State Bank of India v. Nakoda Chemicals Ltd.
In the Telecom Disputes Settlement and Appellate Tribunal
Cyber Appeal 8/2014
Before Justice Shiva Kirti Singh, Chairperson
Decided on January 21, 2020

Relevancy of the Case: Liability of the bank in an online banking fraud case

Statutes and Provisions Involved

• The Information Technology Act, 2000 (Section 43, 43A)

Relevant Facts of the Case

• Nakoda Chemicals Ltd has a bank account with the State Bank of India.
• They lost ₹18.35 lakhs due to 20 online transactions to 20 different accounts.
• Subsequently, the fraudsters withdrew money from various SBI ATMs in different cities.
• The respondent filed a complaint before the IT Adjudicator. The learned Adjudicator allowed the claim and directed the bank to compensate the loss incurred at an 18% interest, along with a cost of ₹39,750.

Prominent Arguments by the Advocates

• The appellant’s counsel contended that the respondent has suffered the loss due to their negligence. Authorised users of the respondent company provided the company account’s login information on a phishing link. They did not verify this link with the bank. Further, they are also liable for contributory negligence.
• The respondent’s counsel relied on Section 43 and 43A of the Information Technology Act, 2000. Since SBI is a body corporate, the bank must follow the RBI guidelines for payment authorisation. The bank has failed to follow the relevant RBI guidelines.

Opinion of the Bench

• The bank has failed to comply with the statutory requirement of providing reasonable security measures by sending OTP/SMS to the respondent company.
• Moreover, there is contributory negligence on the bank’s part. The bank has not approached the tribunal with clean hands, i.e., they did not adhere to the RBI guidelines.

Final Decision

• The tribunal dismissed the appeal and upheld the Adjudicating Officer’s order.
• Also, the tribunal directed the appellant to pay ₹18.35 lakhs at a 12% interest, along with ₹50,000 in costs. The interest rate shall revert to 18% if the bank fails to pay within two months.

Parth Chaturvedi, a graduate of the Faculty of Law at the University of Allahabad, prepared this case summary during his association with The Cyber Blog India in January 2022.