Kiran Raj

The Supreme Court of India, on January 3, 2025, dismissed the Special Leave Petition (SLP) filed by the State Bank of India (SBI), which challenged the Gauhati High Court’s judgment concerning fraudulent online transactions. The Supreme Court upheld the High Court’s decision, affirming that the respondent, Pallabh Bhowmick, bore no liability for the unauthorized transactions from his bank account, as no negligence on his part was established.

The case arose from online transactions conducted on October 18, 2021, which were found to be unauthorized and fraudulent. The respondent had promptly reported the transactions to the bank within 24 hours. The matter was initially heard by a Single Judge of the Gauhati High Court, who ruled in favor of the respondent. Subsequently, SBI filed an intra-court appeal, which was dismissed by the Division Bench of the High Court.

In its judgment, the High Court relied on clauses 8 and 9 of the Reserve Bank of India (RBI) Circular dated July 6, 2017. These provisions outline the liability framework for unauthorized electronic transactions, placing responsibility on the bank when no customer negligence can be established. The High Court stated:

"Having heard and considered the submissions of the learned counsel for the parties and after going through the materials available on record, we are in full agreement with the learned Single Judge that the online transactions that took place on 18.10.2021 from the respondent No. 1/petitioner’s Bank account were unauthorized and fraudulent in nature. No negligence on the part of respondent No. 1/petitioner could be established by the appellant. Clauses 8, 9 of the RBI Circular dated 06.07.2017 would apply. The respondent No. 1/petitioner will not have any liability."

The bank subsequently approached the Supreme Court, filing the SLP against this judgment.

The Supreme Court, comprising Justice J.B. Pardiwala and Justice R. Mahadevan, agreed with the High Court’s findings and dismissed the appeal. The Court observed:

"All transactions relating to the account of the respondent No.1 – herein maintained with the petitioner - Bank were found to be unauthorized and fraudulent. It is the responsibility of the bank so far as such unauthorized and fraudulent transactions are concerned. The Bank should remain vigilant. The Bank has the best of the technology available today to detect and prevent such unauthorized and fraudulent transactions."

The Court took into account that the respondent had immediately reported the fraud to the bank and that the evidence on record did not demonstrate any negligence on his part. The Court also referred to the RBI Circular clauses, which reinforce the bank’s duty to protect account holders from fraudulent activities.

At the same time, the Court noted that customers must also exercise caution and ensure that sensitive information such as OTPs is not shared with unauthorized parties. However, in this specific case, the Court found that the respondent fulfilled his responsibilities by promptly notifying the bank of the fraudulent activity.

The Supreme Court dismissed the Special Leave Petition, upholding the Gauhati High Court’s judgment that absolved the respondent of liability. The Court concluded:

"We see no good reason to disturb the impugned order passed by the High Court."

Pending applications associated with the petition were also disposed of by the Court.

Case Title: State Bank of India v. Pallabh Bhowmick & Ors.
Case Number: Petition for Special Leave to Appeal (C) No. 30677/2024
Bench: Justice J.B. Pardiwala and Justice R. Mahadevan

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