Why SBI ordered to refund Rs 1.6 lakh to consumer after cloned ATM fraud

“The conclusion drawn by the District Consumer Commission that fraud had indeed occurred with the complainant appears correct,” the state consumer commission said on May 20, rejecting SBI’s contention that the customer himself was responsible for the disputed transactions.

State commission rejects SBI’s defence

The state commission, however, found no convincing material to show that the complainant had shared confidential payment credentials with anyone.

It observed that although the complainant’s son may have occasionally used the ATM card, that by itself did not prove authorization for the fraudulent transactions.

The bench noted that SBI itself admitted that Rs 1.60 lakh had been transferred from the complainant’s account through six transactions into another account.

The commission also took note of the fact that the complainant had written to the branch manager on the very date of the incident.

Distinguishing the national consumer commission ruling cited by SBI, the state commission observed that the earlier case involved admitted sharing of payment credentials, whereas no such evidence existed in the present case.

Fraudulent withdrawals through cloned ATM card

According to the complaint, Mahendra Kumar, a resident of Bhojasar village in Jhunjhunu district, had an ATM-enabled account with SBI’s Mandawa branch.

He alleged that on January 5, 2018, fraudsters cloned his ATM card and siphoned off Rs 1.60 lakh through a series of transactions into a bank account in Patiala.

The complainant stated that immediately after receiving information about the unauthorized withdrawals, he informed SBI and requested the bank to freeze the recipient account.

However, he alleged that the bank failed to take immediate steps and instead advised him to first lodge a police complaint.

By the time any effective action was taken, the money had already been withdrawn by the fraudsters.

Kumar further claimed that despite repeated follow-ups and even a complaint before the banking ombudsman, the bank neither carried out proper action nor refunded the amount lost in the fraud.

District commission had awarded compensation

The district consumer commission, Jhunjhunu had earlier allowed the complaint and directed SBI to refund Rs 1.60 lakh within 45 days.

It had also awarded Rs 25,000 towards mental and physical harassment and Rs 7,500 towards litigation expenses.

The district forum further ordered that if the bank failed to comply within 60 days, it would also have to pay 9 per cent annual interest from September 10, 2020 till realization of the amount.

Challenging this order, SBI argued before the state commission that the complainant himself had been negligent.

The bank contended that Mahendra Kumar had shared payment credentials and ATM access with his son, making the transactions possible.

SBI also argued that OTP and password authentication were necessary for such withdrawals and therefore the bank could not be blamed.

The bank further submitted that it had immediately blocked the ATM card and placed a hold on the beneficiary account after learning about the fraud.

It relied upon a February 20, 2024 decision of the national consumer commission to argue that banks cannot be held liable where customers share confidential payment credentials.

Compensation for harassment set aside

Upholding the finding of deficiency in service, the state commission partly modified the district forum’s order on the issue of compensation.

It held that once the complainant was being refunded the entire fraud amount of Rs 1.60 lakh, awarding an additional Rs 25,000 for mental and physical harassment was not justified in the facts of the case.

The commission accordingly set aside the Rs 25,000 compensation component but maintained the direction for refund of Rs 1.60 lakh along with applicable interest.

It also directed that the Rs 40,000 amount which had been kept on hold by the bank could be released to the complainant, subject to his consent.