Protecting Citizens from Banking Fraud: Lessons from a Mumbai High Court Decision

The Mumbai High Court recently made a landmark decision requiring a bank to refund Rs 77 lakh to a company called PSAPL after unauthorized transactions were made from its account. PSAPL received 13 SMS alerts notifying them of the transfers, which were made to unknown parties without their authorization. Despite filing complaints with the bank and the cybercrime cell of the police, the bank claimed that PSAPL was negligent for authorizing the transactions.

The dispute centered around whether PSAPL had added the beneficiaries and authorized the payments, as the bank claimed, and whether they had received the OTPs sent for verification. The bank’s internal systems team certified that the OTPs had been sent and delivered, leading to the accusation that PSAPL was involved with the fraudsters.

However, the Mumbai High Court intervened and ordered PSAPL’s service providers, Airtel and Rediffmail, to certify based on their logs. Both providers confirmed that no SMSes or emails from the bank were received by PSAPL on the specified days. As a result, the court ruled in favor of PSAPL, ordering the bank to refund the full amount.

This case highlights the importance of transparency and accountability in banking transactions, as well as the need for measures to prevent such incidents in the future. The writer of the article suggests implementing technology that allows senders to receive delivery confirmation for SMS messages, as well as enabling citizens to obtain verified logs of their communications from their service providers. Ultimately, the trust in banks must be restored to ensure the security of individuals’ finances.