‘Shakes common man’s faith in banking institutions’: Bombay HC orders banks to adopt sensitive approach to cyber fraud cases

A division bench of Justices Mahesh S Sonak and Advait M Sethna on October 17 passed an order on a plea by a businessman who had challenged the January 2021 order of the Banking Ombudsman that dismissed his complaint about the alleged fraud.

Advocate Harish Pandya said the Ombudsman did not hear his client before passing such an order and the decision was not even communicated to him and he could get a copy of the same only through RTI application.

Meanwhile, the lawyer of Reserve Bank of India (RBI) said the impugned order was sent to the petitioner through email but could not vouch for any hearing being given by the Ombudsman before the order was made.

“This complaint could not have been disposed of in a summary manner without even minimum compliance with the principle of natural justice or fair play. On the above short ground, we set aside the impugned order and restore the petitioner’s complaint to the Ombudsman,” the HC noted.

The court asked the Ombudsman to hear the petitioner and the bank and dispose of the “serious” complaint in accordance with law in an expeditious manner within four months.

The court also directed the state government to file before Ombudsman a copy of chargesheet or cyber report within four weeks.

Referring to a decision of the HC last year that had ordered a bank to refund an amount fraudulently debited from a firm’s bank account, the court asked the Ombudsman if any such relief can be granted to the petitioner. Another bench of HC had last year held that customers notifying bank on time have zero liability in unauthorised transaction due to third party breach through cyber fraud.

Justice Sonak-headed bench went on to observe, “The bank must also adopt a sensitive approach towards such matters. If the amounts are being allegedly siphoned off from the account holders, then the banks must see whether any further measure needs to be taken to prevent such incidents.”

“The attitude of simply denying everything and then claiming that the Ombudsman has no jurisdiction to investigate into the disputed facts is not proper. The bank must also cooperate with the Ombudsman because ultimately such incidents tend to shake the faith of the common people in our banking institutions,” the court added.

Disposing of the plea, the HC said that “even the Ombudsman should approach this matter from this perspective instead of a simple dispute between two parties.”