The Karnataka High Court has directed Bharat Sanchar Nigam Limited (BSNL) to pay ₹55 lakh as compensation to a cooperative bank in Shivamogga district in connection with a SIM swap fraud case, pointing out the responsibility of telecom companies in safeguarding digital financial systems.
A bench headed by Justice Suraj Govindaraju passed the order while hearing separate petitions filed by Sri Basaveshwara Town Cooperative Bank of Shiralakoppa and BSNL, both challenging an earlier Lok Adalat ruling. The court directed BSNL to pay the compensation with 9 per cent interest from February 7, 2019.
The case relates to a fraud in which ₹87.70 lakh was siphoned off from the bank’s account through seven transactions carried out on February 6 and 7, 2019, using a duplicate SIM card issued in the bank’s registered mobile number.
Rejecting BSNL’s argument that it could not be held liable for a fraud committed by third parties, the court emphasised that telecom providers bear significant responsibility in an era where mobile numbers and one-time passwords (OTPs) are central to digital banking and UPI-based transactions.
The bench observed that it is unusual for a duplicate SIM card of the same number to be issued to another person without the knowledge of the original holder. It also noted that BSNL had initiated disciplinary action against the officer responsible for issuing the duplicate SIM, indicating an admission of fault.
The court expressed dissatisfaction with the argument that BSNL should not be liable because the bank had been compensated by its insurance provider. It remarked that such reasoning would imply that a wrongdoer could escape liability simply because the victim had received compensation from another source.
Holding that allowing BSNL to avoid responsibility would be unjust, the High Court enhanced the compensation from ₹5 lakh, as ordered by the Lok Adalat, to ₹55 lakh.
According to the case background, the cooperative bank maintained a current account with Canara Bank and had registered a BSNL SIM for internet banking operations. During the investigation, it was revealed that a BSNL branch in Bengaluru had issued a duplicate SIM of the bank’s registered number to an unknown individual without informing the bank or obtaining its consent.
The fraudsters used this SIM to gain access to OTPs and execute unauthorised transactions. Following the incident, the bank lodged a complaint with the Bengaluru Cyber Crime Police.
During the investigation, authorities recovered approximately ₹30 lakh and seized an additional ₹7.12 lakh. However, the bank still incurred a loss of ₹50.50 lakh.
Before the Lok Adalat, BSNL had argued that the fraud resulted from the bank’s failure to maintain confidentiality of its internet banking credentials and that the telecom company had no direct role in the transactions. The Lok Adalat subsequently ordered BSNL to pay ₹5 lakh as compensation.
Both parties challenged the decision in the High Court — BSNL seeking relief from liability and the bank seeking full recovery of its losses — leading to the present ruling.
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