Court affirms Permanent Lok Adalat’s jurisdiction and BSNL’s negligence in unauthorized duplicate SIM issuance causing over Rs. 50 lakh loss; Canara Bank exonerated
In a landmark judgment dated June 1, 2026, the Karnataka High Court, presided over by Justice Suraj Govindaraj, upheld the liability of Bharat Sanchar Nigam Limited (BSNL) for negligence in the unauthorized issuance of a duplicate SIM card that facilitated a massive SIM swap fraud causing significant financial loss to Sri Basaveshwara Pattana Sahakara Bank Niyamitha (the Co-operative Bank). The court also modified the quantum of compensation awarded by the Permanent Lok Adalat (PLA), increasing it substantially from Rs. 5 lakh to over Rs. 50.5 lakh, with interest and consequential damages.
The case arose from a series of unauthorized transactions amounting to Rs. 87.7 lakh debited from the Co-operative Bank’s current account with Canara Bank during February 2019. It was established that the fraudsters obtained a duplicate SIM card from BSNL without the bank’s authorization, enabling interception of One-Time Passwords (OTP) essential for authenticating online banking transactions. The Co-operative Bank promptly lodged a complaint with the Cyber Crime Police and pursued civil proceedings before the Permanent Lok Adalat seeking recovery of the losses.
BSNL challenged the PLA’s jurisdiction and liability findings, arguing that the dispute related to criminal offences outside the PLA’s scope and contending that the fraud was primarily due to compromise of internet banking credentials held by the Co-operative Bank, not any deficiency on BSNL’s part. BSNL also contended that it had taken departmental disciplinary action against the BSNL official implicated and that the Co-operative Bank had received insurance compensation, which should reduce BSNL’s liability.
The Karnataka High Court, after a detailed examination, rejected BSNL’s jurisdictional challenge, affirming that the Permanent Lok Adalat had lawful authority under the Legal Services Authorities Act, 1987, to adjudicate disputes involving deficiency in public utility services such as telephone service. The court clarified that the civil compensation claim for deficiency in BSNL’s service did not “relate to an offence” within the meaning of statutory exclusions and that the pendency of criminal proceedings did not oust PLA’s jurisdiction.
On the merits, the court found that BSNL owed a strict duty of care to its subscriber, the Co-operative Bank, especially given the heightened financial risks associated with OTP-based banking transactions. The unauthorized issuance of a duplicate SIM without verification was a clear breach of this duty and constituted negligence and deficiency in service. The issuance was the proximate cause of the loss, as without the duplicate SIM the fraudulent transactions could not have been authenticated.
The court applied the doctrine of vicarious liability, holding BSNL responsible for the acts of its official who issued the duplicate SIM in the course of employment, rejecting BSNL’s argument that the act was outside the scope of employment due to collusion or misconduct. Conversely, Canara Bank was exonerated, the court finding no negligence in its banking system or operations.
Regarding compensation, the court distinguished between recoveries of stolen funds through police action and reverse credits, which reduce the net loss, and insurance proceeds, which are collateral benefits and do not reduce BSNL’s liability under the collateral source rule. After accounting for recoveries, the net loss was Rs. 50,50,762/-, which the court directed BSNL to pay as principal compensation, along with interest at 9% per annum from the date of loss and Rs. 5 lakh for consequential damages including reputational harm and liquidity disruption.
The judgment emphasized the critical role of telecom service providers as custodians of mobile numbers integral to digital financial security, imposing a heightened standard of care. It underscored the necessity for rigorous verification before issuing duplicate SIM cards to prevent systemic vulnerabilities in India’s rapidly expanding digital economy.
The court also reiterated that its findings on civil liability do not affect ongoing criminal proceedings and that the insurer’s subrogated rights remain intact.
This decision reinforces accountability for telecom providers and signals a robust judicial approach to emerging digital fraud risks, providing clarity on jurisdictional powers of Permanent Lok Adalats and principles of liability and compensation in complex cyber-fraud scenarios.
Bottom line:-
Telecom service providers, such as BSNL, are liable for negligence in unauthorised issuance of duplicate SIM cards, leading to financial loss to subscribers - Such acts constitute deficiency in service and proximate cause for the loss suffered.
Statutory provision(s): Legal Services Authorities Act, 1987 Sections 22A, 22C, 22E; Indian Evidence Act, 1872 Section 114; Karnataka Cooperative Societies Act, 1959; Indian Penal Code (referred contextually); Telecom Regulatory Authority of India guidelines (referenced)
