Consumer court grants relief to ATM fraud victim

A bank cannot escape its liability by claiming its security systems are foolproof. If there is a flaw or a loophole in the system, the bank would be liable to make good the loss caused to its customer

Banks have security loopholes in their system, but they don't admit. In case of a malfunction, or cheating by a fraudster by exploiting a loophole, banks blame the customer. However, Vidyawanti, a State Bank of India (SBI) customer, sued the mighty SBI for an ATM fraud, and won the case (National Commission's judgment dated February 18, delivered by Justice Ajit Bharihoke for the Bench with Rekha Gupta in Revision Petition No. 4868 of 2012).

Vidyawanti had a savings account, with ATM facility, at SBI. On March 20, 2009 she went to State Bank of Patiala (SBP)'s ATM at Karnal to withdraw Rs 8,000. The ATM failed to dispense the money owing to a technical fault. So, she went to the SBI ATM, where she discovered Rs 40,000 had been withdrawn from her account through two fraudulent transactions of Rs 20,000 each.

Vidyawanti immediately wrote to SBP, demanding a refund of Rs 40,000. Since the bank failed to act on her letter, she filed a joint complaint against SBP and SBI. The banks contested the case. They claimed the ATM processes a request only when the ATM card is inserted in the machine and the personal identification number, or PIN, which is private and known only to the customer, is entered; without this, a transaction could not take place. The bank claimed it had investigated the complaint and not found any foul play.

Karnal District Forum noted that a similar complaint had been made by another customer, Gobind Lal Sharma, saying Rs 20,000 had been wrongly withdrawn from the same ATM on the same day. The Forum concluded the ATM was faulty, and held both SBI and SBP jointly responsible and liable. It also directed the banks to pay Rs 40,000 to Vidyawanti along with the interest at the rate of nine per cent a year from the date on which the amount was debited till payment.

The banks challenged this order in an appeal before the Haryana State Commission, which upheld the banks' defence and dismissed the complaint.

Vidyawanti then filed a revision petition before the National Commission. The banks argued that merely because Vidyawanti as well as Sharma had complained did not mean the complaints were genuine, and that both could also be bogus. The banks repeated its argument that the ATM would not permit any fraudulent transaction as it required the customer to feed in the secret PIN.

The Commission observed both Vidyawanti and Sharma had complained about ATM malfunctioning. So, it was clear there was foul play by a third person who manipulated the ATM machine and unauthorisedly withdrew money. The Commission concluded there was deficiency in service. It set aside the order of the State Commission and restored the order of the District Forum, holding the banks liable to pay Rs 40,000 along with interest.

A bank cannot escape its liability by claiming its security systems are foolproof. If there is a flaw or a loophole in the system, the bank would be liable to make good the loss caused to its customer.

The writer is a consumer activist