The Calcutta High Court has set aside orders passed by the RBI Ombudsman and Axis Bank, directing the bank to refund amounts lost by a customer through unauthorized transactions. The Court held that under the Reserve Bank of India’s (RBI) circular on customer protection, the burden of proving customer liability in cases of unauthorized electronic banking transactions lies strictly with the bank.
Background of the Case
The petitioner, Tilak Shankar Mazumder, approached the High Court challenging an order dated January 29, 2025, passed by the RBI Ombudsman, which had closed his complaint under the Integrated Ombudsman Scheme, 2021.
The case originated in October 2024, when the petitioner’s daughter (the proforma respondent) was visiting Dublin, Ireland. She held an “add-on” credit card linked to the petitioner’s account. On October 20, 2024, her card was stolen, and two successive transactions of 1,000 Euros each were made at a store in Dublin within one minute of each other. The petitioner immediately reported the incident to Axis Bank (Respondent No. 2) and the police within 24 hours.
However, the bank rejected the claim and cast aspersions on the petitioner, alleging that the transactions could not have occurred unless the cardholder had divulged the card number and PIN to a third party. The RBI Ombudsman subsequently dismissed the complaint without assigning specific reasons.
Arguments of the Parties
For the Petitioner: Advocate Sourojit Dasgupta argued that the petitioner informed the bank within 24 hours of the fraudulent use, meeting the criteria for “Zero Liability” under RBI guidelines. He contended that since the card was stolen, there was no negligence on the part of the cardholder. Furthermore, he noted that the bank and the Ombudsman failed to follow the RBI’s standing circular dated July 6, 2017.
For Axis Bank (Respondent No. 2): Advocate Sayani Roy Choudhury submitted that the bank had blocked the card immediately upon receiving the complaint. She argued that the transactions occurred due to the negligence of the petitioner and his daughter, as the card was used without OTP or PIN facilities, requiring “extra caution” from the user. She further contended that since a criminal case was pending, the bank could not be held liable until fault was determined.
Court’s Analysis
Justice Krishna Rao examined the RBI Circular dated July 6, 2017, which outlines the “Limited Liability of a Customer.” The Court highlighted Clause 12 of the circular, stating: “The burden of proving customer liability in case of unauthorised electronic banking transaction shall lie on the bank.”
The Court observed that the bank failed to produce any evidence to prove negligence. Regarding the bank’s claim that the card required extra caution because it lacked PIN/OTP facilities, the Court noted:
“The respondent bank failed to bring any documents to establish that the loss is due to negligence of the petitioner… The bank has not proved that the theft complaint is false or at no point of time, the card was stolen.”
Citing the Gauhati High Court’s interpretation in State Bank of India vs. Pallabh Bhowmick, Justice Rao reiterated that banks have a duty to reverse unauthorized payments if reported within the stipulated timeframe. The Court found that the petitioner had acted promptly, and the bank could not absolve itself of liability based on “perceived negligence.”
Decision
The Court found that the respondents failed to establish that the unauthorized transactions were due to the petitioner’s negligence. Consequently, the Court set aside the orders of the RBI Ombudsman and Axis Bank.
The Court directed Axis Bank to refund the amount of the fraudulent transactions (2,000 Euros) along with associated charges to the petitioner’s account forthwith.
Case Details :
- Case Title: Tilak Shankar Mazumder vs. The Office of R.B.I. Ombudsman, Reserve Bank of India & Anr.
- Case No.: W.P.O. No. 260 of 2025
- Bench: Justice Krishna Rao
- Date: April 20, 2026
