Delhi HC directs SBI to compensate customer in Cyber Fraud Case, emphasises bank’s responsibility in digital security [Read Judgment]

New Delhi: The Delhi High Court has delivered a significant judgment directing the State Bank of India (SBI) to compensate a customer who lost Rs. 2.60 lakh in a cyber fraud incident, emphasizing banks’ responsibility to protect customers from digital banking fraud.

Justice Dharmesh Sharma made important observations regarding banks’ obligations and customer protection in the realm of digital banking.

Delhi High Court Holds SBI Accountable for Cyber Fraud, Orders Compensation

The court addressed the case of Hare Ram Singh, an academician who fell victim to a vishing attack. Fraudsters tricked him into clicking a malicious link, leading to unauthorized withdrawals from his account. The court noted:

“The petitioner, an academician aged about 55 years, became a victim of cyber fraud perpetrated through a vishing attack wherein innocent people are enticed over voice calls to divulge sensitive information pertaining to their bank accounts.”

Highlighting the bank’s responsibilities, the court observed:

“Banking transactions are both contractual and fiduciary. The bank owes a duty to the customer. Therefore, the bank is bound to protect the interests of the customer in all circumstances.”

The court underscored SBI’s service deficiency, stating:

“Despite prompt intimation from the petitioner about the account breach, the bank showed no urgency. Respondents failed to exercise due care, neglecting their duty to act swiftly upon notification of the fraudulent withdrawal.”

Judgment Reinforces Banks’ Duty to Ensure Robust Digital Security Measures

In its judgment, the court directed SBI to pay Rs. 2.60 lakh with 9% interest from April 18, 2021, along with Rs. 25,000 as legal costs. The court concluded that the case fell under the “zero liability” category as per RBI guidelines, meaning the customer should not bear the loss.

The judgment also emphasized that banks must implement robust security measures and act promptly when customers report suspicious transactions.

Mr. Ravi Chandra appeared on behalf of the petitioner.
Mr. Rajiv Kapur, Mr. Akshit Kapur, Ms. Riya appeared for SBI, and Mr. Abhinav Sharma appeared for RBI.

Case Title: Hare Ram Singh vs Reserve Bank of India & Ors.

[Read Judgment]