GOPINATHAN PALAKKAL v Union of India, ICICI Bank Limited and Banking Ombudsman, Reserve Bank of India

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE N.NAGARESH** **THURSDAY, THE 28TH DAY OF JANUARY 2021/8TH MAGHA, 1942** ## **WP(C).No.9652 OF 2019(F)** ## **PETITIONER:** **GOPINATHAN PALAKKAL, AGED 61 YEARS, S/O T.P.KUNHIKANNAN NAMBIAR, TITAN, NELLIKKAVU ROAD, KARAPARAMBA P.O., CALICUT, KERALA-673 010.** **BY ADVS. SRI.M.RAMESH CHANDER (SR.) SMT.K.A.SANJEETHA SRI.BALU TOM** ## **RESPONDENTS:** |**1**|**UNION OF INDIA REPRESENTED BY**| |---|---| ||**SECRETARY TO MINISTRY OF FINANCE,**| ||**NEW DELHI-110 001.**| |**2**|**ICICI BANK LIMITED,**| ||**KOZHIKODE (CALICUT) BRANCH,**| ||**SHAFEER COMPLEX, OPP YMCA,**| ||**KANNUR ROAD, KOZHIKODE-673 001**| ||**REPRESENTED BY ITS MANAGER.**| |**3**|**BANKING OMBUDSMAN,**| ||**RESERVE BANK OF INDIA,**| ||**BAKERY JUNCTION,**| ||**THIRUVANANTHAPURAM-695 033.**| **R1 BY SRI.P.VIJAYAKUMAR, ASGI R1 BY ADV. SRI.RAMANARAYANA PRABHU, CGC R2 BY ADV. SRI.LAL K.JOSEPH R2 BY ADV. SRI.A.A.ZIYAD RAHMAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28.01.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C) No.9652/2019 : 2 : ## **J U D G M E N T** ~ ~ ~ ~ ~ ~ ~ ~ ~ _**Dated this the 28[th] day of January, 2021**_ The petitioner, a Chartered Accountant, has filed this writ petition aggrieved by Ext.P13 order of the Banking Ombudsman. The petitioner seeks to set aside Ext.P13 and to direct the 2[nd] respondent to reimburse ₹6.26 lakhs to the petitioner with interest. 2. The petitioner holds an NRI SB Account with the 2[nd] respondent-Bank. On 25.07.2015, the petitioner noticed that there were unauthorised debits totalling ₹6,26,000/- in his account occurred on 08.07.2015. The petitioner immediately informed the Relationship Manager and Customer Care and also filed police complaint which was acknowledged as per Ext.P1. Five unauthorised payments were effected on 08.07.2015 from the petitioner’s bank account through net-banking. The money was transferred to third parties in ICICI Bank accounts. WP(C) No.9652/2019 : 3 : 3. According to bank authorities, there is a three-layer security control (login password, Grid authentication and OTP alerts. The petitioner informed the Bank that ever since the account was opened, the petitioner was not provided OTP alert service. The Bank also admits that the five unauthorised transactions were made by two of their customers. As the grievance remained unredressed, the petitioner filed Ext.P3 complaint before the Banking Ombudsman. 4. The petitioner filed Ext.P4 statement also before the Ombudsman and the Bank filed Ext.P5 reply. The Ombudsman, as per Ext.P7 order, advised the Bank to take the help of Law Enforcement Agency to get confirmation regarding the email sent by the Bank to the complainant from the Yahoo admin. The Banking Ombudsman ordered that if it is established that OTPs were not sent to the complainant to his registered e-mail ID, the disputed amount should be paid by the Bank. However, after accepting Ext.P7 order of the Ombudsman, the Bank did not act upon and did not reimburse the amount of `6.2 lakhs to the petitioner. WP(C) No.9652/2019 : 4 : 5. The petitioner stated that the police registered Ext.P8 Crime under Section 379 read with Section 34 of IPC and Section 66(C)(B) of the IT Act. The Final Report submitted by the police would show that the amount wholly belonging to the petitioner was stolen by certain persons and it happened due to the negligence of the Bank. 6. The petitioner challenged the order of the Ombudsman in this Court filing W.P.(C) No.30642/2017. This Court disposed of the writ petition as per Ext.P10 judgment dated 21.12. 2018 holding as follows:- “9. In the above view of the matter, I am of the opinion that the summary rejection of a complaint which had been entertained by the Ombudsman in terms of Clause 13(a) of the Scheme was not warranted in the instant case. Since no settlement had been effected in the matter within the time prescribed and since the Ombudsman had apparently proceeded with the hearing of the matter even thereafter, I am of the opinion that the rejection on the ground that the complaint itself was not maintainable is unsustainable. 10. In the result, the proceedings of the Ombudsman closing the complaint preferred by the petitioner under Clause 13(a) of the Scheme are set aside. Exts.P8, P10 and P11 orders will also stand set aside. There will accordingly be a direction to the Banking Ombudsman to consider the complaint preferred by the petitioner on merits and pass orders on the same, after hearing the parties as well, within a WP(C) No.9652/2019 : 5 : period of four months from the date of receipt of a copy of this judgment.” The petitioner filed Ext.P11 statement and Ext.P12 arguments before the Ombudsman. 7. The petitioner would state that he brought to the notice of the Ombudsman the judgment of this Court in _**State Bank of India v. P.V. George [** 2019 (1) KHC 515]_ wherein this Court held that if a customer suffers loss in connection with 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. 8. However, the Ombudsman rejected the complaint as per Ext.P13 dated 13.03.2019 holding that while there is no denial of the fact that the petitioner had lost money due to unauthorised activity, the Ombudsman is not in a position to attribute banking related deficiencies as made out, against the Bank. The petitioner would submit that Ext.P13 order of the WP(C) No.9652/2019 : 6 : Banking Ombudsman is highly illegal and arbitrary. 9. The 2[nd] respondent-Bank filed a counter affidavit and contested the writ petition. The 2[nd] respondent stated that the petitioner had registered the complaint on 25.07.2015 though the transfer took place on 08.07.2015. Admittedly, the petitioner had compromised his grid authorisation and passwords, sharing it with his family members. The petitioner had recorded the grid values in his diary also. The usage of grid was therefore vulnerable. 10. The 2[nd] respondent stated that the fraudulent transactions were made between registered beneficiaries and the Bank had no reason to doubt the transaction. SMS alert service was not in existence during that time. On receipt of the complaint from the petitioner, the 2[nd] respondent conducted an internal investigation. The investigation revealed that it is an instance of internet phishing fund transfer case. The 2[nd] respondent had filed a statement dated 10.03.2016 before the Sub Inspector of Police, Nadakkavu giving detailed information. The 2[nd] respondent WP(C) No.9652/2019 : 7 : thus took all effective steps to trace out the real culprits. The 2[nd] respondent also requested the Sub Inspector of Police to retrieve the e-mail sent by the petitioner from Yahoo administrator. 11. The petitioner has contended that the Bank is responsible for the fraudulent transaction as no e-mails had been forwarded to his registered e-mail ID as to the OTP. The Bank had, in fact, sent the OTP alert in the registered e- mail ID of the petitioner. The petitioner could not prove the specific case put forth by him that no e-mails were sent from the Bank. In the circumstances, the Bank is not liable to make any payment to the petitioner. 12. I have heard the learned counsel for the petitioner, the Central Government Counsel representing the 1[st] respondent and the Standing Counsel appearing for the 2[nd] respondent. 13. The Banking Ombudsman has rejected the claim of the petitioner stating that the Bank had sent OTP in respect of the disputed transactions to the registered e-mail ID of the WP(C) No.9652/2019 : 8 : petitioner. The Bank could not have asked Yahoo administrator to retrieve records of mails sent to the petitioner. The Bank had addressed a letter to the Inspector of Police seeking their help in the matter. In spite of these efforts, the Yahoo administrator has not provided the requisite details. For the sole reason that the Bank could not provide the details, it cannot be concluded that the Bank is at fault. The learned Ombudsman held that while there is no denial of the fact that the petitioner had lost money to unauthorised activity, the Ombudsman is not in a position to attribute banking related deficiencies on the part of the 2[nd] respondent. On these premises, the learned Ombudsman closed with the complaint of the petitioner. 14. In the petitioner's case, the learned Ombudsman has come to a categorical finding that the debits in question are unauthorised. The Police investigation has _prima facie_ established that fraud has been committed. In almost identical circumstances, this Court considered the liability of the Bank in W.P.(C) No.28824/2017 and held as follows:- WP(C) No.9652/2019 : 9 : “20. Thus, it is clear that the bank cannot claim any amount from the customer when a transaction is shown to be a 'disputed transaction'. The bank can recover from the customers only when it can unequivocally prove that the customer was responsible for such transaction, independently through the civil court. The RBI guidelines is a clear mandate to exonerate a customer in such 'disputed transaction'. RBI circular presumes the innocence of the customer in such given circumstances. However, this innocence can be controverted. The onus falls on the bank to prove otherwise. 21. In the present case, the police investigation prima facie established that fraud has been committed. The beneficiaries hail from West Bengal. There is nothing on record to establish any connivance on the part of the petitioners. The police investigation also would reveal that the accused obtained duplicate SIM cards by using fake identity cards. It was also brought out that the beneficiaries immediately withdrew the money from their bank accounts at West Bengal. In such circumstances, the transactions can be treated as 'disputed transactions'. These transactions would fall within the sweep of zero liability as referred to in RBI Circular. The remedy of the bank in such circumstances is to approach the civil court and recover the amount from the persons who were responsible for such transactions. 22. As have come out of the pleadings, amounts have been debited from the loan account of the petitioners. The petitioners cannot be held responsible for such debit without establishing through the civil court that they are responsible for such withdrawal from the loan account. If any amount deposited by the petitioners also have been transferred, in the same manner, that shall be restored to the petitioners without any delay at any rate within two weeks from the date of receipt of a copy of this judgment. These directions are issued without prejudice to the bank to proceed against the persons who are responsible for these transactions WP(C) No.9652/2019 : 10 : through civil court. These writ petitions are disposed of accordingly. No costs.” The dictum laid down by this Court in WP(C) No.28824/2017 would squarely apply to the facts of the petitioners case. In the circumstances, the writ petition is allowed. The unauthorised debits from the account of the petitioner shall be restored to the petitioner by the Bank without any delay and, at any rate, within a period of one month. This direction will be without prejudice to the right of the Bank to proceed against the persons who are responsible for the unauthorised transactions in accordance with law. Sd/- **N. NAGARESH, JUDGE** aks/16.04.2021 WP(C) No.9652/2019 : 11 : ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 PHOTOSTAT COPY OF THE ACKNOWLEDGMENT GIVEN BY THE POLICE DATED 25.7.2015.** **EXHIBIT P2 PHOTOSTAT COPY OF THE COMPLAINT GIVEN BY THE PETITIONER BY EMAIL TO THE BANK REGARDING THE UNAUTHORIZED DEBITS ON 25.7.2015.** **EXHIBIT P3 PHOTOSTAT COPY OF THE COMPLAINT GIVEN TO THE BANKING OMBUDSMAN.** **EXHIBIT P4 PHOTOSTAT COPY OF THE STATEMENT FILED BY THE PETITIONER BEFORE THE BANKING OMBUDSMAN ON 4.2.2016.** **EXHIBIT P5 PHOTOSTAT COPY OF THE STATEMENT BY 3RD RESPONDENT BANK ON 30.10.2015.** **EXHIBIT P6 PHOTOSTAT COPY OF THE REPLY STATEMENT FILED BY THE PETITIONER ON 23.11.2015.** - **EXHIBIT P7 PHOTOSTAT COPY OF THE AWARD PASSED BY THE BANKING OMBUDSMAN DATED 4.2.2016.** **EXHIBIT P8 PHOTOSTAT COPY OF THE CHARGE U/S.379 R/W.SEC.34 OF IPC AND SEC.6(C)(D) OF THE IT ACT. EXHIBIT P9 PHOTOSTAT COPY OF THE COUNTER AFFIDAVIT (SITHOUT EXHIBITS) FILED BY 2ND RESPONDENT DATED 21.2.2018.** **EXHIBIT P10 PHOTOSTAT COPY OF THE JUDGMENT IN WPCNO.30642/2017 DATED 21.12.2018.** - **EXHIBIT P11 PHOTOSTAT COPY OF THE STATEMENT FILED BY THE PETITIONER ON 11.2.2019 IN THE MEETING OF THE BANKING OMBUDSMAN.** **EXHIBIT P12 PHOTOSTAT COPY OF THE WRITTEN ARGUMENT ELICTING THE POINTS PRESSED.** WP(C) No.9652/2019 : 12 : **EXHIBIT P13 PHOTOSTAT COPY OF THE ORDER NO.OBO(T)NO.5708/CTS 2773/2018-19 DATED 13.3.2019 ISSUED BY BANKING OMBUDSMAN.** ## **RESPONDENTS' EXHIBITS:** **EXHIBIT R2(a) TRUE COPY OF THE REPLY DATED 19-2-2016 SENT TO THE SUB INSPECTOR OF POLICE, NADAKKAVU POLICE STATION.** **EXHIBIT R2(b) TRUE COPY OF THE DETAILED ENQUIRY REPORT MADE BY THE ANSWERING RESPONDENT BANK.** **EXHIBIT R2 (c) TRUE COPY OF THE COMMUNICATION DATED 10.03.2016.** ncd