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Kerala High Court observed that for loss of its customer’s money on aspect of unauthorized withdrawals where merely that the customer didn’t respond for the SMS the banks cannot be exonerated from liability.
Justice PB Suresh Kumar has observed that if loss if faced by the customer on some transaction which is not authorized by him then the liability is of the banks for the loss suffered by the party. He dismissed the second appeal filed by the State Bank of India.
In the present case there was a withdrawal of Rs.2,40,910.36 from PV George’s account of SBI NRE between the dates of 22/03/2012 and 26/03/2012 through different places of Brazil. A suit was filed by him against the bank seeking for refund of the amount with interest.
The trial court has dismissed the suit; the First appellate court has held that since there was an unauthorized withdrawal which was made by debit card issued to plaintiff through ATM in foreign country by an unauthorized third party the bank is liable for the loss of the plaintiff.
Justice Suresh Kumar has considered the following substantial question of law
The court has stated that any transaction which is not authorized by the customer due to which the customer has faced some loss, the liability will be on bank for the said loss. It has added that “There is a duty to exercise reasonable care by the bank to protect the interest of the customer as its providing service to the customer. The bank has to take necessary steps to prevent any kind of unauthorized withdrawals from their account.”
The bank has an obligation of creating safe electronic banking environment tackling all the wrongful and malicious conducts which results in loss for its customers. The court has also referred the statute which are put in place like countries that of USA and Canada where the liability and enforcement mechanism protects the interest of the customers of the bank.
The court referring to RBI circular has stated that if a loss is suffered by the customer regarding transaction which was made without his junction by some fraudster, then it is an ambit of failure on the part of security of the bank, therefore the liability will be of banks to their customers for the loss.
The judge said that “SMS alerts is a facility which most of the banks give to their customers in relation with their accounts where the electronic bank facility is there including ATM cum Debit Card. These kinds of facilities are provided to everyone even if they ask for such or not. Such voluntary facility given by the bank is questioning the rights of the customer as there is no specific term contract between the parties that if the customer doesn’t respond to the SMS alerts due to the unauthorized transaction which states that bank has the liability for such transaction and the account holders who doesn’t have a habit of checking their SMS alerts in regular intervals or are not able to check phone cannot be made liable merely that a SMS alert has received and they didn’t respond.
The court in this case has added that there was no such contract between the bank and customer and thus there would be a liability on the bank to refund the amount to the customer as ordered by First Appellate court.
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