scams. Such campaigns should be carried out across various media platforms, including print, television, and social media.
The Bank’s Role in Preventing Cyber Fraud
In the ruling, the court noted that banks have a crucial role in preventing unauthorized transactions once a complaint is made. IDBI Bank was criticized for not taking immediate steps to stop further transactions or initiate a chargeback to recover the stolen funds. The court ruled that the bank had shown negligence by not freezing the suspicious accounts and failing to act quickly.
The court also rejected IDBI Bank’s argument that the Banking Ombudsman was not included in the petition and ruled that the Ombudsman’s role was merely advisory and did not affect the court’s decision.
The Incident and the Legal Battle
The victim had reported the unauthorized transactions within 48 hours to both the bank and the RBI Banking Ombudsman. The Ombudsman ordered IDBI Bank to refund ₹15 Lakh, but the remaining amount was not refunded. The victim then took the matter to the Rajasthan High Court.
The court found that the bank had failed in its responsibility to protect the victim’s account and ensure the safety of his funds. It ordered IDBI Bank to refund the entire ₹58 Lakh, along with interest, to the victim, in line with the RBI’s guidelines.
Conclusion
This case serves as a reminder of the importance of banks taking immediate and decisive action when unauthorized transactions are reported. It also highlights the role of government regulations in protecting consumers from digital fraud. The court’s ruling reinforces the need for banks to implement better fraud detection mechanisms and take greater responsibility in safeguarding their customers’ money.
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