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The bank contended before the high court that only people who have access to the bank account can add a beneficiary, implying that the petitioner was negligent in adding the beneficiary and that the money was lost due to the petitioner's negligence
The Bombay High Court has held that a customer has zero liability when unauthorized transactions occur due to a third-party breach where the deficiency lies neither with the bank nor the customer.
“..a customer has zero liability when the unauthorized transactions occur due to a third party breach where the deficiency lies neither with the bank nor with the customer but elswhere in the system and the customer notifies the bank regarding the unauthorized transactions within a certain time frame,” the court said.
The division bench of the high court, comprising Justice GS Kulkarni and Justice Firdosh Pooniwalla, was hearing a petition against the banking ombudsman refusing to direct Bank of Baroda to return Rs. 76 lakhs lost by a customer in a cyber fraud.
The petitioner submitted that on October 1, 2022, certain individuals were added as beneficiaries to the bank account without sending any OTP to the petitioner or notifying him.
The next day, Rs. 76 lakhs were transferred to different individuals from the petitioner’s bank account.
The petitioner approached the cyber police and filed a complaint. Simultaneously, he approached the bank to initiate the process of recovering the money in terms of the 2017 RBI Circular titled "Customer Protection - Limiting Liability of Customers in Unauthorized Electronic Banking Transactions."
The petitioner also approached the banking ombudsman for the recovery of the money. However, the application was rejected by the ombudsman.
The bank contended before the high court that only people who have access to the bank account can add a beneficiary, implying that the petitioner was negligent in adding the beneficiary and that the money was lost due to the petitioner's negligence.
However, the high court relied on the cyber cell report and concluded that there was no negligence on the part of the petitioner.
Therefore, the bench directed the bank to pay Rs. 76 lakhs to the petitioner within six weeks.
Case title: Jaiprakash kulkarni vs Banking Ombudsman & Ors
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