Order Paytm To Compensate Loss Suffered By Customer On Account Of Unauthorized Fraudulent Transaction: Madras HC Directs RBI
While hearing a petition as to an unauthorized fraudulent transaction from a bank account, and emphasizing that PayTM (Tenth Respondent) had failed to establish the liability on the part of the customer within 90 days as prescribed in the guidelines of the RBI, the Madras High Court has held that the RBI (Sixth Respondent) has got the obligation to intervene when to the knowledge of RBI, the PayTM continues to violate the RBI guidelines and adopts an unfriendly attitude towards its users.
Observing that a customer's savings habits or mode of money transactions could have an impact on the country's economy, the Single Judge Bench of Justice RN Manjula said that “the RBI has an obligation to safeguard the customer’s interest when it comes to their knowledge that a payment bank like PayTM evades to comply RBI guidelines and shrieks away its liability to compensate the petitioner in tune with the guidelines of RBI”.
Advocate Sharath Chandran appeared for the Petitioner, whereas, Advocate A. Gopinath appeared for the Respondent.
Going by the background of the case, the Petitioner, a postgraduate at the SRM Medical College, was serving as a resident doctor to attend the patients affected with COVID-19. On receiving continuous SMS showing an attempt made by some miscreant to hack into her savings account, she immediately asked the bank to block the account. Even though she was under the impression that her account had been blocked pursuant to her request, she found that there was an unauthorized debit from her account for a total sum of Rs.3 lacs in different installments. Aghast by this illegal siphoning off, she rushed to the City Union Bank and lodged a written complaint, apart from filing a police complaint.
On receiving information from her bank branch that her money was transferred fraudulently to a PayTM account, immediately, she called PayTM and registered a complaint. Again, the accused attempted to hack her account, but failed, since the transfer of funds had been blocked. Claiming that the complaint was filed within 3 days, the Petitioner sought for entitlement to reversal of loss suffered due to the fraud committed on her account. Since this was denied by the bank by attempting to shift the blame on the Petitioner, she suffered a miscarriage due to shock. The Petitioner then filed a complaint before the RBI Ombudsman, which was closed by observing that there was no deficiency observed against the bank. Hence, present petition.
After considering the submissions, the High Court said that even though the public is encouraged to use payment banks such as PayTM, Google Pay, Amazon Pay, etc., the customer is made to run from pillar to post, in case he is affected due to any 3rd party violations or fraudulent intervention.
“What is surprising is that even when the RBI has issued detailed master directions for both banks and Prepaid Payment Instruments [PPI], every institution shifts the blame upon the other and no one has come up with a concrete idea as to who has to bear the loss suffered by the petitioner, for none of her mistakes”, added the Court.
While referring to the claim made by the bank that there was no security compromise at their end, and hence, the banker is not liable to compensate the Petitioner, the High Court clarified that whatever might be the modus operandi adopted by the fraudsters, the fact remains that it was not the Petitioner who had revealed the details of her PIN Number or other details to the fraudsters either knowingly or unknowingly.
The Bench noted that when RBI was asked about this complaint, then RBI was also diplomatic to the extent that it did not pinpoint who would be liable to compensate the Petitioner.
“The case in hand does fall within the clause (b) of the following portion of the circular dated 04.01.2019 vide No. DPSS.CO.PD.No.1417/02.14.006/2018-19, which is applicable to all authorized non-bank Prepaid Payment Instrument issuers for customer protection/limiting the liability of customers in unauthorized electronic payment transactions in prepaid payment instruments (PPIs) issued by authorized non-banks”, added the Bench.
Accordingly, the High Court ordered RBI to issue directions to PayTM to make good the loss suffered by the Petitioner without any other reduction, except the reduction of the amount, if any already reversed to the account of the Petitioner.
Cause Title: Dr. R Pavithra v. Commissioner of Police and Ors.
