Introduction:

In a significant legal battle, Pharma Search Ayurveda Pvt. Ltd. and its director, Jaiprakash Kulkarni, challenged the Bank of Baroda over a cyber fraud incident resulting in the loss of Rs. 76,90,017. This case underscores crucial issues of customer liability in unauthorized electronic banking transactions.

Arguments of Both Sides:

Pharma Search Ayurveda Pvt. Ltd. and Jaiprakash Kulkarni argued that the bank failed to follow RBI guidelines, leading to unauthorized transactions without OTP verification. They maintained their innocence, claiming no negligence on their part, and promptly reported the fraud.

Bank of Baroda contended that the transactions were authenticated with valid credentials, including OTPs, implying customer negligence or compromise of credentials by the petitioners.

Court’s Judgment:

The Bombay High Court, led by Justice GS Kulkarni and Justice Firdosh P. Pooniwalla, examined the RBI Circular and the bank’s Consumer Protection Policy. The court ruled in favor of the petitioners, emphasizing that the fraud resulted from a third-party breach, absolving both the bank and the petitioners of liability under RBI guidelines. The court noted discrepancies in SMS and email notifications, confirming the absence of customer negligence. Consequently, it directed Bank of Baroda to refund Rs. 76,90,017 along with interest and compensation, overturning the Banking Ombudsman’s decision.