Bank will be liable for fraudent or unauthorised withdrawal of cash from...

Bank will be liable for fraudent or unauthorised withdrawal of cash from ATM


A State Commission held that the bank is liable to pay the compensation. In this case the complainant was having a savings account with the bank with the ATM cum Debit Card facility. When the complainant was at home, he got an SMS saying that the money is withdrawn from his bank account. But the main contention of the complainant was that he was having the ATM card and the pin number and the the money was withdrawn from his bank account fraudulently. According to the the electronic evidence, the CCTV footage showed that a man with a covered face, took out the money from the ATM. The commission held that the the PIN is like a password and only in the knowledge of the ATM Card holder does not mean that such withdrawals cannot be made unauthorisedly or fraudulently.



(Against order dtd. 30.5.08 in Appeal no.364/2008
Of the State Commission, Delhi)

STATE BANK OF INDIA ……. Petitioner (s)


K. K. BHALLA …….. Respondent (s)


For the Petitioner : Mr.Gautam Gupta, Advocate

For the Respondent : Mr.K.K.Bhalla, in-person.

Pronounced on 7th April, 2011



The present revision petition has been filed by the State Bank of India (hereinafter referred to as the ‘Petitioner’) being aggrieved by the order of the State Consumer Disputes Redressal Commission, New Delhi (hereinafter referred to as the ‘State Commission’) in favour of Shri K.K.Bhalla (hereinafter referred to as the ‘Respondent’).

The brief facts of the case are that the Respondent who was the original complainant before the District Forum was maintaining a savings bank account No.10502174881 with the Petitioner/Bank at its Janakpuri Branch, New Delhi and along with the savings bank account an ATM-cum-Debit facility was also given to the Respondent in order to facilitate him to operate his account. According to the Respondent, in January, 2006 he had a clear balance of Rs.77,629/- in his savings bank account and that he had operated the ATM-cum-Debit Card only about 4 times since December, 2005. Therefore, he was shocked when he went to the bank on 11.05.2006 to find that he had a balance of only Rs.391/- in his account and someone had fraudulently withdrawn Rs.65,116/- from his account. Since he had carefully kept the ATM Card as well as the password PIN number used for operating the card in his personal custody/knowledge, he suspected that his account was fraudulently manipulated with the connivance of someone in the Petitioner/Bank. He further stated that he was an 80 years old pensioner with no other source of income and was in great distress by this fraud committed in respect of his savings. He, therefore, filed a complaint before the District Forum requesting that the State Bank of India may be directed to deposit the aforesaid amount of Rs.65,116/- into his account at the earliest. Petitioner/Bank in reply to the complaint stated that the ATM-cum-Debit Card and the PIN number allotted to the customers are to be kept in their safe custody. Petitioner has no control over the same once this has been done. Further, the four digit password necessary to operate the ATM-cum-Debit Card is known and fed by the ATM cardholder and is not given by the Bank. Therefore, there is no deficiency in service on the part of the Petitioner.
During the proceedings the District Forum noted that CCTV footage is recorded at the ATMs to rule out fraudulent transactions. In view of this the District Forum issued the following directions to Shri R.C. Mangle, who was the Deputy Manager in the Petitioner/ Bank:
“OPs are directed to examine the CCTV footage of relevant time, when withdrawals have taken place through ATM from complainant’s account and at suitable time, to take help of complainant to identify the person involved in withdrawals relevant in this case. 08.02.08 for f/p.”

However, after due enquiries the District Forum was informed by the Petitioners that the CCTV footage from ATM at Delhi and Mandi(H.P.) on the date when the ATM Card of the Respondent was operated from these places was not available. For this reason, the District Forum accepted the complaint and directed the petitioner to credit in the saving bank account of the complainant the amount of fraudulent withdrawal and also to pay him compensation of Rs.15,000/- including the costs for the harassment caused.
Aggrieved by this order, Petitioner filed an appeal before the State Commission which dismissed the appeal on the following grounds:
“Merely because the ATM equipment does not accept anything except ATM card and PIN and the PIN is like a password and only in the knowledge of the ATM Card holder does not mean that such withdrawals cannot be made unauthorisedly or fraudulently. Had it been so there would not have been large number of cases of fraudulent withdrawals from the ATM accounts of consumers. This is not the first case of its kind that we are dealing with. In the past also we have dealt with large number of such cases and the same pleas were raised by the counsel for the bank that ATM equipment does not accept anything except ATM and PIN and the PIN is like a password and only in the knowledge of the ATM Card holder. Either such withdrawals are made by unauthorized persons who come to know about the PIN number either from the staff of the bank of even the connivance or involvement of the staff cannot be ruled out. Service provider like banks have to ensure that no such fraudulent withdrawals take place and to ensure that no such fraudulent withdrawals either through the connivance of the staff of the bank or by some unauthorized persons every bank is obliged to install CCTV and it was only through these CCTVs that large numbers of banks were able to detect fraudulent withdrawals.

In the instant case the District Forum took abundant precaution before arriving at the conclusion by directing the appellant to produce CCTV footage of all the dates withdrawals from the ATM but it failed to produce any of the footage.”

Hence the present revision petition.
Counsel for Petitioner was present. Respondent was present in-person. During his oral submissions, Counsel for Petitioner again reiterated that an ATM Card can only be used if the customer inputs his personal four digit identification number which is selected by the customer and not by the Bank. In the interest of security the customer is advised to retain this PIN in his memory so that no one else is privy to this information. The reverse of the ATM has a magnetic strip and white strip for signature of the cardholder. The Magnetic strip contains the cardholder’s details. This card can be used to gain entry into ATM enclosure by swiping it in the access lodge. In other words, unless a person is in possession of the relevant ATM Card and knows, the four digit PIN, the ATM Card cannot be used and operated. As a matter of further precaution, in case the PIN number is entered wrongly thrice in succession the ATM will swallow the card itself or cancel the card permanently. In the instant case the Respondent has himself stated that the ATM Card had never left his personal custody and, therefore, no one else could have access to use it. Also the four digit PIN necessary to operate the ATM was known only to the Respondent Under these circumstances, the contention of the Respondent that his ATM Card was fraudulently used by some staff of the bank has no basis.
Respondent confirmed before us that the ATM Card as well as the PIN number was only in his personal custody and knowledge and he had used the card only four times for smaller withdrawals. Under these circumstances, it was obvious that the account was fraudulently operated through the ATM. He suspected some bank staff to be involved in it. It was also suspicious that the CCTV footage was not available and in view of these circumstances the learned fora had rightly concluded that the Petitioner/Bank was responsible for the fraudulent use of the ATM for which he should be compensated.
We have heard the learned counsel for Petitioner as well as the Respondent and have gone through the evidence on record.
It is not in dispute that the ATM Card was issued to the Respondent and that he had kept the Card in his safe custody. Thus, no one had access to it nor was it ever missing. Further, only the Respondent was aware of the special four digit PIN number which is essential to operate the ATM Card. Despite all these facts, learned fora below ruled in favour of the Respondent only on the grounds that the CCTV footage which was required in respect of ATM transactions was not made available and this was a major lapse on the part of the Petitioner/Bank since it breached the security and safety in ATMs and was thus, clearly a deficiency in service.
We are not convinced by this reasoning of either the District Forum or the State Commission, particularly, in view of the fact that merely because the CCTV was not working on those dates and its footage was thus not available, does not mean that the money could be withdrawn fraudulently without using the ATM Card and the PIN number. In case the ATM Card had been stolen or the PIN number had become known to persons other than ATM card holder then the CCTV coverage could have helped in identifying the persons who had fraudulently used the card. In the instant case it is not disputed that the ATM Card or PIN remained in the self-custody/knowledge of the Respondent. In view of elaborate procedure evolved by the Petitioner/Bank to ensure that without the ATM Card and knowledge of the PIN number, it is not possible for money to be withdrawn by an unauthorized person from an ATM, we find it difficult to accept the Respondent’s contention. No doubt there have been cases of fraudulent withdrawals as stated by the State Commission but the circumstances of those cases may not be the same as in this case and in all probability, these fraudulent withdrawals occurred either because the ATM Card or the PIN number fell in wrong hands.
Keeping in view these facts, we have no option but to set aside the orders of the learned fora below and accept the revision petition which is allowed with no order as to costs.
Learned counsel for Petitioner/Bank states that he has already deposited 50% of the amount awarded by the learned fora below. If that be so, he is at liberty to seek its refund with accrued interest thereon.



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  1. Not advising the Bank within a reasonable time about unauthorized access to or erroneous transactions in the account(s) through the Internet Banking Services.

    The Bank shall not be liable for any unauthorized transactions in the account(s) through the use of Internet Banking Services which can be attributed to the fraudulent or negligent conduct of the User.
    The Bank shall not be liable to the account holder(s) for any damages whatsoever whether such damages are direct, indirect, incidental, consequential and irrespective of whether any claim is based on investment or any other loss of any character or nature whatsoever and whether sustained by the account holder(s) or any other person, if Internet Banking access is not available in the desired manner for reasons including but not limited to natural calamity, fire and other natural disasters, legal restraints , faults in the telecommunication network or Internet or network failure , software or hardware error or any other reasons beyond the control of the Bank.
    The Bank shall endeavor to take all possible steps to maintain secrecy and confidentiality of its customer account(s)/information but shall not be liable to the account holder(s) for any damages whatsoever caused on account of breach of secrecy/confidentiality due to reasons beyond the control of the Bank.
    Bank, for valid reasons, may refuse to execute any instructions placed by the User.
    The Bank will in no way be held responsible or liable for delay, failure and/or untimely delivery of SMS password and/or SMS Alerts due to but not limited to network congestions, network failure, systems failure or any others reasons beyond the reasonable control of the Bank or its service provider(s).
    Notwithstanding anything contained herein, where Bank has reason to believe that any transaction or marking of liens, have been fraudulently made (hereinafter referred to as a “suspect transaction”), Bank shall be entitled to withhold payment pertaining to such suspect transaction in accordance with regulatory laws relating to Money Laundering or otherwise. If Bank determines after due enquiry and investigation that the transaction is a valid transaction and not a suspect transaction, Bank shall release such withheld payment subsequently.


  2. Dear Readers
    please read it carefully in the end commission in revision petition change the order of state comm. and held it is not the liability of the bank.

    and dear Runjhun I would like to advice you please read it than you should make some summary