Bank to pay Rs 1 lakh to credit card customer after its collection agent harassed him to repay bill of a fraud transaction; rules Delhi HC
New Delhi, Dec 8, 2025
Synopsis
The Delhi High Court has awarded Rs 1 lakh to a credit card customer. This comes after the customer faced harassment from a bank's recovery agent. The court also ordered the bank to reverse Rs 76,777 in fraudulent transactions. The judgement highlights issues with the RBI's Ombudsman scheme and directs improvements for consumer protection.
On November 27, 2025, the Delhi High Court provided relief to Mr. Sarwar Raza after his credit card was misused for fraudulent transactions through Paytm, Flipkart, and others, amounting to Rs 76,777. Mr. Raza told the court that despite notifying the bank about these fraudulent transactions, he received an outstanding demand notice and a collection agent showed up at his home.
The Delhi High Court observed that Mr. Raza had filed a complaint with the Reserve Bank of India Banking Ombudsman on two occasions, both of which were rejected. The first time it was rejected because the complaint was filed through an advocate. The second time it was dismissed because Mr. Raza had approached RBI first instead of the bank.
The Delhi High Court said: “The Reserve Bank-Integrated Ombudsman Scheme, 2021, has to be an effective Scheme and is not a mere toothless division of the RBI….The rejection of complaints filed by the public due to such technical reasons show that the functioning of the Ombudsman of the RBI is not more consumer friendly….”
In the end, after a long battle, the Delhi High Court ruled in favour of Mr. Raza, instructing the bank to compensate him with Rs 1 lakh for the harassment he faced. They also ordered that any money fraudulently withdrawn from his credit card account be returned, his CIBIL score be restored to its previous state, and further issued directions to the RBI for improvements in its ombudsman scheme.
Naman Singh Bagga, Partner, C&S Partners, said to ET Wealth Online: "The High Court, noticing that the mechanisms put in place under the RBI-Integrated Ombudsman Scheme, 2021 and the RBI Circular dated 06.07.2017 on ‘Customer Protection—Limiting Liability in Unauthorised Electronic Banking Transactions’ were not being implemented in their letter and spirit for effective consumer redressal, decided the matter in favour of the petitioner."
Bagga says that the high court emphasised that even where an OTP or password is inadvertently shared, consumers must have immediate channels to block cards and report unauthorised transactions.
Bagga says: "The court further emphasized that the Scheme must function as an effective mechanism, and therefore complaints ought not to be disposed of through system-generated, technical rejections without real human scrutiny. The key takeaway is the Court’s reaffirmation that grievance redressal authorities must act in a consumer-centric manner, and discourage mechanical or automated processes."
Read the story to know how did Mr. Raza won the case in Delhi High Court and what transpired with him.
Brief facts of the fraud incident
The background which led to this case in Delhi High Court is that in January 2022, Mr. Raza, who is also a practicing advocate in Delhi, was issued a credit card (‘credit card No.1’), by Citibank.
On April 5, 2022, the online password associated with credit card no. 1 was disabled due to multiple wrong attempts and thus on April 5, 2022, a new credit card was issued to Mr. Raza by the Bank (‘credit card No.2’). The credit card no.1 was disabled by the Bank on April 6, 2022 due to security reasons.
Meanwhile, Raza’s registered mobile number for the card was also changed on request of the fraudsters under suspicious circumstances and the bank intimated this information to Mr. Raza’s old number as well. The Delhi High Court said how the mobile number was changed is a matter of investigation and did not deal with it in this present case.
So, Mr. Raza had no clue about the wrong attempts on card no.1 or the request to change his mobile number. He argued that credit card No. 2 was issued to him without him asking for it. He called the bank’s customer care to complain about the issuance of the credit card no. 2, and the bank’s agent assured him that if he did not activate the card, it wouldn’t show up in the bank’s records.
Then on April 6, 2022, the fraudsters used the credit card for transactions and since the mobile number was changed, Mr. Raza was completely unaware of it.
It wasn’t until April 12, 2022, when he received the credit card statement in his e-mail showing the details of the credit card no. 2, which he claims he neither requested for, nor activated, that he found out about the fraud. The statement for credit card no. 2 showed a debit of Rs 76,777, which was undertaken on April 6, 2022, just a day after the credit card was issued.
This Rs 76,777 was debited from credit card No.2 for a rent payment transaction on Paytm, but Mr. Raza contended that he never made the transaction.
As soon as he got the account statement on April 12, 2022, he filed a complaint with the Bank on that very day, as well as with the Cyber Cell of Delhi Police. Following his complaints, the Bank provisionally credited his credit card account with the Rs 76,777.
However, in July 2022, the Bank closed his complaint and reversed the provisional credit granted to him, and started billing the disputed amount in the billing cycles from July 2022.
The reason given for closing the complaint was that the transaction had been done through APIN/IPIN/OTP credentials, which Mr. Raza claims he never entered, as the credit card No.-2 had neither been activated, nor used by him. After the bank closed the complaint , Mr. Raza on July 22, 2022, reached out to the Ombudsman, Reserve Bank of India, to contest the bank’s decision.
Mr. Raza had filed two complaints with the Ombudsman, but the Ombudsman ended up closing complaint No. N202223022001847, under clause 10(2)(f) of the Reserve Bank-Integrated Ombudsman Scheme, 2021 and complaint No. N202223022001848 under clause 10(2)(a)(i) of the Scheme.
Meanwhile, the bank kept charging interest and penalty on the amount that was allegedly fraudulently debited from credit card no. 2 and eventually, even sent a collection agent to his house. Feeling aggrieved, Raza decided to take legal action against the bank.
B. Shravanth Shanker, Advocate-on-Record, Supreme Court of India, said to ET Wealth Online: "The petitioner succeeded because the Court treated the dispute as a failure of institutional safeguards in a cyber fraud incident rather than a routine billing issue."
According to Shanker, the court held that a cardholder facing an unauthorised transaction cannot be burdened with interest, penalties or coercive recovery. Since the bank persisted with demands despite interim restraint, the Court directed full financial restoration, including reversal of charges, restoration of the petitioner’s CIBIL score and Rs 1 lakh in costs for harassment.
Shanker says: "It further deprecated the RBI Ombudsman’s automated complaint rejections and required supervised, accountable redress. The judgment reinforces consumer primacy and strict responsibility on banks and regulators in digital fraud cases. The key takeaway is that in unauthorised electronic transactions, consumer protection and institutional accountability are non-negotiable."
Delhi High Court analysis of facts and events and directions
Delhi High Court in its judgement (W.P.(C) 16659/2022 & CM APPL. 52510/2022) dated November 27, 2025, said that the list of the SMS alerts which were issued to the Petitioner (Mr. Raza) on behalf of the Bank show that an updating of the registered mobile number linked with the bank account of the Petitioner (Mr. Raza) took place on April 3, 2022 and on the said date, multiple messages were sent by the Bank to the Petitioner (Mr. Raza) on the registered mobile number, with respect to the said updation process.
On April 5, 2022, the online password associated with credit card no. 1 was disabled due to multiple wrong attempts and eventually, the credit card no.1 was disabled by the Bank on April 6, 2022 due to security reasons.
The chart of messages placed on record by the Bank shows that due to the repeated wrong login attempts that took place on April 6, 2022, the credit card no. 1 was disabled and a new card i.e. credit card no. 2 was generated on April 7, 2022.
For reasons not specified, the Petitioner (Mr. Raza) did not lodge any complaint on that date. The alleged transactions were carried out on April 7, 2022 on platforms including Flipkart, Paytm, etc., but even at that stage, the Petitioner (Mr. Raza) did not lodge a complaint. It was only on April 12, 2022, for the first time, the Petitioner (Mr. Raza) lodged a complaint.
The manner in which the registered mobile number of the Petitioner got changed is still shrouded in mystery. However, Delhi High Court was of the view that a factual analysis of the alleged transactions can’t be undertaken in this writ petition, as to whether the mobile phone was misused by anyone known to the Petitioner (Mr. Raza) or if the OTP inadvertently passed on by the Petitioner to anyone.
The Delhi High Court was not inclined to get into analysing as to whether all the messages set out in the chart produced by the Bank have in fact been received by the Petitioner (Mr. Raza) or not.
Delhi High Court said: “These facts can only be gone into after a factual analysis of the case and a thorough examination and evidence may be required for the same. The Court, however, notes with some consternation that the recovery agents did send threatening messages to the Petitioner, visited his residence and asked for payments of the alleged outstanding amount.”
Delhi High Court said that such conduct of recovery agents, in their opinion is condemnable and not at all permissible.
Delhi High Court said: “Moreover, even if there has been an inadvertent sharing of an OTP or a password by any credit card holder, there ought to be some mechanism by which the consumer would be able to immediately contact the concerned bank for blocking of credit card. The charging of late payment of fee, interest, etc., in such cases when customers have lodged complaints and that too without resolving the same, shall not be permissible.”
Delhi High Court analyses RBI Ombudsman scheme
The Delhi High Court said that the RBI Ombudsman rejected the complaints filed by the Petitioner (Mr. Raza) on both occasions through system generated responses. Even the Circular No. RBI/2017-18/15 dated 6th July, 2017 on ‘Customer Protection - Limiting Liability of Customers in Unauthorised Electronic Banking Transactions' ought to be strictly implemented by the banks.
The Delhi High Court said that the first instance of rejection of the complaint in this case was because the complaint was filed by an advocate. In the second case, RBI said some inadvertent field which was wrongly filled.
The Delhi High Court said that the rejection of complaints filed by the public due to such technical reasons shows that the functioning of the Ombudsman of the RBI is not consumer-friendly.
Delhi High Court said: “Thus, both, the Reserve Bank-Integrated Ombudsman Scheme, 2021 and the Circular No. RBI/2017-18/15 dated 6th July, 2017 on ‘Customer Protection - Limiting Liability of Customers in Unauthorised Electronic Banking Transactions' ought to be implemented in its letter & spirit.”
Delhi High Court judgement
The Delhi High Court said that the prayers in this writ petition are for refunding the amount of Rs.76,777 which was the value of the transaction that took place on credit card no. 2 which the Petitioner (Mr. Raza) stated to have not initiated. The bank has, however, already re-credited the said amount to the Petitioner, along with interest and penalty, as stated by the Petitioner in its Rejoinder dated June 13, 2023.
Further, the Petitioner (Mr. Raza) has sought restoring of his CIBIL score and for restraining the Bank from charging any penalty charges.
Considering the factual chronology as set out above, the Delhi High Court was of the opinion that the purpose and intent of all financial regulatory mechanisms including banks, financial institutions and regulators ought to be to:
a) Put in place adequate safeguards to avoid misuse.
b) Take stringent actions against perpetrators.
c) Ensure that innocent credit card holders are not made to undergo harassment and frustration by incessant emails, messages and demands.
Accordingly, with the intent of achieving the abovementioned purpose, the following directions are issued by Delhi High Court:
(1) The amount of Rs 76,777 has already been re-credited to the Petitioner (Mr. Raza). No payment of late fee, interest charge, or any amount in respect of the said amount shall be charged by the Bank.
(2) The CIBIL score of the Petitioner (Mr. Raza) shall not be changed merely based on the disputed transactions and the same shall be restored, if there are no other grounds for changing the score.
(3) For the conduct of the recovery agents of the bank, the Court deems it appropriate to hold the Bank responsible for the harassment caused to the Petitioner. Accordingly, costs of Rs.1 lakh are directed to be paid to the Petitioner (Mr. Raza) by the Bank by January 15, 2026.
(4) Insofar as the RBI is concerned, steps shall be taken for ensuring that all complaints filed by the customers are not rejected simply by a mechanised process. If there are any mistakes made by complainants, an opportunity ought to be given to them to correct any errors or mistakes. Rejection of complaints by the Ombudsman by a mechanised model results in more disputes being filed in consumer forums, commercial Courts, civil Courts and writ petitions.
Issues which ought to be resolved at the level of the Ombudsman of the RBI shall be resolved at that stage itself and for the said purpose, if any strengthening, expansion or supplementing of the human resource at the Ombudsman’s office is required, the same shall be undertaken.
(5) Whenever the complaints filed before the RBI Ombudsman are finally rejected, the same shall undergo a second level human supervision process, by trained legal personnel for e.g. retired judicial officers, lawyers, etc., who are legally trained for at least ten years, so that complaints are not rejected due to small errors.
If the complaint redressal mechanism adopted by the Ombudsman is made more effective and efficient, litigation in Courts and consumer forum/s can be reduced considerably. (6) RBI shall issue directions to all banks regulated by them to create a flowchart in the complaints tab on their respective websites where the manner in which a customer can register a complaint with the customer care executive, branch manager, as well as the nodal officer can be communicated to the customers.
(7) The Ombudsman of RBI shall also ensure that all banks and financial institutions clearly reflect on their respective websites, the hierarchy of all such officers who deal with consumer complaints, in the form of a flowchart.
Delhi High Court said: "These directions shall be brought to the notice of the office of the concerned Deputy Governor, RBI, through the Assistant General Manager, RBI, as also, through Mr. Ramesh Babu, ld. Counsel. The Deputy Governor,RBI shall then place an affidavit on record, by 15th January 2026, stating as to what measures have been taken to implement the directions given above."
The writ petition along with pending application, if any, is disposed of in the aforesaid terms. List for reporting for compliance on 30th January 2026.
Alay Razvi, Managing Partner, Accord Juris, says: "The Delhi High Court ruled for the petitioner because the bank and the RBI Ombudsman failed to follow fair procedure while handling an obvious fraud scenario of mobile number change, new card issuance and OTP-based transaction were never convincingly explained, yet the bank reversed the provisional credit and pursued recovery despite a court stay."
[The Economic Times]
