Kochi: The Kerala High Court on Tuesday observed that banks are liable to meet the loss of depositors from unauthorized transactions by criminals involved in financial fraudulence. The court observed that the banks could not be free from the liability to meet the financial loss by claiming that they have sent SMS alert to the customer. The court was hearing the petition of Kottayam native PV George who lost money from his bank account.
In the complaint, George stated that over Rs 2.5 lakh was withdrawn from his bank account through an ATM counter in Brazil.
“If a depositor loses money from his account from unauthorised transactions, the bank is liable to compensate. Banks should set up an efficient mechanism to check ATM fraudulence. Hence, bank is liable to meet the loss from such fraudulent transactions,” said justice PB Suresh Kumar.
The court examined that bank is responsible to prevent the fraudulence in electronic banking facility. It is part of the agreement between the bank and the customer. The Reserve Bank of India stressed the point regarding electronic banking security in a circular issued in 2017. If a customer suffers loss without his knowledge, it shows the failure of the bank’s security. Hence, the bank is liable to give compensation to the customers, said the court.
The court also noted that the bank should not shrug off the responsibility by claiming that customers failed to respond to the SMS alerts on the transactions.
Complaint led to the verdict
The complainant George is an NRI who works in Brazil. When he was in his native place in Kottayam, he found Rs 2.41 lakh withdrawn from his bank account on March 26, 2012. The fraudsters conducted the transactions 14 times between March 22 and March 26, 2012.
Following this, Geroge filed a complaint seeking compensation. But Pala Munisif court dismissed the petition in 2015. Later he moved the Pala sub court in 2018 and the court ordered the bank to give compensation to the complainant. Following this, the bank appealed to the High Court and the court pronounced the verdict in favour of the customer.