The burden of proof in unauthorized electronic banking transactions lies with the bank, but customers can be liable if they were negligent, as shown in deliberate self-initiated transactions.

JUDGMENT :

SHEKHAR B. SARAF, J.

1. The present writ petition has been filed under Article 226 of the Constitution of India wherein the petitioners have prayed for the issuance of a writ of mandamus directing the Bank of Baroda (hereinafter referred to as ‘respondent no.1’) and Reserve Bank of India (hereinafter referred to as ‘respondent no.3’) to restore the illicitly embezzled fund of Rs.38,78,000/- inclusive of penal interest at the rate of 24%.

FACTS

2. The factual matrix of the present writ petition is delineated below:

a. The petitioner no.1 and petitioner no.2 are father and son respectively. Both of them are proprietors of their respective proprietorship firm engaged in the business of transformers fabrication.

b. Petitioners have opened two accounts with respondent no.1 which was having cash credit facility with limit of Rs.1,20,00,000/- and Rs.1,30,00,000/-, respectively and active net banking facility.

c. On June 19, 2022, petitioner no.1 transferred amount of Rs.37,85,000/- into account of petitioner no.2, and thereafter, the said amount was transferred to an unknown account. Aggrieved, the petitioner no.2 lodged an F.I.R dated June 21, 2022 in Cyber Crime Police Station, Civil Lines bearing no. 0012 of 2022 and the petitioner no.1 filed a complaint to respondent no.1 regarding the said embezzlement.

d. Being aggrieved by the inaction of respondents, petitioners approached this Court by means of the present writ petition.

CONTENTIONS OF PETITIONERS

3. The learned counsel appearing on behalf of the petitioners has made the following submissions:

a. It is the case of the petitioners that despite being vigilant and paying all due diligence, such unsolicited transactions have been carried out in their bank accounts.

b. The sim card got blocked and no sms and calls can be received subsequent to transfer of money from the account of petitioner no.1 to the account of petitioner no. 2.

c. No action has been taken either by the Police or the Bank even after intimation to the police within 24 hours the petitioner received sms. The investigation is halted without any reason.

d. The petitioner has reported the unsolicited transaction within 3 days according to RBI Circular no. RBI/2017-2018/15, DBR. NO. Leg. BC. 78/09.07.005/2017-2018 dated July 6, 2017 wherein it is provided that such fraudulent transaction should immediately be restored to customer without any liability and also the burden of proof in such scenario shall completely lie upon the bank.

e. The I.P. Address for the alleged transaction was not the same as of immediate preceding transaction which demonstrate that some third person was involved for the embezzlement.

f. To buttress his arguments, counsel has placed reliance on State Bank of India v. Pallabh Bhowmick & Ors. in S.L.P. No. 30677/2024 and a Bombay High Court Judgment in Jaiprakash Kulkarni and others v. The Banking Ombudsman and others (W.P. No. 1150 of 2023) reported in 2024 SCC Online Bombay 1666 wherein the court has held that amount withdrawn by fraudulent transaction, should be restored back, if reported.

CONTENTIONS OF RESPONDENTS

4. The learned counsel appearing on behalf of the respondents has rebutted the arguments of petitioner and made following submissions:

a. The alleged embezzled amount was transferred from the account of petitioner no.1 to the account of petitioner no.2 and subsequently has been utilised by transferring it to the accounts of beneficiaries that had already been added by