Consumer Commission Rules Against HDFC Bank and Kotak Mahindra Bank in Unauthorised Transaction Case

Consumer Commission Rules Against HDFC Bank and Kotak Mahindra Bank in Unauthorised Transaction Case

The Consumer Disputes Redressal Commission (CDRC) bench of Bangalore Urban II Additional District Commissioner, with B. Devaraju as the President and V. Anuradha as the Member, has found HDFC Bank and Kotak Mahindra Bank responsible for their failure to take action following a formal complaint regarding a hacking incident involving the complainant's bank account. This incident resulted in the loss of ₹50,000 from the complainant's savings account.

On August 27, 2018, while Complainant Satish TN was in Ahmedabad, he received text messages on his mobile phone indicating that ₹50,000 had been transferred from his HDFC bank account in three separate transactions. Alarmed by this unauthorised activity, Satish TN immediately returned to Bengaluru and took steps to block his account at the Jayanagar branch. Further investigation discovered that the money had been transferred to another at the Parel, Mumbai, branch of a branch Kotak Mahindra Bank which was fraudulently opened in the complainant’s name.

Within three business days of detecting the deceitful transactions, Satish TN lodged a formal complaint with the bank authorities, adhering to the guidelines set forth by the Reserve Bank of India (RBI). Simultaneously, he reported the incident to the police, resulting in the identification of an individual located in Manipur. This individual had opened a bank account in Mumbai under the complainant’s name and executed the transfer of ₹50,000.

Dissatisfied with the insufficient actions taken by HDFC and Kotak Mahindra banks to address his concerns and recover his lost funds, Satish TN sought recourse by approaching the District Consumer Disputes Redressal Commission located in Shantinagar (District Commission) in October 2020.

Satish TN maintained that the unauthorised transactions stemmed from a hacking incident into his account while asserting that he had not disclosed any confidential information to anyone. His argument centred on the obligation of both banks, under the RBI guidelines, to conduct an investigation into the matter and reimburse the amount lost due to the online breach of his account. He underscored that his timely filing of a formal complaint within three days further reinforced this obligation. As part of his plea, he sought the recovery of the ₹50,000 that had been illicitly taken from his account, in addition to compensation for the inconvenience he had endured as a result of the incident and reimbursement for his legal expenses.

The banks claimed that the complaint was not sustainable and should be dismissed. They argued that all three transactions were conducted in accordance with the law, using the customer's registered mobile number, which generated OTPs. Consequently, they maintained that these transactions should not be deemed unlawful.

The District Commission considered the crucial fact that Satish TN had lodged a formal complaint with the bank authorities within three working days of uncovering the fraudulent transactions. According to RBI guidelines, when such a formal complaint is made within this timeframe, the bank is legally obliged to investigate and reimburse the amount involved in an online account breach. Despite this binding obligation, both banks implicated in the case had neglected to take swift and essential measures to address Satish TN's grievance.

Moreover, the District Commission took into account the RBI's directives regarding customer protection, which impose restrictions on customers' liability in instances of unauthorised electronic banking transactions. These guidelines explicitly state that if a formal complaint is filed within the prescribed timeframe, the bank is responsible for investigating and reimbursing the affected customer for the amount involved in an online account breach. The District Commission underscored that, as per the circular issued by the RBI, the onus of establishing customer liability in such situations falls squarely upon the bank.

As a result, the District Commission issued a combined order, mandating both HDFC Bank and Kotak Mahindra Bank to reimburse the misappropriated ₹50,000 to Satish TN. Furthermore, the commission decreed that Satish TN had the right to receive compensation for the inconvenience and distress he had endured due to the incident. Consequently, he was granted ₹25,000 as compensation and an additional ₹5,000 to cover his legal expenses.