New Delhi: State-run telecom operator BSNL has been directed by the Karnataka High Court to pay more than Rs 55 lakh in compensation and damages to a co-operative bank that suffered losses in a SIM swap fraud. The court said that the duplicate SIM card was used to enable the cybercriminals to access OTPs and make fraudulent transactions in banking activities.
The judgement was issued in a case about Sri Basaveshwara Pattana Sahakara Bank Niyamitha, which had suffered more than Rs 87 lakh loss due to a series of unauthorised online transfers in February 2019. The court had ruled BSNL negligent in the procedure of verification and distribution of the SIM card, according to a report in The Times of India.
Fraudsters Used Duplicate SIM to Access Banking OTPs
The co-operative bank had a current account in Canara Bank, which was linked to a mobile number with BSNL for OTP-based authentication on internet banking transactions.
Between February 6 and February 7, 2019, fraudsters carried out seven unauthorised RTGS and NEFT transactions worth Rs 87.7 lakh. Later investigations found that an unknown person had got a duplicate SIM card in a BSNL office in Bengaluru which was connected to the bank’s registered mobile number.
The bank claimed it didn’t ask for or approve the duplicate SIM. Once they were able to access the OTP given to the number, the fraudsters could make unauthorised transfers.
Bank Recovered Part of the Amount
A sum of Rs 30 lakh was later credited back in reverse, and another Rs 7.12 lakh was recovered through police investigations, court documents said.
But the bank still had a loss of Rs 50.50 lakh, which it had not been able to recover, and thus sought compensation. The case was first heard in the Permanent Lok Adalat and then at the High Court.
Court Finds BSNL Negligent
Justice Suraj Govindaraj noted that there were serious lapses in the process of verifying a non-subscriber’s identity when he issued a duplicate SIM card.
“The very fact that a duplicate SIM reached a non-subscriber is proof that verification was either not conducted or was conducted in such a perfunctory manner as to be worthless,” the court said, as quoted by TOI.
The court added that telecom companies are more responsible in handling mobile numbers used for banking services and financial transactions.
Insurance Recovery Does Not Remove Liability
BSNL contended that the bank has already been able to recover significant losses through insurance claims and other recoveries and that it shouldn’t be compensated.
The High Court dismissed this argument, saying a victim’s insurance policy doesn’t exempt a negligent party of liability. The court said that it would not be just to let BSNL off the hook just because the bank had taken insurance precautionary measures.
Compensation Ordered by High Court
The Karnataka High Court now increased the compensation that was earlier provided and ordered BSNL to pay the following:
- Rs 5,050,762 principal compensation
- Rs 5 lakhs for consequential damages for damage to reputation and disruption of liquidity.
- Interest is at 9 per cent per annum from February 7, 2019.
The court also rejected the petition filed by BSNL challenging the compensation order, putting the blame on the telecom operator for damages caused due to the unauthorised issuance of SIMs.
