Banking Trust on Trial: Negi v. Bank of Baroda and the Burden of Proof in Unauthorized Transactions

Author: Divay Nair, JECRC University

To the Point

In today’s digital banking world, mistakes and fraud can happen in just a few seconds. But when money disappears from a person’s account, who is responsible the customer or the bank? The Allahabad High Court answered this clearly in July 2025. In the case of Negi v. Bank of Baroda, the Court ruled that it is the bank’s responsibility to prove that a transaction was authorized, not the customer’s job to prove it wasn’t.

This ruling marks an important step in protecting the rights of ordinary people who trust banks with their money.

Abstract

In recent years, India has seen a sharp rise in online banking fraud and unauthorized transactions. Many victims find it hard to get justice because banks often blame the customer. The Negi v. Bank of Baroda case brings hope to such customers. The Court clearly said that when customers report a suspicious transaction, the bank must provide proof that the transaction was valid. It cannot simply deny the claim.

This paper explains the key facts of the case, the legal principles involved, and what it means for Indian banking going forward.

Use of Legal Jargon

• Burden of Proof – In this case, the burden falls on the bank.
  
• Unauthorized Electronic Transfer – A transaction done without the account holder’s knowledge or approval.
  
• Banking Negligence – Failure by the bank to follow reasonable care and procedures.
  
• Constructive Liability – When someone is held responsible even if they didn’t act directly, but failed to prevent harm.
  

The Facts of the Case

Suresh Chandra Singh Negi and his son shared a joint account with Bank of Baroda. One day, they found that ₹37.85 lakh had been withdrawn through a series of digital transactions. They immediately raised the issue with the bank. They also followed up with 10 emails, 3 formal letters, and 5 phone calls. In January 2025, the finance head of the bank verbally assured them that payment would be made. But nothing happened.

Negi continued using the account and kept asking for resolution. By May 2025, it became clear that the bank had no intention of fixing the problem. The customer then took the matter to the High Court.

The Court’s Observations

The Allahabad High Court looked at all the details. It found that:

• The bank failed to show any authorization logs proving that the customer approved the transactions.
  
• The SMS/email alerts were either not sent or not explained properly.
  
• The bank had no evidence of doing a proper internal investigation.
  
• The complaint was made in good faith and on time, showing the customer’s honesty.
  

The Court stated that banks have better access to data, and so they must justify any disputed transaction. Simply saying “we think it was valid” is not enough. The bank must show proof.

Legal Foundation

The judgment aligns with several earlier cases and legal provisions:

• Section 43 & 66 of the Information Technology Act, 2000
  These sections punish unauthorized access and hacking, and also hold companies responsible for failing to protect digital systems.
  
• Rajnesh v. Neha (2020)
  The Supreme Court emphasized that institutions must follow fair and transparent processes.
  
• ICICI Bank v. Customer (RBI Ombudsman, 2020)
  Held that failure to send transaction alerts weakens a bank’s defense.
  

The court also relied on general principles of fiduciary duty, which means banks must act in the best interest of their customers.

Why This Case Matters

This ruling is important because:

• It makes banks more accountable.
  
• It gives customers stronger rights in digital disputes.
  
• It discourages banks from casually blaming the customer.
  
• It encourages better security, monitoring, and record-keeping.
  

In a world where digital payments are increasing every day, this case could help hundreds of people who lose money due to unauthorized transactions.

What Should Banks Do Now?

Banks must take the following steps seriously:

1. Maintain clear records of customer authorizations.
   
2. Send timely alerts for all high-value transactions.
   
3. Improve fraud detection systems to catch unusual activity.
   
4. Respond quickly and honestly to complaints.
   
5. Train staff to investigate first, deny later—not the other way around.
   

What Can Customers Learn

• Always report suspicious transactions immediately.
  
• Keep written proof (emails, SMS, letters) of all complaints.
  
• Don’t be afraid to approach courts or consumer forums.
  
• Understand your rights under laws like the IT Act and banking regulations.
  

Conclusion

The Negi v. Bank of Baroda case is a turning point for Indian banking law. It makes it clear that banks cannot ignore customer complaints or shift blame unfairly. With the rise of digital payments, courts must protect consumers more than ever.

This judgment shows that trust must be backed by responsibility. If banks enjoy the power of handling people’s money, they must also accept the duty to protect it. When they fail, they must prove they did everything right—not expect the customer to prove otherwise.

FAQs

Q1. Who was held responsible in the case?
The Bank of Baroda was held responsible for failing to prove that the disputed transaction was authorized.

Q2. What amount was involved?
₹37.85 lakh was withdrawn without the customer’s knowledge.

Q3. What should I do if I face a similar situation?
Immediately report the issue to the bank in writing, keep all records, and approach legal authorities if needed.

Q4. What law protects customers in such cases?
Sections 43 and 66 of the IT Act, and general consumer protection and banking laws, apply.

Q5. Will this case help other customers?
Yes, it sets a legal precedent that banks must prove disputed digital transactions were valid.