The Madras High Court has ruled that digital payment platform Paytm must compensate a victim of cyber fraud, despite not being a traditional banking institution.
Victim approaches court
This came forth when Dr R Pavithra, a post-graduate medical student, lost around INR 3 lakh due to fraudulent transactions on her Paytm account.
The hackers siphoned off her money from her savings account at City Union Bank using Paytm’s digital payment interface.
In a typical ‘pass-the-parcel’ scenario, neither party came upfront.
RBI’s role
The RBI which is a quiet observer in such matters also told the court it typically does not interfere in transactions between regulated entities and their customers.
Despite its detailed instructions for banks and Prepaid Payment Instruments (PPI), no concrete responsibility has been established for such third-party violations.
The Madras High Court cut to the chase by insisting that the complainant must not suffer for no fault of hers.
Paytm’s Misstep
Paytm failed to prove within the RBI-mandated 90-day period that the customer was liable for the loss.
This would make it clear that the amount should be repaid to the customer, irrespective of negligence on her part.
The Verdict
The High Court ruled that RBI must ensure Paytm compensates the victim
The order highlighted RBI’s obligation to intervene when Paytm continues to violate guidelines and adopts an unfriendly attitude towards its users.
This is a landmark ruling since it raises questions about the responsibilities of digital giants like Paytm, Google Pay, Amazon Pay, and others in protecting their users from fraud.
