NCDRC holds HDFC Bank liable for deficiency in service by failing to reverse fraudulent transaction

NCDRC holds HDFC Bank liable for deficiency in service by failing to reverse fraudulent transaction

Sets aside the orders of the District and State Commissions

The New Delhi bench of the National Consumer Disputes Redressal Commission (NCDRC) has held HDFC Bank liable for deficiency in service for failing to provide security measures to the complainant on issuing a credit card, which resulted in unauthorized transactions of Rs. 24,000.

The bench led by Dr. Inder Jit Singh (Presiding Member) set aside the respective orders of the East Delhi District Commission and the Delhi State Commission and directed HDFC Bank to refund Rs.24,000 and pay a compensation of Rs.10,000 to the complainant.

An individual, Parveen Kumar Jain (complainant) owned a credit card issued by the HDFC Bank.

In 2014, he noticed unauthorized transactions of Rs.24,000 from his credit card. Despite promptly reporting the incident to the bank, including filing a police complaint, the bank did not reverse the unauthorized transactions.

Thereafter, despite regularly communicating with the bank, he did not receive a satisfactory response. Aggrieved by the outcome, the complainant approached the District Consumer Disputes Redressal Commission (DCDRC) East Delhi, by filing a complaint against the bank.

He contended that despite being a loyal customer for a decade, the bank unjustly demanded repayment for transactions not authorized by him. He stated that the bank was responsible for the security of his credit card.

In response, the bank submitted that the misuse of the credit card was facilitated by the complainant's disclosure of confidential details.

Thus, the DCDRC dismissed the complaint stating that the allegations involved fraud and required proper investigation and criminal trial, which was outside the scope of summary proceedings under the Consumer Protection Act.

Aggrieved by the decision of the district forum, the complainant, appealed before the Delhi State Consumer Disputes Redressal Commission (DSCDRC).

However, the State Commission upheld the District Commission's decision. It held that the issues involving disputes of a criminal nature could not be adjudicated under the summary proceedings of the Consumer Protection Act.

Subsequently, the complainant approached the NCDRC, which disagreed with the findings of the District and the State Commissions.

The NCDRC noted that the consumer commissions, established under the Consumer Protection Act, had the jurisdiction to adjudicate matters concerning deficiency in service provided by the service provider without delving into the criminal aspects of a transaction. It held that it was on them to filter out the causes of action.

The Commission held that banking was explicitly classified as a ‘service’ under Section 2 (1)(o) of the Consumer Protection Act. The primary consideration in the matter was whether the bank was deficient in service or engaged in unfair trade practices.

The NCDRC noted that the complainant, a user of the credit card issued by the bank, fell within the definition of a consumer. He had the right to file a complaint under the Consumer Protection Act.

While referring to the decision of the Supreme Court in the J.J. Merchant and Ors. vs. Shrinath Chaturvedi (2002 SC 635) case, the NCDRC observed that the Act provided an exhaustive procedure for summary or speedy trials. It ensured conformity with the principles of natural justice.

It pointed out that the legislature had deliberately furnished an alternative, effective, simple, inexpensive, and speedy remedy to the consumers. The Commission stated that it should not be curtailed because summary trials may not be suitable for dealing with questions of fact involving criminal aspects.

The NCDRC observed that the complainant had speedily reported the fraudulent transactions and took reasonable measures. Thus, while acknowledging the criminal nature of the offence, the Commission upheld the complainant's right to seek remedies under the Consumer Protection Act for deficiency in service.

The bench noted that the Reserve Bank of India (RBI) had issued comprehensive guidelines to address the situations involving internet/online fraud, specifying the respective liabilities of the customers and the banks. As per the guidelines, a customer incurs zero liability in case of unauthorized transactions due to contributory fraud or deficiency on the part of the bank.

The guidelines also covered situations of third-party breaches wherein the deficiency was outside the control of both the bank and the customer. The NCDRC further noted that if a customer notified the bank of such transactions within three working days, there was zero liability for him. However, a customer remained liable for losses resulting from unauthorized transactions if it was due to his negligence, such as by sharing the payment credentials.

The NCDRC observed that the complainant's credit card was used fraudulently for transactions of Rs.24,000. On receiving a confirmation call from the bank, he denied making the transactions. The next day, he contacted the Customer Care department of the bank to inquire about the disputed transactions.

The Commission held that the complainant took reasonable measures and showed no negligence in reporting the fraudulent transactions.

Thus, the NCDRC directed the bank to reverse the fraudulent transactions of Rs.24,000 and pay Rs.10,000 for the litigation costs incurred by the complainant.