Karnataka High Court Holds BSNL Responsible for SIM Swap Fraud, Awards ₹50 Lakh Compensation to Bank

The Karnataka High Court has held Bharat Sanchar Nigam Limited (BSNL) liable for negligence after the unauthorised issuance of a duplicate SIM card enabled fraudsters to access banking authentication systems and siphon funds from a co-operative bank’s account. The court directed BSNL to pay nearly ₹50 lakh in compensation, stressing that telecom operators play a crucial role in protecting the integrity of digital financial transactions.

The dispute arose after fraudsters allegedly obtained a duplicate SIM card linked to the internet banking account of a co-operative bank. By gaining access to One-Time Passwords (OTPs), they carried out a series of unauthorised RTGS and NEFT transactions amounting to ₹87.70 lakh. Although a portion of the money was later recovered, substantial losses remained.

Justice Suraj Govindaraj observed that the duplicate SIM card was issued without proper verification and that this lapse directly enabled the fraudulent transfers. The court held that the issuance of SIM cards and replacement SIMs is a core telecom service, and any failure to follow verification procedures can have serious consequences in an era where banking systems rely heavily on mobile-based authentication.

The court further noted that telecom providers occupy a position of trust within the digital economy and must exercise the highest degree of care while processing SIM replacement requests. It emphasized that improper issuance of a duplicate SIM effectively compromises the final layer of security protecting online banking transactions.

Rejecting BSNL’s attempt to shift responsibility to an individual employee, the court held the organisation vicariously liable for actions performed by its officials in the course of their duties. The court, however, upheld the finding that Canara Bank bore no liability for the loss.