Factual Background 

In the case of Dr R Pavithra v The Commissioner of Police Pavithra’s In response to complaints, it was discovered that two people had hacked into her savings bank account and transferred funds to their Paytm accounts using the latter’s electronic payment system. Her bank, the City Union Bank, as well as Paytm, had all declined to take accountability for the erroneous transactions.

Argument Advance

Paytm argues that the court has no jurisdiction to institute a suit and it does not interfere in transactions between regulated entities and their customers.

Analysis of Court Order 

Although the digital payment platform Paytm is a private organization and not a bank subject to writ jurisdiction the Madras High Court single bench Justice RN Manjula ruled that Paytm cannot avoid its responsibility to protect its customers in accordance with the Reserve Bank of India (RBI) guidelines. To compensate a post-graduate medical student who had lost almost 3 lakh due to fraudulent transactions on Paytm, the RBI was instructed to provide directions to Paytm.

The High Court ruled that the petitioner should not be punished for any error she made because every institution was shifting the responsibility from one party to another. Even while it is recommended that people use payment banks like Paytm, Google Pay, Amazon Pay, etc. they may still be impacted by third-party violations or fraudulent activity. The petitioner instantly complained to her bank, which then relayed her concerns to Paytm, according to the court. Additionally, it stated that Paytm was required under RBI circulars to prove, within 90 days of the incident, that the petitioner was accountable for the loss. But it hadn’t succeeded in doing that. Thus, the Court stated, regardless of whether the fault was on her side or not, the cash needed to be restored to the client in accordance with RBI rules. As a result, it instructed RBI to instruct Paytm to make up for the loss. Writ Petitions are permitted.