HDFC Bank Ltd And Ors V. Jesna Jose: NCDRC Held Bank Liable For Online Fraudulent Transaction – Litigation, Mediation & Arbitration – India – Mondaq News Alerts

In the recent Judgement passed by NCDRC on 21st
December 2020, NCDRC held the bank liable for the online fraudulent
transactions if there is no fault on the customer’s part.


In the present case, the Complainant purchased a Pre-paid forex
plus Debit card bearing the serial no. 4123310000407245 of a limit
of US$ 10,000/-, from the Opposite Party no. 2 (The Manager, HDFC
Bank Ltd.). On 19.12.2008, the Complainant’s father received a
call from Mrs. K Pradeepa claiming to be from the credit card
department of the Opposite Party bank located at Chennai, which was
a confirmation call in respect of a transaction of US$310 attempted
on the aforesaid forex card. After verifying the same with the
Complainant, the Complainant’s father denied having transacted
on the card at all. Thereafter, the account statement was requested
by Complainant’s father from the Opposite Party.

The Complainant stated that on 20.12.2008, the Complainant’s
father was informed by the Opposite Party about the transactions to
the tune of US$ 6,000/- which were taken place on the aforesaid
forex card in the past few days. On 24.12.2008, a criminal case was
registered by the Complainant at Burbank police station, Los
Angles. On 04.03.2009, charge slips for the disputed transactions
were received by the complainant, however, the said charge slips
were in respect of 27 out of total 29 transactions. The Complainant
contended that the Opposite Party failed to take any action against
the fraudulent transactions in spite of having knowledge about the
same since 14.12.2008. Furthermore, the Complainant claimed that
her signature does not match with the signatures on the charge
slips. After that, several representations were made by the
Complainant to the Opposite Party for redressal of her grievances,
but the Opposite Party took no action. Against this careless
behavior of the Opposite Party, a complaint was filed by the
Complainant before the District Forum.

The Opposite Parties challenged the maintainability of the
complaint before the District Forum on the ground that the
Complainant had already filed a complaint before the Banking
Ombudsman, which is not yet disposed of. Furthermore, the following
contentions were raised by the Opposite Parties:

  • When the large volume of transactions occurred on the forex
    card of the Complainant, the Opposite Parties tried to contact her,
    and when they failed in contacting the Complainant, then they
    contacted the father of the Complainant to inform about the
    fraudulent transactions. The forex card was put on the “Hot
    List” immediately after that.
  • SMS alerts facility was not opted by the Complainant due to
    which the messages for the disputed transactions were not received
    by the Complainant.
  • The Opposite Parties had taken all the requisite steps and the
    allegations of deficiency of service are not justifiable.

After hearing both parties, District Forum allowed the
complaint, and the Opposite Parties were directed to pay $6110 in
Indian Rupees from 16.12.2009 to date of Order with the interest of
12% per annum, Rs 40,000/- as compensation for mental harassment,
and Rs 5,000/- as litigation costs. Along with this, the forum held
that in case of failure in payment of the above-said amount by the
Opposite Parties, the Complainant is entitled to recover the entire
amount along with the interest of 3% per annum from the date of
order till the date of realization.

Against the above order passed by the District Forum, an Appeal
was filed by the Opposite Parties before the State Commission, but
the State Commission confirmed the order passed by the District
Forum and dismissed the appeal.

Therefore, the present Revision Petition was filed by the
Opposite Parties against the order of the State Commission.

Arguments Raised by the Parties

In addition to the arguments raised by the Opposite Parties
before the District Forum, the Counsel for the Opposite Parties
contended that the bank is not liable to intimate card-holders in
case of a suspicious or fraudulent transaction. It was also stated
that the bank is not responsible for matching the signature of the
customer available with the bank with the signatures on the
transaction slips as the entire process is automatic and does not
require human intervention. Furthermore, the Counsel for the
Opposite Parties brings into the focus of the Commission the terms
and conditions for the use of Forex Card. As per Condition 36,
“transactions are deemed authorized and complete once EDC
terminal generates a sales slip”. The production of 27 charge
slips by the Complainant is evidence in itself that the disputed
transactions were authorized. Reliance was also placed on Condition
22 as per which “the cardholder shall at all time ensure that
the card is kept at a safe place. The cardholder shall under no
circumstances whatsoever allow the card to be used by the other
individual”. The Opposite Parties also challenged the
maintainability of the Complaint as the same was filed by the Power
of Attorney holder.

The Counsel for the Complainant rejected the arguments raised by
the Opposite Parties on the ground that the card was in the
possession of the Complainant at the time of the transactions and
hence, there is no negligence on the part of the Complainant and
the transactions might be the result of hacking or forgery. The
Counsel further stated to the Complainant that the Opposite Party
was aware of the fraudulent transaction on 14.12.2008, but the
Opposite Party took no action. Also, the Opposite Parties failed to
match the signatures in the charge slips from the specimen

Analysis by NCDRC

For dealing with the present question at hand, NCDRC relied on
Consumer Education & Research Society and Anr v New
India Assurance Co. Ltd. And Ors. I (2008) CPJ 317 (NC)
this Commission has held that under the Consumer Protection
Act,1986 technicalities are not encouraged and the only procedure
is to follow the principles of natural justice. In another case on
which NCDRC relied was Shankar Finance and Investments vs.
State of Andhra Pradesh and Ors. Criminal Appeal No. 1449 of
in which the Hon’ble Supreme Court has held, in
the context of the NegotiableInstruments Act, 1938, that a
Complaint may be filed by the Power of Attorney Holder and in doing
so the Power of Attorney Holder is acting not in a personal
capacity but as an agent on whose behalf the Power of Attorney has
been executed. I am, therefore, of the considered view that a
Complaint filed by the power of attorney holder is

NCDRC concluded that there is no proof that the credit card of
the complainant has been stolen and observed that the disputed
transactions might be the result of forgery/hacking or some other
technical or security lapse in the electronic banking system.
Furthermore, NCDRC also observed that the bank cannot rely on
arbitrary terms and conditions, and the terms and conditions should
be in compliance with the directions issued by the RBI. NCDRC also
referred to the case of Punjab National Bank and Anr. V
Leader Valves II (2020) CPJ 92 (NC)
, in which the
Commission has held the bank liable for all unauthorized and
fraudulent electronic banking transactions.

NCDRC referred the RBI circular bearing No.
DBR.No.Leg.BC.78/09.07.005/2017-18dated 6th July 2017, issued to
all commercial bank, as per which, the customer has zero liability
where an unauthorized transaction occurs due to fraud, negligence
on the part of the bank, or any third-party breach. Furthermore,
NCDRC held that the jurisdiction of the commission under section 21
(b) is limited and can be exercised only when the forum exercises
the jurisdiction wrongly or there is a miscarriage of justice. For
this, the reliance was placed by the NCDRC in the case of
Mrs. Rubi (Chandra) Dutta Vs. M/s United India Insurance
Co. Ltd . (2011) 11 SCC 269
and Lourdes Society
Snehanjali Girls Hostel and Ors. Vs. H & R Johnson (India) Ltd.
And Ors. (2016 8 SCC 286.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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