Case Note & Summary
The dispute arose from two unauthorized electronic debits from the respondent customer's State Bank of India account: Rs.1,99,000 and Rs.25,000 on 19.07.2022. The customer noticed the fraudulent debits and within three hours emailed the bank seeking reversal. The bank re-credited only Rs.25,000, not the larger amount, despite several requests. The customer filed a complaint before the District Consumer Disputes Redressal Commission, which dismissed it holding no deficiency of service and finding the RBI circular inapplicable. On appeal, the Karnataka State Consumer Disputes Redressal Commission allowed the appeal, directed reversal of Rs.1,99,000, and awarded Rs.25,000 compensation including litigation expenses. The State Commission held that the RBI zero liability clause applied because intimation was given within three hours and partial re-credit of Rs.25,000 indicated bank awareness of the fraud. The bank's second appeal before the National Consumer Disputes Redressal Commission was dismissed. The NCDRC accepted the customer's version that he had reported the fraud to Cyber Crime Police and SBI helpline immediately, and his account was freezed, thereby rejecting the bank's claim of delayed written intimation on 26.07.2022. The NCDRC relied on a Guwahati High Court Division Bench decision that in case of unauthorized electronic banking transaction due to third-party breach, customer liability is zero if reported within three working days; the bank is obliged under RBI circular to reverse the amount. Aggrieved, the bank filed the present writ petition under Articles 226 and 227 of the Constitution seeking certiorari to quash the orders dated 15.04.2026 and 26.05.2025. The High Court Bench heard the matter and reserved judgment. The available excerpt ends while discussing the NCDRC's reasoning, so the final High Court order is not stated.
Headnote
A) Consumer Protection - Unauthorized Electronic Banking Transactions - Zero Liability of Customer - Reserve Bank of India Circular on Customer Protection (Limited Liability) - Customer reported unauthorized debits of Rs.1,99,000 and Rs.25,000 within 3 hours of occurrence; bank re-credited only Rs.25,000; KSCDRC and NCDRC held that under RBI circular, if unauthorized transaction is reported within 3 working days, customer liability is zero and bank must reverse the amount; bank's defence of delayed intimation was rejected because contemporaneous complaint to Cyber Crime Police and SBI helpline established immediate reporting. Held that bank is liable to reverse Rs.1,99,000 and pay Rs.25,000 compensation (Paras 4.1-4.9).
B) Consumer Protection - Deficiency of Service - Burden of Proving Customer Negligence/OTP Sharing - Consumer Protection Act - The bank alleged customer shared OTP and downloaded fraudulent app, but NCDRC found no OTP was shared for the larger debits and only Rs.20 was credited after a fraudulent call; re-credit of Rs.25,000 presupposes bank's awareness of fraud. Held that bank cannot attribute negligence solely to customer in third-party breach (Paras 4.5-4.8).
C) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 Constitution of India, 1950 - Bank filed writ petition to quash NCDRC and State Commission orders; High Court heard arguments on whether concurrent findings of consumer fora should be interfered with in writ jurisdiction. Final High Court ruling not mentioned (Paras 1-3).
Issue of Consideration
Whether the KSCDRC and NCDRC were correct in applying the RBI zero liability circular to hold the Bank liable to reverse Rs.1,99,000 and pay Rs.25,000 compensation for an unauthorized electronic banking transaction reported within 3 hours, despite the Bank's defence of customer negligence and delayed written intimation.
Law Points
- RBI circular on customer protection
- zero liability of customer
- unauthorized electronic banking transaction
- reporting within 3 working days
- deficiency of service
- burden of proving OTP sharing
- re-credit of partial amount presupposes bank awareness
- writ jurisdiction under Articles 226 and 227
Case Details
2026 LawText (KAR) (08) 13
WRIT PETITION NO.18741 OF 2026 (GM-CON)
Francis Xavier, Pradosh Kumar Banerjee (Party-in-Person)
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Nature of Litigation
Writ petition under Articles 226 and 227 of the Constitution challenging orders of National Consumer Disputes Redressal Commission and Karnataka State Consumer Disputes Redressal Commission holding the petitioner bank liable for unauthorized electronic banking transactions.
Remedy Sought
The petitioner bank sought a writ of certiorari to quash the NCDRC order dated 15.04.2026 in Second Appeal No.NC/SA/540/2025 and the KSCDRC order dated 26.05.2025 in Appeal No.1742/2023, and to set aside directions to credit Rs.1,99,000 and pay Rs.25,000 compensation.
Filing Reason
The bank was aggrieved by concurrent findings of deficiency of service based on RBI zero liability circular despite its defence of customer negligence in sharing OTP and delayed written intimation.
Previous Decisions
District Consumer Disputes Redressal Commission dismissed the complaint holding no deficiency of service; Karnataka State Consumer Disputes Redressal Commission allowed the appeal and directed the bank to credit Rs.1,99,000 with Rs.25,000 compensation; National Consumer Disputes Redressal Commission upheld the State Commission order and dismissed the bank's second appeal.
Issues
Whether the RBI zero liability circular applies to an unauthorized electronic banking transaction reported within 3 hours of occurrence.
Whether the bank can avoid liability by alleging customer negligence in sharing OTP and delayed written intimation when contemporaneous reports to Cyber Crime Police and SBI helpline exist.
Whether the consumer fora correctly held the bank liable to reverse Rs.1,99,000 and pay Rs.25,000 compensation for deficiency of service.
Submissions/Arguments
Bank contended that the customer was responsible for sharing OTP and bank details on a fraudulent link, that the customer informed the bank in writing only on 26.07.2022 after 8 days, and that no deficiency of service could be attributed to the bank.
Bank argued that the customer voluntarily downloaded a fraudulent application and shared OTP despite repeated warnings by the bank, and therefore the bank cannot be burdened with liability.
Customer contended that he reported the fraudulent transaction immediately by email within 3 hours, that no OTP was shared for the debits, and that the re-credit of Rs.25,000 presupposed bank awareness of the unauthorized transaction.
Customer further argued that the bank's claim of delayed intimation was false because the matter was reported to Cyber Crime Police and SBI helpline immediately, leading to his account being freezed.
Ratio Decidendi
The NCDRC, relying on RBI circular and a Guwahati High Court Division Bench decision, held that in an unauthorized electronic banking transaction caused by third-party breach, customer liability is zero if the transaction is reported within three working days; the bank is obliged to reverse the amount. The High Court's ratio is not available in the excerpt.
Judgment Excerpts
Within 3 hours he has immediately mailed to the Bank with respect to fraudulent transaction and sought for credit of the amounts debited from his account.
The re-credit of Rs.25,000/- presupposes that the Bank was well aware of the fraudulent transaction and unauthorised debit.
The National Commission relying on the judgment of Division Bench of Guwahati High Court in State Bank of India Vs. Valhava, Boumik and four others in WA.No.364/2022 decided on 13.09.2024, wherein the Division Bench held that in case of unauthorised electronic banking transaction occurring due to third party breach, in that circumstances the efficiency neither lies with the customer nor the Bank.
Procedural History
Customer filed complaint before District Consumer Disputes Redressal Commission, which dismissed the complaint. Customer appealed to Karnataka State Consumer Disputes Redressal Commission in Appeal No.1742/2023; State Commission allowed the appeal on 26.05.2025 and directed bank to credit Rs.1,99,000 with Rs.25,000 compensation. Bank filed second appeal before National Consumer Disputes Redressal Commission in Second Appeal No.NC/SA/540/2025; NCDRC dismissed the appeal on 15.04.2026, upholding the State Commission. Bank filed present writ petition before High Court of Karnataka under Articles 226 and 227; matter reserved on 23.07.2026 and pronounced on 11.08.2026.
Acts & Sections
- Constitution of India, 1950: Articles 226, 227
