Freezing of account not deficiency in service: Consumer court

A consumer court has ruled that if a bank freezes account of a costumer in case of internet hacking or economic fraud, it cannot be treated as deficiency in service.

With this observation, the Gujarat State Consumer Disputes Redressal Commission has quashed the order passed by Anand's consumer court, by which the Axis Bank was ordered to pay Rs 5,000 towards mental harassment and Rs 2,000 towards cost of litigation to Vijay Sonvani after the bank froze his savings account.

Sonvani's savings account was blocked after somebody extracted Rs 18,000 from his account in Pune through internet hacking. Sonvani had no clue about this. When he went to withdraw money from an ATM in Ahmedabad, he found the debit facility on his debit card as blocked. On inquiry, it was revealed that the amount was siphoned off from his account on December 11, 2008.

After entering some communication with the bank, Sonvani filed a complaint with a consumer forum at Anand for causing hardship by freezing his account. He demanded of Rs 60,000 towards damages, but the forum in 2010 asked the bank to pay Rs 7,000 and 6% interest till the date he moved the consumer court.

The forum, however, accepted the bank's claims that the debit facility was stopped as precautionary measure and it was done in good faith. It was to prevent further fraud because a third person happened to know the password from Sonvani and withdrew the amount. The action was taken in the interest of the consumer.

Aggrieved with the forum's order to pay damages, the bank moved the commission, which arrived at the conclusion that the bank's gesture of freezing the account was in Sonvani's interest.

The commission also noticed that money cannot be withdrawn without card and password, and even the bank also does not know password. The person who withdrew money seemed to know it in Pune, and this could be negligence on part of Sonvani.

The bank immediately lodged complaint and when the money was recovered, the amount was immediately deposited in the savings account. This was no deficiency in the bank's service.

Our opinion

Unfortunately as the original order of the commission being in Gujarati, we have to make do with the newspaper report and base our opinion on the same.

This  is one of those cases where you can clearly see merits and demerits on both sides. The bank was clearly trying to protect the customer by freezing the account but what is not clear is how the Bank came to know of the security breach when the customer has not complained ?

There are big gaps in the story. Even going with the case as presented in the newpaper, the bank should definitely have informed the customer of the freezing of his account. A Bank simply cannot freeze operations a customer's account arbitrarily as that can have serious ripple effect. What if he had given a cheque for some important payment? There is a deficiency of service.

But to us the most serious issue here is the growing net based transactions and their legal implications. The Bank is offering the passwords to the client and the client is supposed to keep it secret. After that if a breach happens, it is impossible for the customer to defend himself from the accusation that he must have been careless and therefore at fault. Unless, the customer can convince the court otherwise, it will be very difficult to force the Bank to check in their own house for the same breach. And it should be remembered, that often it is at the Bank's end the lack of stringent measures to protect customer data has been noticed.

The average person these days have started embracing the net and are not at all serious or very casual about transacting on the net. Net transactions are growing rapidly but unfortunately not the legal protections or clarity available to both the buyer and seller.

Article referred to
http://articles.timesofindia.indiatimes.com/2013-02-01/ahmedabad/36683589_1_consumer-court-consumer-forum-debit