Bank liable If Customer Loses Money Due to Unauthorized Withdrawal from Account: Kerala Consumer Court

Bank liable If Customer Loses Money Due to Unauthorized Withdrawal from Account: Kerala Consumer Court

Directs the State Bank of India to compensate the complainant for deficiency in service

The District Consumer Disputes Redressal Commission (DCDRC) at Ernakulam, Kerala has emphasized that a bank is liable if a customer loses money due to unauthorized transactions from his bank account.

The commission was hearing a 2019 complaint filed by Salim PM, a customer, who lost Rs.1.6 lakh due to a fraudulent withdrawal from his bank account.

The consumer forum directed the State Bank of India (SBI) to compensate the customer. It rejected the bank's contention that there was no deficiency of service or unfair trade practice on its part since the customer was informed about the withdrawal through SMS notifications. The Court ruled that a customer could not be expected to read all SMS alerts.

The DCDRC order stated, "The complainant is not duty bound to read all the messages and some among them have been received in the odd hours of the night by the complainant.”

Earlier, a banking ombudsman had directed SBI to pay Salim about Rs.80,000 for his loss. An additional amount of Rs.10,000 was also credited to his account. Not satisfied with the bank’s offer, the customer approached the consumer Court seeking the payment of the remaining Rs.70,000 he had lost.

A bench of district consumer forum DB Binu (president), V Ramachandran (member), and Sreevidhia TN (member) held that since the bank provided services to the customers, it owed a duty to protect their interests. This included taking steps to prevent unauthorized withdrawals from a customer's bank account. Failing to do so meant it was liable for the loss.

The complainant had alleged that a fraudulent withdrawal of money took place three times from his bank account due to which he lost the amount. He stated that before the incident, he noticed that his ATM card was not working and had approached SBI to replace the card.

The bank informed him that it was in the process of replacing old cards with a new chip card and a new card was issued to him.

However, when he went to the ATM branch to withdraw money, he was shocked to find only a Rs.3,011 balance amount. He claimed that an amount of Rs.1.6 lakhs was lost from his bank account.

The consumer forum held that the bank was liable to compensate the complainant. It allowed the claim of Rs. 85,000 (Rs. 70,000 for the loss, Rs. 10,000 as compensation, and Rs. 5,000 as litigation cost).