Banks Liable For Unauthorised Withdrawals Even If Customers Did Not Respond To ‘SMS Alerts’: Kerala High Court

Banks Liable For Unauthorised Withdrawals Even If Customers Did Not Respond To ‘SMS Alerts’: Kerala High Court

The Kerala high Court observed that a bank cannot be exonerated from the liability for the loss caused to its customer on account of the unauthorised withdrawals made from his account merely on the ground that the customer has not responded promptly to the SMS alerts given by the bank.

Justice PB Suresh Kumar, while dismissing the second appeal filed by State Bank of India.

Bank’s duty to take necessary steps to prevent unauthorised withdrawals.

“Where a bank is providing service to its customer, it owes a duty to exercise reasonable care to protect the interests of the customer. Needless to say that a bank owes a duty to its customers to take necessary steps to prevent unauthorised withdrawals from their accounts”, the court said.

Create a safe electronic banking environment 

The court also said that it is the obligation of the banks providing such services, to create a safe electronic banking environment to combat all forms of malicious conducts resulting in loss to their customers.

Customer Not Responding To SMS Alerts Will Not Exonerate Bank’s Liability

Dismissing the appeal, the judge said: “SMS alerts is one of the facility extended by most of the banks to their customers in connection with the savings bank accounts having electronic banking facilities including ATM cum-Debit Card facilities. Such facilities are provided not only to those who specifically request for the same, but also to those who do not ask for such facilities. Could such a facility voluntarily given by banks to their customers determine the rights of parties, is the question. According to me, only if there exists a specific term in the contract between a bank and its customer to the effect that the bank would be exonerated from the liability in connection with the unauthorised transactions if the customer does not respond to the SMS alerts, SMS alerts cannot be the basis for determining the liability of the customer, for, there would be account holders who may not be in the habit of checking SMS alerts at regular intervals and account holders like the plaintiff in the instant case who is working in an offshore oil rig, who may not be able to access their mobile phones for several days having regard to the peculiarity of their avocation.”


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