Karnataka HC directs BSNL to pay ₹55 lakh for issuing duplicate SIM

The Karnataka High Court directed Bharat Sanchar Nigam Limited (BSNL) to pay Rs 55 lakh in compensation to a cooperative bank in Shivamogga district in connection with a SIM swap fraud.

The High Court issued the order, warning that telecom companies must be extremely careful when distributing duplicate SIMs, as mobile numbers and OTPs are important security features in digital banking and UPI-based financial systems.

A bench headed by Justice Suraj Govindaraju passed this order after hearing separate petitions filed by Sri Basaveshwara Town Cooperative Bank of Shiralakoppa, Shivamogga and BSNL challenging the Lok Adalat’s order in the case. The bench directed that compensation be paid with 9% interest from February 7, 2019.

The case pertains to fraudsters siphoning Rs 87.7 lakh from the bank’s account using a duplicate SIM card. The Lok Adalat, which heard the case, ordered BSNL to pay Rs 5 lakh in compensation. Challenging the order, both BSNL and the bank had approached the High Court.

The bench rejected BSNL’s argument that it cannot be held liable for fraud committed by a third party. The bench stated that banking and telecom companies will bear more responsibility when registered mobile numbers are used for OTP-based high-value financial transactions.

The bench stated that it is uncommon for duplicate SIMs of the same number to reach others without the original holder’s knowledge. Moreover, by initiating disciplinary action against the officer who issued a duplicate SIM card, BSNL has admitted its mistake, the court said.

Expressing dissatisfaction with the lawyers’ argument that BSNL need not pay compensation because the money had been returned to the bank by the insurance company in compensation, the bench questioned if BSNL was suggesting that no action should be taken against the robber because the person who was robbed had been compensated by an insurance company.

The High Court ruled that allowing the erring BSNL to escape liability was unfair and ordered the payment of compensation.

Background of the case: Shri Basaveshwara Town Cooperative Bank held a current account with Canara Bank and had registered a BSNL SIM for internet banking transactions. On February 6 and 7, 2019, Rs 87.70 lakh was transferred from the bank account in seven transactions.

After learning of the fraud, the bank filed a complaint with the Bengaluru Cyber ​​Crime Police. During the investigation, it emerged that the BSNL Bengaluru branch issued the same SIM number assigned to the bank to an unknown person, who then used it to siphon off the bank’s funds. BSNL did not even inform the bank about the SIM card issuance. In addition, it was found that the bank’s permission was not obtained.

During the investigation, police recovered about Rs 30 lakh and seized Rs 7.12 lakh. However, the bank suffered a loss of Rs 50.50 lakh. In the Lok Adalat hearing, BSNL’s lawyer stated that the fraudsters connected Canara Bank with the applicant bank.

This is an internal fault of the bank. The bank failed to maintain the confidentiality of the internet banking login and password, the lawyer contended. They argued that BSNL has no connection with the transactions made from the bank account.

After several compromises, the Lok Adalat ordered BSNL to pay a compensation of Rs 5 lakh. BSNL filed an application in the High Court challenging this order. The bank also filed an appeal, claiming the Rs 5 lakh compensation was too little and that the entire amount should be recovered from BSNL. ETV Bharat