Bank Held Liable for Fraudulent ATM Withdrawals: Consumer Forum Upholds Customer's Rights.


22 October 2024 Civil Appeals >> Civil & Consumer Law   |   Consumer Protection Act >> Consumer Rights  

In a significant ruling of P.N.B. Main Branch, Haridwar Through its Branch Manager v/s Preet Kaur., that reinforces consumer protection in the digital banking era, the State Consumer Disputes Redressal Commission has dismissed an appeal filed by Punjab National Bank (PNB), upholding the decision of the District Consumer Disputes Redressal Forum, Haridwar. The case centered on the fraudulent withdrawal of Rs. 75,000 from the savings account of Preet Kaur, a labor worker, through ATM transactions in Ghaziabad.

The crux of the matter revolved around unauthorized transactions occurring between August 24th and 26th, 2018, despite Kaur's claim that she had not shared her ATM PIN or card details with anyone. The District Commission had previously ruled in favor of Kaur, directing PNB to refund the withdrawn amount with 6% interest and pay Rs. 5,000 as litigation costs.


 

 

PNB, in its appeal, argued that the transactions occurred outside the Haridwar jurisdiction, that the Ghaziabad ATM was not under their direct control, and that the customer was responsible for the security of her PIN. They also claimed the incident was not a case of card cloning.

However, the State Commission, after reviewing the evidence and RBI guidelines, found PNB's arguments unconvincing. The Commission emphasized the bank's responsibility to ensure the safety and security of electronic banking transactions, citing RBI notifications that mandate robust fraud detection and prevention mechanisms.

The ruling highlighted the bank's failure to provide concrete evidence that Kaur was negligent or that the transactions were not due to a security lapse on their part. The Commission noted that Kaur had promptly reported the fraudulent transactions to the bank and the police, yet PNB failed to take adequate action within the stipulated time frame as per RBI guidelines.

The Commission also addressed PNB’s argument regarding jurisdiction, stating that the bank's responsibility extended to securing transactions regardless of the ATM's location. They further noted the lack of CCTV footage or evidence proving Kaur's direct involvement in the Ghaziabad transactions.

Referencing several precedents from the National Consumer Disputes Redressal Commission, the State Commission underscored the principle that banks are liable for unauthorized transactions resulting from systemic failures or malfeasance, regardless of whether the fault lies with bank employees or external parties, provided the customer is not negligent.

The Commission concluded that PNB had failed to discharge its duty of care towards its customer, upholding the District Commission's order. This ruling serves as a crucial reminder to banks about their obligations in securing electronic transactions and protecting consumers from financial fraud. The decision reinforces the consumer's right to redressal in cases of unauthorized banking transactions and sets a precedent for holding banks accountable for security breaches.

The Commission directed that copies of the order be provided to all parties and uploaded to the Commission's website. The case file was consigned to the record room, marking the end of a significant legal battle for consumer justice.


Consumer Protection Act, 1986