When you notice any fraudulent transaction in a bank account, one of the first things that everybody advises is to file a complaint with the police and inform the bank through its dedicated fraud transaction reporting mechanism. This is exactly what a person from Haridwar did when Rs 75,000 was withdrawn from his bank account through a fraudulent ATM transaction in Ghaziabad. However, the bank instead of solving this problem in time, allegedly implied that the person himself withdrew money from his bank account and is now trying to prove this transaction as a fraudulent one.
Frustrated by the bank’s behavior and the lack of meaningful progress in their investigation, the individual initially lodged a complaint with the banking ombudsman. Following that, they took the matter to a district consumer forum, which eventually led to the case being escalated to the Uttarakhand Consumer Commission. An interesting detail in this series of legal proceedings is that the bank consistently asserted that the ATM withdrawal in question was not fraudulent.
Read on to find out how an individual was awarded Rs 99,000 in compensation for the inadequate service provided by Punjab National Bank (PNB), and explore the reasons that led the Uttarakhand State Consumer Commission to issue such a ruling that PNB was responsible for the ATM fraud.
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What did the investigation by consumer forum and commission find
As per the order of Uttarakhand State Consumer Commission dated October 22, 2024, here’s what was found after the investigation:
● The complainant based in Haridwar, had Rs 77, 214 in her Punjab National Bank savings account out of which Rs 75,000 was withdrawn from an ATM in Ghaziabad between August 21, 2018 and August 26, 2018.
● The complainant alleged that PNB had sent no SMS alerts about these fraudulent transactions.
● When the complainant got to know about these transactions, she called PNB’s customer care and lodged a FIR in Haridwar’s Ranipur police station.
● According to PNB’s own investigation shared with the consumer forum, the complainant’s card was not cloned so it’s unlikely the transactions were fraudulent.
● State Police investigation revealed that these transactions took place due to card cloning.
● PNB failed to take any substantial action within three days of the transactions being reported as fraudulent.
“The appellant Bank has also not filed any concrete and reliable evidence on the fact that such fraudulent withdrawals were made by such an ATM card number which was already issued to the respondent – complainant and there was no case of card cloning,” noted the Uttarakhand State Consumer Commission in its investigation notes.
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PNB alleges customer herself conducted the fraud transactions
PNB’s legal team presented their case to the Uttarakhand State Consumer Commission, stating that the bank has completed an internal investigation and shared its findings with the Banking Ombudsman via an email dated May 8, 2019. Additionally, PNB’s lawyers emphasized that an ATM card can only be used when the cardholder physically possesses the card and enters the correct ATM PIN.
“…The responsibility to preserve the ATM pin lies solely on the account holder. There is no deficiency in service…., hence the appeal deserves to be allowed and the impugned judgement and order is liable to be set aside,” said PNB’s lawyers before the Uttarakhand State Commission.
PNB says it informed the customer via an alleged letter about its investigation
In a written statement, PNB stated before the Uttarakhand State Consumer Commission that a letter was sent to convey the findings of the bank’s investigation into the suspected fraudulent transactions.
“……But no concrete and reliable evidence has been given by the Bank to this regard whether such a letter was actually dispatched to the respondent – complainant either through registered post or by email,” said the Uttarakhand State Consumer Commission.
State Commission finds no merit in PNB’s argument and finds the bank guilty
The State Commission based its decision on the affidavit submitted by the complainant, in which she stated that she had never shared any details, such as the CVV of her ATM card or any other personal information, with anyone to facilitate the illegal transactions.
“If the illegal and fraudulent transactions were made without sharing pin-code CVV value and password to any other person, even then the transactions had taken place in any other city, i.e. Ghaziabad, in such circumstances, it will be deemed that there was no negligence on the part of the respondent – complainant and such transactions took place due to the reason that the Bank had not provided sufficient, full proof security for the ATM /Credit card transaction….The appellant Bank has also not filed any concrete and reliable evidence on the fact that such fraudulent withdrawals were made by such an ATM card number which was already issued to the respondent – complainant and there was no case of card cloning,” said the Uttarakhand State Consumer Commission.
State Commission orders PNB to pay compensation with interest
According to the order, here’s how much compensation PNB was ordered to pay:
● Pay Rs 75,000 with simple interest at 6% rate.
“The interest to be levied is from the date of institution of the complaint, i.e. 05.07.2019 till the date of final payment and further pay an amount of Rs 5,000/- towards the costs of litigation,” as per the order of the Uttarakhand State Consumer Commission.
If PNB decides to pay, then it has to pay Rs 75,000+6%*5 years 4 months*75,000= Rs 75,000+ 24,000= Rs 99,000. An email sent to PNB on November 7, 2024 did not elicit any response as of the time of publishing.
What might be the reason behind PNB losing the case
According to Vishal Gehrana, Principal Associate, Karanjawala & Co. and Advocate on Record, Supreme Court, in this case cited above, PNB was made liable primarily because it failed to fulfil its duty of due diligence towards the complainant.
Gehrana says, “The Commission observed that as a financial institution, PNB is responsible for protecting its customers from any unauthorised transactions and also ensuring the security of their bank accounts. Despite multiple withdrawals from the complainant’s account over a brief period, the bank did not send her any alerts, as mandated by guidelines issued by the RBI on electronic transactions. On account of the lapse on the part of the bank to inform the complainant promptly, the complainant could not take timely action to stop any further unauthorised withdrawals from her account. Further, the complainant has promptly reported the fraud both to the bank and the police. However, in the opinion of the Commission, the bank’s response was inadequate and did not meet the standard of service expected under the applicable laws.”
“This judgement reiterates that the obligations of the financial institutions like banks is to protect and assist their customers, particularly in cases of fraud and other financial crimes. Further, the judgement also emphasises that the bank has a fiduciary duty towards its clients, which goes much beyond the basic financial transactions. Banks hold a position of trust and must accordingly prioritise their clients’ interests, particularly when there is a possibility of fraud. The judgement of the Commission demonstrates that when banks fail to fulfil this fiduciary duty, they could be held liable for the damages suffered by the customer,” adds Gehrana.
