Banks Cannot Recover From Customers The Amount Lost By Them Through Online Fraud : Kerala HC

Exercising their authority as per SARFAESI Act, banks cannot recover amount lost due to online fraud from customers. Instead they would need to take the matter to the civil court to get their dues back from the persons responsible, the court said.

In accordance with SARFAESI Act, a bank does not need to approach a court or tribunal for enforcing any security interest established in its favour. Previous to this, banks were allowed to assert their rights only via adjudication.

Justice A Muhamed Mustaque after referring to earlier two rulings by the SC and a decision given by the high court that banks are held responsible for unauthorized withdrawals in the judgement said, “Thus, it is clear that the bank cannot claim any amount from the customer when a transaction is shown to be a ‘disputed transaction’ And such a claim can be made from the customer only when the bank can prove unequivocally independent of the civil court that the customer had been responsible for such a transaction.

The HC deliberated on two customer pleas that sought a declaration that customers have zero liability in respect of the fraudulent transactions in their bank account. Senior advocate who represented the two customers said that the customers had bank overdraft facility and found that the money went missing from their bank account.

The fraudulent transaction was given shape by the miscreants as they could get duplicate SIM cards issued of the petitioners. Also the matter was reported to the bank within 3 working days.

And in the judgment, the court clearly pointed out that matter can no longer be included within the ambit of SARFAESI Act if it comprises allegations of fraud. However, if the loss is on account of customer’s negligence, he or she would have to bear the entire loss, the court said. To what extent the customer can be made responsible for such negligence is a matter of probe and adjudication through a civil suit, the court added.

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