Bank liable if customer loses money due to unauthorised withdrawals from account: Kerala Consumer Court

The consumer court added that a customer is not duty bound to read all SMS alerts sent about bank withdrawals, while directing SBI to pay the sum fraudulently withdrawn.

A Consumer court in Kerala recently emphasised that a bank is liable if a customer loses money due to unauthorised transactions from their bank accounts. [Salim PM v M/s State Bank of India].

The District Consumer Disputes Redressal Commission at Ernakulam made the observation while directing State Bank of India (SBI) to compensate a customer for an unauthorised withdrawal of money from his bank account.

The consumer court also rejected SBI's contention that there was no deficiency of service or unfair trade practice on its part since the customer, Salim, had been informed about the withdrawal through SMS notifications.

Rather, the consumer court opined that a customer cannot be expected to read all such SMS alerts.

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

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

A banking ombudsman had earlier directed SBI to pay Salim about ₹80,000 for his loss. An additional amount of ₹10,000 was also credited to his account.

Therefore, Salim moved the consumer court seeking the payment of the remaining ₹70,000 that he had lost.

A bench of district consumer forum President DB Binu and members V Ramachandran and Sreevidhia TN allowed the claim to the extent of ₹ 85,000 (₹70,000 for the loss, ₹10,000 as compensation and ₹5,000 as costs of litigation).

The bench opined that since the bank is providing a service to the customer, it owes a duty to exercise reasonable care to protect the interest of the customer. This includes a duty to take steps to prevent unauthorised withdrawals from a customer's bank accounts.

As a corollary, the court added that if a customer suffers a loss due to unauthorised transactions, the bank is liable to the customer for such loss.

In the complaint, Salim claimed alleged that a fraudulent withdrawal of money took place three times from his bank account due to which he lost a total sum of ₹1.6 lakh.

Salim submitted that before the incident, he noticed that his ATM card was not working and that he had approached SBI to replace his old card.

The bank informed him that it is in the process of replacing old cards with a new chip card. Thereafter, a new card was given to him, he added.

Salim further submitted when he went to the ATM to withdraw money, he was shocked to find only ₹ 3,011 was left. He claimed that an amount of ₹ 1.6 lakhs was lost from his bank account.

The consumer forum delivered its ruling in the case on July 29, when it ordered SBI to pay ₹85,000, in addition to the ₹90,000 already paid after the earlier banking ombudsman ruling.

[Read Final Order]