Deficiency of Service under Consumer Protection Act

Whether Illegal Debit reversed by a bank comes under the purview of

deficiency of service . What is the basis of ascertainment of quantum of
compensation and damages .
The moment a person comes into this world , he starts consuming. He needs
clothes, food items and many more things and these needs keep taking one form or the other
all along his life. Thus we all are consumers . When we approach the market as a consumer,
we expect value for money . Right quality, right quantity, right prices, right information about
the mode of use, etc. However , there may be instances where a consumer is harassed or
cheated .The government understood the need to protect consumers from such events to take
place and thus enacted The Consumer Protection Act 1986 to provide simpler and quicker
redressal of consumer grievances . This Act introduced the concept of consumer and provided
certain additional rights to him . The Consumer Protection Act provides means to protect
consumers from getting cheated or harassed by suppliers.

Who is a consumer ?
Section 2(d) of the Consumer Protection Act says that consumer means any person who—
(i) buys any goods for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment, and includes any user of such
goods other than the person who buys such goods for consideration paid or promised or
partly paid or partly promised, or under any system of deferred payment when such use
is made with the approval of such person, but does not include a person who obtains
such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred payment, and includes
any beneficiary of such services other than the person who hires or avails of the services
for consideration paid or promised, or partly paid and partly promised, or under any
system of deferred payment, when such services are availed of with the approval of the
first mentioned person;

This can be explained with the case of Dinesh Bhagat v. Bajaj Auto Ltd ( AIR 1992 , CPJ
272 )
In this case , A purchased a scooter which was in B’s possession from the date of purchase. B
was using it and taking it to the seller for repairs and service from time to time. Later on B
had a complaint regarding the scooter. He sued the seller. The seller pleaded that since B did
not buy the scooter, he was not a consumer under the Act. The Delhi State Commission held
that B, the complainant was using it with the approval of A, the buyer, and therefore he was
consumer under the Act. 1

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Any person who obtains the goods for resale or commercial purposes is not a consumer .
When goods are bought to resell or commercially exploit them, such buyer or user is not a
consumer under the Act. This can be explained with the case of Smt. Pushpa Meena v. Shah
Enterprises Ltd. ( AIR 1991 , CPR 229) .
In this case a jeep was purchased to run it as a taxi. The question was whether the buyer of
the jeep was a consumer under the Act. The Rajasthan State Commission held that to use the
jeep as a taxi with the object to earn profits was a commercial purpose, and therefore, the
buyer/user was not a consumer within the meaning of the Act .

Deficiency of Service according to the Consumer Protection Act , 1986 :

When a service is found deficient by a consumer, he can make a complaint under the Act.
The requirement is that the matter must fall within the definition of service, and it must entail
a deficiency as per the norms given by the Act.
Section 2(1)(g) of the Act provides that, deficiency means any fault, imperfection,
shortcoming or inadequacy in the quality, nature and manner of performance which is
required to be maintained by or under any law for the time being in force or has been under
taken to be performed by a person in pursuance of a contract or otherwise in relation to any
service. This can be explained with the help of certain cases .

In the case of General Manager, South Eastern Railway v. Anand Prasad Sinha I ( AIR
1991 , CPJ 10 (12) NC ).
A boarded a train. The compartment in which he and his wife travelled was in a bad shape-
fans not working, shutters of windows were not working, rexin of the upper berth was badly
torn and there were rusty nails which caused some injuries to the wife of A. A made a
complaint against the railway department. It was held that the complaint constituted
deficiency in service and the compensation of Rs. 1500 was awarded to A .

In another case , Poonam Verma v. Ashwin Patel ( AIR 1996 , II CPJ 1 SC ) :

Dr. A treated P under Allopathic system but he himself was a Homoeopathic practitioner.
Later on P allegated A for wrong treatment. The State Commission held it as deficiency in
service .

What is Illegal Debit and when can it be reversed ?

Debit card fraud occurs when criminal gains access our debit card number or our pin to make
unauthorized or illegal purchases . They can also withdraw cash from our account. There are
many different methods of obtaining our information . For example hackers can gain access
to our data from an insecure computer or network . When our debit card is used fraudulently,
the money goes missing from our account instantly and payments or checks may bounce,
and we may not be able to afford even certain necessities. It can take quite sometime for the
fraud to be cleared up and the money to be restored to our account . 2

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How can we detect debit card fraud ?

We can detect debit card fraud if we have signed up for online banking facilities which are
provided by the banks . Through the process of online banking , we can check our
transactions daily and as soon as a debit card fraud takes place , we get the message from the
banks that cash has been withdrawn from our account .

Case relating to illegal debit and deficiency of services :

Puneet Mittal vs State Bank Of India on 31 January, 2015 :

Court : Saket Court New Delhi ( District Court )

Judge : MS . Tanvi Khurana
Civil Suit No : 646/14
Case ID No : 02406C0103052013
Plaintiff : Mr. Puneet Mittal
Defendants : State Bank Of India (Nariman Point , Mumbai)
State Bank of India ( New Park extention, New Delhi )

Facts of the case :

The plaintiff had a Savings Bank Account with defendant – The State Bank of India,
Nariman Point , Mumbai , bearing no. 10786738903 at the Green Park Extension Branch
from last 25 years.
The ATM cum Debit Card number was also issued to the plaintiff by bank.
On 27.07.2012 he had received two messages on his mobile number reflecting that his ATM
cum Debit Card was used at ATM No. S0A001316022 at Majestic, Bangalore with
transaction no. 2605 and 2606 for withdrawing the amount of Rs. 40,000/ in two transactions
of Rs.20,000/ each, while ATM cum Debit Card was in possession of the plaintiff in Delhi.
The plaintiff immediately changed his PIN number and took a mini statement and found that
similarly Rs.40,000/ had been withdrawn on 27.07.2012 as well at MG Road, Bangalore.
Transactions Nos. were 9758 and 9759. The Plaintiff made complaint at the helpline number
of the bank and written complaint as lodged with Deputy Commissioner of Police, Hauz
Khas. The written complaint was also given to the bank on the same date and Card was
blocked. 3

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The plaintiff put forth that the bank was the custodian of the amount and the bank was liable
to prevent any misuse or fraudulent withdrawal of the amount.

The plaintiff sent a notice to the defendants that the demand of the amount of Rs. 80,000/
with 18% interest should be given to him as compensation and damages and Rs.80,000/ from
bank along with interest at the rate 18% amounting to Rs.10,200/should be given to him .
Therefore the suit for recovery of Rs. 90,200/ along with interest at the rate 18% should be
given to the plaintiff .

Issues of the Case :

The main issues of the case were :

1. Whether the plaintiff is entitled to recovery a sum of Rs. 90,200/ claimed in the plaint.
2. Whether the plaintiff is entitled to the interest claimed.
3. If the plaintiff is entitled to the interest then at what rate

Judgement of the case :

This suit was filed for the recovery of Rs. 90,200/ with future interest along with interest at
the rate of 18% per annum .
The plaintiff submitted that that he has held a Savings Bank Account with defendant – The
State Bank of India, Nariman Point , Mumbai , bearing no. 10786738903 at the Green Park
Extension Branch from last 25 years. ATM cum Debit Card number was also issued to the
plaintiff by bank.
On 27.07.2012 he had received two messages at on his mobile number reflecting that his
ATM cum Debit Card was used at ATM No. S0A001316022 at Majestic,Bangalore with
transaction no. 2605 and 2606 for withdrawing the amount of Rs. 40,000/ in two transactions
of Rs.20,000/ each, while ATM cum Debit Card was in possession of the plaintiff in Delhi.
The plaintiff immediately changed his PIN number and took a mini statement and found that
similarly Rs.40,000/ had been withdrawn on 27.07.2012 as well at MG Road, Bangalore.
Transactions Nos. were 9758 and 9759. The Plaintiff made complaint at the helpline number
of the bank and written complaint as lodged with Deputy Commissioner of Police, Hauz
Khas. The written complaint was also given to the bank on the same date and Card was
blocked.
The grievance of the plaintiff that defendant bank was the custodian of the amount and the
bank was liable to prevent any misuse or fraudulent withdrawal of the amount. Notice
seeking demand of the amount of Rs. 80,000/ with 18% interest was issued upon the
defendant on 01.11.2013. The present suit has been filed seeking Rs.80,000/ from bank
along with interest at the rate 18% amounting to Rs.10,200/. Therefore suit for recovery of
Rs. 90,200/ along with interest at the rate 18% was filed.

The defendant said that they filed their written statement challenging the maintainability of
the matter on the ground that plaintiff had not approached the court with clean hands.
Territorial jurisdiction of the court was also questioned as the alleged transaction of the ATM
cum Debit Card was stated to have taken place in Bangalore, Karnataka. The defendants held
that false allegations were levelled by the plaintiff as it is one of the condition for use of
ATM that issuing bank will not be held liable or responsible for any transaction incurred on
the card prior to the time of reporting the loss of the card to the banker.
The defendants argued that the terms and conditions clearly mention that card holder would
be liable for the loss when the someone obtained and misused the card. It was counter
alleged by the defendant that plaintiff must have shared his PIN with a third party in violation
of terms and conditions of ATM use. It was also submitted that the suit would not
maintainable by the application of Section 16, Specific Relief Act, 1963 as plaintiff has
himself violated the essential terms of the contract. It was further submitted that all four
transactions amounting to Rs. 80,000/ were done with the ATM card and valid ATM PIN. It
was also contended that after lodging the complaint no unlawful transaction or misuse of the
ATM Card was reported. It was also contended that there was no negligence on the part of
the defendant and hence, defendants were not liable.
It was mentioned that it is the duty and the responsibility of the customer for the safety
and security of the ATM Card and ATM pin . It was also mentioned that the messages (SMS)
are generated through system without manual intervention and it involves the role of
concerned service provider and defendant cannot be held to be liable for it. Rest of the
contents of the plaint were denied and it was stressed that plaintiff intentionally allowed
illegal withdrawal to some other person who was not authorised to withdraw and to receive
the same against instruction. It was contended that bank acted promptly in registering the
complaint of the plaintiff and card was immediately blocked. Any liability was denied and
the dismissal of the suit was prayed for.
The Plaintiff filed a replication denying the contents of the written statement and
maintaining the suit to be maintainable. It was mentioned that plaintiff is had his account in
Delhi , the amount was withdrawn from the account situated at Delhi. The SMS was received
in Delhi. The complaints were lodged in Delhi and legal notice was also issued and replied in
Delhi. Hence this court had the jurisdiction to entertain and decide the present suit.
It was maintained that there was no breach on the part of the plaintiff rather it was the
plaintiff who had promptly sought redressal by filing various complaints rather the bank did
not inform him about the other transactions which he got to know only when the mini
statements were taken from ATM Machine. It was submitted that redressal was also sought at
the Banking Ombudsman wherein proceeding on the complaint were stopped and plaintiff
was given option to approach any other Forum for resolution of his grievance. The plaint was
reaffirmed and claim sought was maintained.

Thus we can see that illegal debit does come under the purview of
deficiency of services and the bank will pay for the entire loss in the
following cases :

1. When a fraudulent transaction happens due to the deficiency or negligence on the part of
the bank irrespective of the fact that the customer has reported it or not , the customer should
not be held liable. As per RBI recommendations, the bank will have to refund to the customer
the transaction amount .

2. When there is a third-party breach where the deficiency lies neither with the bank nor the
customer but with the system somewhere else and the customer notifies the bank regarding
the transaction within three working days .

For example : The systems of Hitachi Payment Service, to which some banks had outsourced
their ATM transaction processing, were compromised affecting around 3.2 million cards
across banks such as ICICI, SBI, YES and HDFC.
In this scenario, if the customer informs the bank about the fraudulent transaction within
three working days after receiving the communication, the bank will have to make good the
entire loss to the customer.
If the fraud has happened due to the negligence of the customer, he or she will
have to bear the entire loss till the bank is informed about the transaction.
If the customer shares confidential information like ATM PIN, card number, etc, with
somebody knowingly or unknowingly, he or she will have to bear the entire loss till the bank
is informed about the transaction.
Thus the systems and procedures in banks must be designed to make customers
feel safe about carrying out electronic banking transactions. Banks must ask their customers
to mandatorily register for SMS alerts and wherever available register for e-mail alerts.
Further, banks have been told to not to offer the facility of electronic transactions, other than
ATM cash withdrawals, to customers who do not provide mobile numbers. Banks also have
to inform customers that they should notify the bank as soon as they find cash being
withdrawn from their account if they have not made the transaction . 4

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a-transaction-you-havent-done-read-this/articleshow/61577976.cms
Banks have to credit or reverse the unauthorised electronic transaction to the customer's
account within 10 working days from the date of notification by the customer. And once
reported, in case of debit card or bank account fraud, the bank should ensure that the
customer does not suffer loss of interest. If the transaction has happened on a credit card, the
customer should not have to suffer .
Also, once reported, banks have to resolve the case within 90 days from the date of receipt of
the complain.5

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you-fall-victim-to-a-fraudster/story/257827.html