High Court’s historic decision on SIM Swap fraud: BSNL’s negligence proved costly, now it will have to bear damages worth lakhs – ..
In the digital era, the faster the cases of cyber fraud are increasing, the bigger the challenge is being posed to the security system. In this series, Karnataka High Court has directly held the government telecom company BSNL (Bharat Sanchar Nigam Limited) responsible in a case related to ‘SIM-Swap’ fraud. This case pertains to the theft of more than ₹87 lakh from the account of a co-operative bank.
According to a report by ‘Bar & Bench’, the court found that BSNL officials had issued a duplicate SIM card to a stranger without any approval or verification from the bank. Using this SIM card, fraudsters obtained the transaction OTP of the bank and crossed lakhs of rupees.
What is the whole matter and how did this SIM-swap fraud happen?
This entire controversy is related to Shri Basaveshwara Pattana Cooperative Bank Regular. This co-operative bank had a current account in Canara Bank. The bank used a registered mobile number with BSNL to receive OTP for all its major internet banking and financial transactions.
Event date: Between February 6 and 7, 2019, fraudsters breached the bank’s accounts.
Illegal Transaction: The miscreants stole a total of Rs. 10,000 through seven different unauthorized RTGS and NEFT transactions without the bank’s knowledge. ₹87.7 lakh Took away.
Investigation revealed: Cyber crime investigation revealed that an unknown person had obtained a duplicate SIM card of the same registered mobile number of the bank from the BSNL office in Bengaluru. For this, neither any permission was taken from the bank nor proper verification of identity was done. The fraudsters had completed all the transactions with the help of the OTP received on this duplicate SIM.
Complete calculations of financial loss and court order
Of the total amount defrauded, ₹30 lakh was later returned and ₹7.12 lakh was recovered by the cyber crime police. Despite this the bank suffered a direct loss of ₹50,50,762. After sending a legal notice in the year 2021, the bank moved the Permanent Lok Adalat, which held BSNL negligent but fixed the compensation at only ₹5 lakh. After this the matter reached the High Court.
Justice Suraj Govindraj changed the old decision of the Lok Adalat and increased the compensation amount received by the Co-operative Bank and rejected all the arguments of BSNL.
Why did the court completely reject BSNL’s claims?
During the hearing, BSNL gave many arguments to protect itself, but the High Court found them legally wrong:
“The greater the risk, the greater the caution”
The High Court clarified that when a mobile number belongs to a banking institution and is being used for large financial transactions, then the responsibility of the telecom company increases more than usual. A stranger getting a duplicate SIM without proper verification proves that the company’s verification system was either completely broken or very superficial.
Vicarious Liability (responsibility for the fault of another): BSNL said that a departmental inquiry is going on against their official (Mr. Karunakaran) who had issued the SIM and the manager is not named in the police charge sheet. On this the court said that you cannot say two contradictory things simultaneously. To prove civil negligence, evidence of departmental discrepancy is enough; the company cannot absolve itself of the mistake of its employee.
Unique logic of insurance: BSNL also argued that the bank has already received ₹57.65 lakh from its insurance company, hence no compensation is due now. The court gave an excellent example by completely rejecting this argument.
Strong comment from the court
“BSNL cannot be allowed to run away from its responsibility just because the Co-operative Bank had wisely got itself insured. Arguing this is exactly the same as saying that since the robbery victim has received the claim money from his insurance company, the robber is no longer required to return the money or be prosecuted.”
This historic decision has made it clear that for even the slightest negligence in issuing SIM cards, telecom companies will have to pay a heavy price, which will further strengthen the digital security of common consumers and financial institutions.
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