Haryana

Karnal

CC/283/2022

Bhagwan Bhardwaj - Complainant(s)

Versus

The Branch Manager, State Bank Of India - Opp.Party(s)

V.S. Malik

02 Apr 2024

ORDER

BEFORE THE PRESIDENT, DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION KARNAL.

                                                Complaint No.283 of 2022

                                                Date of Inst: 23.05.2022

                                                Date of Decision: 02.04.2024

 

Bhagwan Bhardwaj son of Shri Balram Bhardwaj, resident of H.No.1932, Gali No.1, Professor Colony, Kurukshetra.

 

…… Complainant

Versus

 

1.     The Branch Manager, State Bank of India, NIT Branch, Kurukshetra.

 

2.     Nodel Officer, SBI Cards and Payment Services Ltd. DLF Infinity Towers, Tower-C, 12^th Floor, Block-2, Building DLF Cyber City Gurugram.

                                                                 …… Opposite parties

 

Complaint Under Section 35 of Consumer Protection Act, 2019 as amdned upto date.

 

 

Before:    Shri Jaswant Singh…………President

                Sh.Vineet Kaushik……….Member

                Dr.Suman Singth…………Member

 

 

Argued by:Shri V.S.Malik, counsel for the complainant.

                Shri Jarnail Singh Ranga, counsel for the OP No.1.

                Shri Rakesh Malik, counsel for the OP No.2.

 

       

                (Jaswant Singh President)

 

ORDER:

 

                The complainant has filed the present complaint under Section 35 of Consumer Protection Act, 2019 against the Opposite parties (hereinafter referred as the ‘OPs’) on the averments that complainant is having saving account in the bank of OP No.1 and the complainant has also availed facility of Housing Loan from the said branch. In the month of January, 2018, complainant received a call from the branch of OP No.1 requesting the complainant to visit the branch, so the complainant visited the branch and there some officials of SBI credit card were present and requested him to avail facility of credit card. Since the complainant’s bank track record was excellent, they immediately sanctioned and issued a credit card to complainant. On 13.10.2021, when the complainant was present at Government College Indri, on duty, he received a call from customer care and was told that they are updating the credit card of all the customers, so the complainant is to cooperate with customer care and will have to share information including OTP to them, but within few minutes, complainant realized that some fraud of Rs.1,28,651/- has been done with him so the complainant immediately called customer care and asked them to block his credit card. The complainant even sent e-mail to the Nodal Officer of SBI Card regarding the same. The complainant received a message that his transaction of Rs.1,28,651/- need to be confirmed within three days but after few days, complainant received a e-mail that the fraudulent transaction by credit card has been done and mentioned that credit card transaction has been sent to one fraudulent website known as housing.com. The said website has already been fraudulent website and they have defrauded the credit card customers of various bank. Even in some court cases it has been held that it is the duty of the bank to curb the said fraudulent website and take precautions so that hard earned money of their customer cannot be illegally and fraudulently taken by the said fraudulent website. So, it is also the negligence of the bank not to have taken any preventive measure against such frauds. Even the card of the complainant was blocked then also the auto debit of Rs.3345/- was done which again the complainant reported, showing that SBI Branch and its credit card agency are negligent. Complainant sent a legal notice to OPs on 20.04.2022, through his counsel but no reply was given by OPs No.1 & 2 despite receiving the notice, hence, this complaint.  

2.             On notice, OPs appeared and filed their separate written version. OP No.1 filed its written version raising preliminary objections regarding maintainability; jurisdiction, etc. On merits, it is pleaded that as per cardholder agreement received by the complainant from the OP no.2 any kind of dispute related to card provided to the complainant will be resolved before the arbitrator only. State Bank of India is a bank and the OP No.2 is a credit card company and a separate legal entity of its own. The complainant is a well educated person, while information comes on TV, personal mobile phone several times that the bank does not ask any information from any customer and if such call received or asking for confidential information, should be ignored, otherwise there is a strong possibility of fraud. The other allegations made in the complaint have been denied and prayed for dismissal of the complaint.

3.             OP No.2 filed its written version raising preliminary objections regarding maintainability; suppression of true and material facts; jurisdiction, etc. On merits, it is pleaded transaction cannot be done without confidential details of the card i.e. card expiry date, CVV, wherein OP always advise their cardholders not to share their card details. Additionally, we wish to confirm that SBI card has implemented Dynamic OTP as an additional factor of authentication for online (3D)/Card not present transaction (CNP) providing enhanced level of security to all CNP transactions. Also, it is clear from the contents of complaint that the complainant has shared the details with third party and in this case it is the complainant who is liable for the negligence. The other allegations made in the complaint have been denied and prayed for dismissal of the complaint.

4.             Parties then led their respective evidence.

5.             Complainant has tendered into evidence his affidavit Ex.CW1, copy of e-mails Ex.C1 to Ex.C13, copy of guidelines of SBI Card Ex.C14, copy of case report Ex.C15 and closed the evidence on 19.05.2023 by suffering separate statement.

6.             Learned counsel for OP No.1 tendered into evidence affidavit of Neha Som, Assistant Manager, Ex.OP1/A, copy of statement of accounts Ex.OP1 and Ex.OP2 and closed the evidence on 09.10.2023 by suffering separate statement.

7.             Learned counsel for OP No.2 tendered into evidence affidavit of Rashmi Arora, Authorized representative of OP No.2, copy of customer protection letter Ex.OP2/1, copy of application form Ex.OP2/2, copy of declaration form Ex.OP2/3, copy of pre-approved data Ex.OP2/4 and closed the evidence on 09.10.2023 by suffering separate statement.

8.             We have heard the learned counsel of the parties and perused the case file carefully and have also gone through the evidence led by the parties.

9.             Learned counsel for complainant, while reiterating the contents of the complaint, has vehemently argued that on 13.10.2021, complainant received a call from customer care number and told that they are updating the credit card of all the customers, and requested the complainant to share information including OTP and after few minutes an amount of Rs.1,28,651/- had been deducted. The complainant immediately called customer card and got his credit card blocked and also sent an e-mail to the Nodal Officer of SBI Card but OPs did not block the credit card and also did not refund an amount of Rs.1,28,651/- which was debited from his credit card fraudulently, thus, there is deficiency in service on the part of OPs and lastly prayed for allowing the complaint.

10.           Per contra, learned counsel for the OP No.1, while reiterating the contents of its written version, has vehemently argued that SBI bank and the SBI Credit Card are different and legal entities and have no concern with each other. The fraud transaction, if any, has been committed from the credit card of the complainant. No amount has been debited from the saving account of the complainant, thus, OP No.1 has no concern with it. He further argued that as per cardholder agreement any kind of dispute related to card provided to the customer will be resolved before the arbitrator only and thus, this Commission has no jurisdiction to entertain, try and decide the present complaint and lastly prayed for dismissal of the complaint.

11.           Learned counsel for OP no.2, while reiterating the contents of its written version, has vehemently argued that the instructions for not sharing important information like OTP has already been widely circulated by every bank, therefore, there is no fault on the part of OP No.2, rather the complainant has himself shared OTPs. Hence, there is no deficiency on the part of OP No.2 and lastly prayed for dismissal of the complaint.  

12.           We have duly considered the rival contentions of the parties.

13.           Firstly, we decide the question whether this Commission has jurisdiction to decide the present complaint or not.

14.           The OP no.1 has taken a plea that there is an arbitration clause, which stipulates that in all events of dispute/difference between the card holder and the SBI cards, the same shall be resolved by appointment of a sole arbitrator, so this Commission has no jurisdiction to entertain the present complaint. In this regard, OP has not placed on record any Arbitration Agreement or any document to prove that there exists an arbitration clause agreed between the parties.  Therefore, plea taken by the OP is not tenable in the eyes of law.  Furthermore, if for the sake of argument, it may be considered that there exists an arbitration clause in the agreement between the parties, in that case also this Commission has jurisdiction to try and entertain the present complaint as it is a settled proposition of law that complaint under Consumer Protection Act, being an additional remedy, despite there being an arbitration agreement, the proceedings before Consumer Commission have to go on. The remedy under Consumer Protection Act is a remedy provided to a consumer when there is a defect in any goods or services. In this regard, we place reliance on the case titled “M/s Emaar MGF Land Limited Versus Aftab Singh, review petition © Nos.2629-2630 of 2018 (SC), wherein Hon’ble Supreme Court of India held in para no.55 as under:-

“We may, however, hasten to add that in the event a person entitled to seek an additional special remedy provided under the statutes does not opt for the additional/special remedy and he is a party to an arbitration agreement, there is no inhibition in disputes being proceeded in arbitration. It is only the case where specific/special remedies are provided for and which are opted by an aggrieved person that judicial authority can refuse to relegate the parties to the arbitration.”

15.           Further, similar view was taken by Hon’ble National Commission in case titled as Sanjay Gopinath Versus M/s IREO Grace Realitech Pvt. Ltd. (bunch of the cases) decided on 31.08.2021 wherein Hon’ble National Commission while placing reliance on the judgment of Hon’ble Supreme Court of India titled as M/s Emaar MGF Land Limited Versus Aftab Singh-I (2019) CPJ 5 (SC) has held that an Arbitration clause in the Agreement does not bar the jurisdiction of Consumer Fora to entertain the complaint. Hence, the objection raised by the learned counsel for the opposite party that the clause of Arbitration bars this commission from entertaining the complaints is unsustainable.

16.           Hence, keeping in view ratio of the law laid down in the above judgments and in view of above discussion, this Commission has jurisdiction to entertain and try the present complaint.

17.           The core issue of the complainant is that the bank/SBI card failure to ensure a secure banking environment, resulting in unauthorized transactions, constitutes a service deficiency. The complainant seeks compensation for the amount wrongfully withdrawn, including interest from the loss date, and additional compensation for mental anguish, hardship, and financial loss caused by the bank/ SBI card negligence.

18.           The complainant has alleged that on 13.10.2021, an amount of Rs.1,28,651/- has been debited from the credit card of the complainant by the third person and he immediately informed the OPs with regard to debiting of Rs.1,28,651/- from his credit card and requested them to block the credit card. The onus to prove his case was relied upon the complainant. To prove his case, the complainant has placed on file, copy of e-mail Ex.C1 dated 13.10.2021, which was sent to bank and SBI Card. The relevant portion of the e-mail is reproduced as under:-

“It is submitted to your kind information that a fraud transaction of amount Rs.1,28,651/- was done today by calling from a No.+911860180129 which is the same as customer care number. The screen shot of the message is attached herewith for your reference. Then immediately I called customer care and asked them not to clear this transaction and block my credit card. Now you are requested to do the needful in this matter so that deducted amount will be refunded”.

19.           In reference to the said e-mail, the OP No.2 has replied through e-mail Ex.C2, dated 15.10.2021, the relevant portion of the said e-mail is reproduced as under:-

“We would like to inform you that as per our records, the transaction has not yet been confirmed by the concerned merchant.

Furthermore, we hereby inform you that the transactions get cancelled automatically, in case the same is not confirmed within 4 days from the date of debit.”

 

 20.          It has been proved from the above said e-mails that complainant has immediately informed the OPs with regard to fraud transaction committed in his credit card and OP No.2 has assured that said transaction get automatically be cancelled within 4 days from the date of debit.

21.           After that the complainant made conversation with the OPs through the e-mails Ex.C3 to C13 with regard to the said transaction and for redressal of his grievances but OPs have failed to resolve his grievances. 

22.           The opposite party has alleged that the transaction occurred because the complainant voluntarily shared OTP, indicating negligence on his part, absolving them of any service deficiency. Moreover, the number from which the complainant received call and shared OTP was of customer care number of SBI Card and if the representative of the SBI demands the personal credentials, then every prudent person upon doing the faith upon the representative of such a reputed bank in all over India, can share the OTP. Moreover, the OP has not denied the factum that the number from which the call was received by the complainant was not of their customer care. In this regard, we place reliance judgment of Honorable Justice Mr. P.B. Suresh Kumar, wherein it has been held that the Bank is responsible for reimbursing the sum involved in the fraudulent ATM withdrawals. He dismissed all the defenses presented by the Bank and further concluded that:

"In short., there is also no difficulty in holding that if a customer suffers loss in connection with the transactions made without his junction by fraudsters, it has to be presumed that it is on account of the failure on the part of the bank to put in place a system which prevents such withdrawals, and the banks are, therefore, liable for the loss caused to their customers. All over the world, the courts are adopting the aforesaid approach to protect the interests of the customers of electronic banking."

 

23.           The above judgment highlighted several important aspects pertinent to banking, which have been consistently emphasized to various judicial authorities:

A.             In digital banking, the relationship between a agreement. remains that of a debtor and creditor, governed by their contractual banker and a customer

B.             The duty of care forms an integral, though not exhaustively defined, part of the contractual relationship between the banker and customer. This includes banks having the responsibility to exercise reasonable care in safeguarding customer unauthorized transactions. interests, particularly in preventing

C.             Banks are obligated to establish a secure electronic banking environment to prevent any forms of malicious activities that could lead to customer losses.

D.             The liability of the customer cannot be determined solely based on SMS alerts.

E.             Consequently, the Court upheld the decree, mandating the bank to compensate the customer, including interest and costs.

In the context of electronic banking, banks offering such services are obligated to establish a secure electronic banking environment to prevent any malicious activities that could harm their customers. This obligation arises from an implied term in the contracts between banks and their customers, requiring the banks to safeguard their customers' funds against unauthorized transactions.

In developed countries, specific statutes are in place to define the liabilities and provide enforcement mechanisms to protect bank customers. For instance, in the United States, the Electronic Funds Transfer Act governs such Situations, stipulating conditions under which a consumer is liable for unauthorized electronic fund transfers Similarly, in Canada, the Canadian Code of Practice for Consumer Debit Card Services protects consumers from liabilities arising from unauthorized card use.

In India, although there is no specific statutory provision, the Reserve Bank of India (RBI) exercises control over banks and has issued various directives. These directives instruct banks to implement systems and procedures ensuring the safety and security of electronics banking transactions, establish mechanisms for fraud detection and prevention, assess risks from unauthorized transactions, and take appropriate measures to mitigate these risks.

 

24.           Furthermore, in case titled as The State Bank of India Vs P:V.George wherein Hon’ble Kerala High Court in RSA 1087 of 2018 has held that even when the Customer does not respond to the SMS alerts related to a fraudulent withdrawal, the Bank cannot deny the liability on a fraudulent transaction, despite the limited liability circular of RBI.

9. Question (i) The relationship between a bank and its customers arises out of the contracts entered into between them. Such contracts consist of general terms applicable to all transactions and also special terms applicable to the special services, if any, provided by the bank to its customers. The relationship between a bank and its customer, RSA No. 1087 of 2018 in so far as it relates to the money deposited in the account of a customer, is that of debtor and creditor. The contractual relationship exists between a bank and its customers are founded on customs and usages. Many of these customs and usages have been recognized by courts and it is now an accepted principle that to the extent that they have been so recognized,  by courts and it is now an accepted principle that to the extent that they have been so recognized, they are implied

terms of the contracts between banks and their customers. Duties of care is an accepted implied term in the contractual relationship that exists between a bank and its customer. It is impossible to define exhaustively the duties of care owed by a bank to its customer. It depends on the nature of services extended by the bank to its customers. But one thing is certain that where a bank is providing service to its customer, it owes a duty to exercise reasonable care to protect the interests of the customer. Needless to say, that a bank owes a duty to its customers to take necessary steps to prevent unauthorised withdrawals from their accounts. As a corollary, there is no difficulty in holding that if a customer suffers loss on account of the transactions not authorised by him, the bank is liable to the customer for the said loss."

 

25.           The point No.6 and 6 (A) of grievance redressal policy Ex.C14, is reproduced as under:-

6.     Liability of the customers in unauthorized credit card transactions:-    

       

SBI card is committed to provide superior and safe customer service experience to all its customers. In order to enable the above, SBI card has over the years invested in technology and has robust security systems and fraud detection and preventions mechanisms in place to ensure safe and secure experience to its customers.

The customer protection policy is designed to ensure customer protection relating to unauthorized transactions resulting in debits to customer’s card. The policy is based on the principles of transparency and fairness in the treatment of customers.

1. Zero liability of customer

Customer shall be entitled to full compensation of real loss in the event of contributory fraud/negligence/deficiency on the part of SBI Card (irrespective of whether or not the transaction is reported by the customer).

Customer has Zero Liability in all cases of third party breach where the deficiency lies neither with SBI card nor with the customer but lies elsewhere in the system and the customer notifies SBI card within three working days of receiving the communication from SBI Card regarding the unauthorized transaction.

26.           From the above said grievance redressal policy, it is proved that the customer has zero liability in all cases of third party breach subject to the condition that the customer notify SBI card within three working days of receiving the communication from SBI card regarding unauthorized transaction.

27.           Furthermore, the relevant portion of customer protection - limiting liability of customers in unauthorized electronic banking transactions issued by RBI vide DBR No.Leg.BC.78/09.07.005/2017-18 dated 06.06.2017, is reproduced as under:-

6 (b) Limited liability of a customer.

A customer shall be liable for the loss occurring due to unauthorized transactions in the following cases:

 

1. In cases where the loss is due to negligence by a customer, such as where he has shared the payment credentials, the customer will bear the entire loss until he reports the unauthorized transaction to the bank. Any loss occurring after the reporting of the unauthorized transaction shall be borne by the bank.
2. In cases where the responsibility for the unauthorized electronic banking transaction lies neither with the bank nor with the customer, but lies elsewhere in the system and when there is a delay (of four to seven working days after receiving the communication from the bank) on the part of the customer in notifying the bank of such a transaction, the per transaction liability of the customer shall be limited to the transaction value or the amount mentioned in Table 1 whichever is lower. 

28.           Furthermore, the Hon’ble Kerala High Court, in case  titled as State Bank of India Versus P.V. George has held that banks are liable for every unauthorized online transaction. Liability on customers is limited to informing banks about the unauthorized transaction taken place. Therefore, it can easily be assumed that if any unauthorized transaction has taken place, the bank will be held accountable for such transaction provided that the bank has been informed about such transaction.

29.           Learned counsel for OP No.1 has alleged that the disputed amount has not been debited from the saving account of the complainant and OP No.2 has a separate legal entity, therefore, OP No.1 has no role to play in the matter in dispute. In order to prove its case, OP No.1 has placed on file copy of statement of account of the complainant’s account Ex.OP1 and on perusal of the same, it has been proved that disputed amount has not been debited from the account of complainant, rather the amount has been debited from the credit card of the complainant. Hence, there is no deficiency on the part of OP No.1.                 

29.           Keeping in view the ratio of the law laid down in the abovesaid judgments and the facts and circumstances of the present complaint, we are of the considered view that the act of the OP No.2 while not reversing the amount of Rs.1,28,651/- amounts to deficiency in service and unfair trade practice.

30.           In view of the above discussion, we allow the present complaint and direct the OP No.2 to refund Rs.1,28,651/- (Rs.One lac twenty eight thousand six hundred and fifty one only) and not to charge any interest/penalty upon the said amount. We further direct the OP No.2 to pay Rs.25,000/- to the complainant on account of mental agony and harassment suffered by him and Rs.11,000/- for the litigation expense. Complaint qua OP No.1 stands dismissed. This order shall be complied within 45 days from the receipt of copy of this order. The parties concerned be communicated of the order accordingly and the file be consigned to the record room after due compliance.

 

Dated: 02.04.2024                                                           

                                                                  President,

                                                     District Consumer Disputes

                                                     Redressal Commission, Karnal.

 

(Vineet Kaushik)        (Dr. Suman Singh)

                           Member                          Member