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There have been so far many awards from Adjudicators in different states  in which Bankers have been held liable for frauds such as “Phishing”. Starting with the S Umshankar Vs ICICI Bank award in 2010, adjudicators in Mumbai, Gujarat, Telengana have on different cases ordered that the victim should be compensated by the Bank in case where the negligence of the Bank has contributed to the loss.

Though the kind of negligence could be different in different cases, and in some of the cases, contributory negligence can also be attributed by circumstances on the victim, the Adjudicators have held that the Bank continues to be primarily liable. In all these cases, Banks try to deflect the blame on the customer and point out the beneficiary of the fraud proceeds as the only culprits forgetting that without the assistance of the bank neither the amount could be fraudulently withdrawn from the paying bank nor collected and withdrawn from the collecting Bank. 

The Adjudicators who are IT Secretaries have some understanding of the technology involved and have repeatedly come to the conclusion that Customers are not to be victimized for the failure of the banking technology to ensure “Secure Banking”.

Though in some cases, the victims being unaware of the process of recovery, approach the Ombudsman or the Consumer forums, and some times have received relief and some times not, it is necessary to observe that the most appropriate forum for such disputes is the Adjudication where the cause of action is built up on a matter of contravention of ITA2000. Where the cause of action is not adhering to a RBI guideline, then the Ombudsman may exercise his jurisdiction and where the cause of action is a “Deficiency of Service”, the jurisdiction can be exercised by the Consumer forum. However, since a “Criminal activity” is behind the loss, and complicated electronic evidences have to be evaluated, it is preferable that the Adjudication is the best forum to take up such issues. 

The second level of evaluation of such cases happen at the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) which is a two member bench where one is a retired Supreme Court judge and the other is a technical member. Hence even in this forum there is a possibility that technical aspects of the case can be evaluated with the assistance of persons having the technical knowledge.

As a result, even where the counsels fail to bring up appropriate points for contention, the two fora namely the Adjudication and TDSAT can be considered having sufficient resources to come to a reasoned judgement in the techno legal cases that the Bank fraud incidents represent.

After the judgement in TDSAT in two cases one of the ICICI Bank and the other of the IDBI Bank, some jurisprudential precedence has been established in such cases.

However, it is notable that now the Supreme Court got an opportunity to consider one case of phishing where DAV School in Kolkata had been defrauded  to the extent of Rs 30 lakhs. Apparently the fraud was caused by SIM cloning and Phishing. But it cannot be ruled out that a bigger conspiracy which could have involved the Bank was behind this loss.

This case went to the State Consumer Grievance redressal forum which expressed the doubt that the Principal was negligent and therefore suspected of complicity and ruled that the Bank cannot be therefore held liable. This was also upheld by the NCDRC (National Consumer Disputes Redressal Commission) and the matter landed up in Supreme Court as a second appeal.

The judgement dated 18th December 2019 from a Supreme Court bench consisting of the honourable judges Dr D Y Chandrachud and Hrishikesh Roy has now held that the Senior Manager, Indian Bank Midnapur Branch, Kolkata is held liable to compensate Rs 25 lakhs transferred  until 2.9.2014 where as the loss of another Rs 5 lakhs transferred subsequently before a complaint was formally filed on 9.9.2014,  was to be borne by the school since it was considered to be on account of their delayed filing of complaint.

This case involved many reasons of which the following are visible from the judgement

a) Negligence on the part of the Bank of having granted Internet Banking facility without request

b) Negligence on the part of the Bank in linking the School’s account to the personal ID of the Principal

c) Compromise of the log in credentials of the individual who was the principal of the School

d) Negligence on the part of the Bank in using the Password authentication system which is not a “Signature” under the ITA 2000 and contravention of RBI circular of June 2001 on Internet Banking.

e) Negligence on the part of the Bank in identifying the unusual nature of the transactions through adaptive authentication security

f) Negligence of one or more collecting Bankers in opening and facilitating the laundering of the proceeds of the fraud through a deficient KYC process.

g) Negligence of the Mobile Service Provider (BSNL) in issuing the duplicate SIM without noting the subtle difference in the name of the applicant reporting loss

Out of these, many of the reasons were not perhaps part of the arguments in the Supreme Court.

However the honourable Supreme Court considered that both the Consumer forums had held that there was a negligence of the Bank but failed to rule compensation for the doubt that there was a complicity of the Principal as a “Master Mind”. However the Police in their investigation had ruled out the complicity of the Principal and hence what remained was only the negligence of the Bank as the cause of the loss. .

Hence the Supreme Court took the stand that the Bank was responsible for the loss of Rs 25 lakhs.

While we appreciate this part of the judgement, the judgement may still be faulted for not allowing the balance Rs 5 lakhs which was rejected for the reason of delay. The reasons for which the loss of Rs 25 lakhs was caused namely the wrongful linking of the school account to the personal ID of the principal was also the reason for this loss and hence it was not logical that the claim on this part of the loss should have been rejected.

It must be remembered that when such a huge loss occurs, the customer would be in such a stunned state of mind that filing a formal complaint after understanding where to file a complaint, whether merely informing the Bank is sufficient since it could also be an erroneous debit etc could take  a few days. In the subject case there is no evidence that verbal complaint was not made to the Bank. Hence the Court was perhaps not correct in rejecting this part of the compensation.

However, the client should be relieved that at least Rs 25 lakhs out Rs 30 lakhs is coming back and more importantly, the personal  stigma that the earlier consumer forums attached to the Principal was removed.

At present when such instances arise, the limited liability circular  of the RBI may also come in handy. According to this circular, if the customer reports an unauthorized debit within 3 days would be zero and between  4-7 days his liability could be nominal and there after as per a reasonable policy of the Bank.

Even in such cases, Banks some times make a false and unsubstantiated claim as to the negligence of the customer in revealing his OTP etc. However the burden of proof for  proving any “Complicity” would   be on the Bank.

Hence in future cases it may not be necessary for the victim to go through the difficulty of the judicial process which is simply beyond the reach of common man. In this instance the victim was a large institution and hence it was possible to fight the case upto the Supreme Court.

In most other cases, the Indian judicial system is so harassing for the victim  and so expensive that individuals without deep pockets do not have a guarantee of Justice as we expect under the Constitution as even the CJI has recently admitted.

Naavi

Looking at some of the criticisms that have come on PDPA2019, one cannot but feel that the experts in India appear to be easily swayed towards taking a negative view point on whatever the Government does. While the politicians have made it a habit to mislead the public and create a ruckus whether it is the Article 370, or Citizen Act Amendment, it is sad that this tendency is also seen in the criticism of a law like PDPA which should be seen more as a professional challenge.

We must recognize that drafting a Data Protection Law is a big challenge since this law tries to protect “Privacy” through “Protecting Personal Information”. “Privacy” itself is an enigma defying precise definition since it is a “State of Mind” of an individual and a “Feeling to be left alone”. This state of mind is uncertain and dynamic and changes in time for a given individual and for different individuals. The law is expected to protect this enigmatic concept in aggregation across the population. Hence satisfying every individual is not feasible.

Some individuals are highly concerned and secretive about themselves and some others are paranoid about security and suspect every person they see as a potential terrorist. Hence “Privacy Protection” of one is in conflict with the “Security Expectation” of another. Hence the Government has to balance the two differing views in the legislation.

Similarly the business is a stake holder in the legislation since “Data” is a valuable “Asset” from which several businesses can be generated.

Hence the legislation cannot pursue a myopic view of a “Privacy Activist” alone and has to reflect the views of a person who considers “Right to Security” as a fundamental right as much as the “Right to Privacy” and expects the Government to fulfill its duty in this regard.

The criticism of Justice Srikrishna included on Section 35 has to be seen in this context. In my opinion the section confines itself to within what Article 19(2) of the constitution provides as possible exception to a fundamental right and even here restricts the provision only to Security of State, Friendly relations with foreign states and Public order, leaving other issues like defamation, contempt of court etc. The provision should therefore be seen as a necessary and enabling provision as well as an international obligation. Branding it as “Creating a Orwellian State” is an exaggeration that should be avoided.

Similarly, going by the report of Hindu,  there is also a severe criticism that the DPA may be constituted with Government Secretaries. This also seems to be a speculation only since the change made from the previous draft is only in the constitution of the committee that selects the DPA members and not the DPA itself. Now a committee of Secretaries will select the appropriate persons who need to have at least 10 years of experience in Data Protection. Such experienced persons are not in Government and hence Government secretaries cannot be appointed for this post. Also there is an age limit of 65 which puts most retired bureaucrats away. There are only a few persons in the industry who meet this criteria since the concept of Privacy itself is new in India.

We sincerely hope that the Government will not look at any imported professionals from abroad because experience relevant for the purpose could be available abroad more easily in EU and US than in India. But the “Data Sovereignty” concern should prevent this.

It is possible that the selection committee may not clearly distinguish the experience in “Privacy Protection through Information Privacy Protection” and “Information Security” and end up picking experienced CISOs as members of DPA. This if it happens reflects the ignorance of the selection panel rather than any lacuna in the law as drafted now.

Some might have been displeased that the CJI is not part of the selection panel and hence the criticism that DPA may be constituted with Government secretaries. We must realize that any committee in which CJI is a part has a time line for decision making which is not good enough to identify and appoint the members committee in the near future. The present constitution of the committee will ensure that DPA will see the light of the day within the next few months instead of being postponed indefinitely.

We have not forgotten that the Cyber Appellate Tribunal was kept defunct for 7 years at the expense of cyber crime victims because the CJI and the Ministry could not identify a proper candidate for the Chairmanship between 2011 and 2018 until the tribunal was merged with TDSAT. The present move of the Government is therefore justified to avoid delays.

Beyond such criticisms, no body seems to appreciate the positive features in the bill and if critics put across both the positive and negative features of the Bill then their words would carry better weight.

In this context we must recognize the following features that need special mention

1. Bill defines the role of the Data Principal and Data Fiduciary as an elevated trustee relationship instead of the mere “Master-Servant” relationship if a Data Subject and Data Controller. Though Section 4 of the Act has been modified by the new Bill, the retention of the words “Data Fiduciary” and “Data Principal” are significant. (Credit for this goes to Justice Srikrishna)
2. Bill identifies a role for a “Consent manager” who will be a Fiduciary with a limited objective.
3. Bill recognizes the needs of Start ups to be free from stringent regulations during their test phase and recommends a “Sandbox” for their operations.
4. Bill recognizes the needs of Indian BPOs who process only personal data of foreign citizens and provides a specific exemption.
5. Bill recognizes the role of Social Intermediaries and brings them under the category of Significant data fiduciaries.
6. Bill recognizes the role of Guardian Fiduciaries in the form of websites serving content for children which can be misused.
7. Bill recognizes the concept of “Measurable Compliance Standard” by a concept of a “Data Trust Score” and mandates its disclosure.
8. Bill has reduced the criminal offences to just “Re-identification” and therefore removed the dangers inherent in the earlier draft.
9. The concept of annual data audit by an external auditor is also a novel concept.
10. Concept of a responsibility for grievance redressal is also welcome

Though there are a few typographical errors and minor corrections which can be made, over all it is not fair to demonize the new version of the Bill.

In fact I was pleasantly surprised to hear a discussion about this Bill in the US which highlighted several of the above novel features . A link to this discussion is provided below.

Listen to this discussion

It is unfortunate that we in India donot have a positive attitude to recognize the positive features of the Bill.

The Indian Bill has decided to place lot of responsibilities with the DPA and most of the concerns we are seeing now are premature speculations that the DPA will not do its job. I think we need to look optimistically at the constitution of the DPA before the next round of criticisms if any.

One thing we can suggest is that the Government should put up the list of prospective candidates to be selected to the DPA in the public domain and enable a background verification with public participation so that only the most elite of the Data Protection experts get into this key board.

Naavi

Yesterday, mr Ravi Shankar Prasad, the honourable minister of MeitY presented the “Personal Data Protection Act 2019” (PDPA2019) which is the revised version of PDPA 2018 suggested by the Justice Srikrishna Committee which was presently under discussion. The new version incorporates some changes based on the public comments as well as the discussions with stakeholders undertaken by the Government.

The copy of the new version can be accessed here : http://www.pdpa2019.in

The bill has now been sent to a select committee for review and re-presentation during the budget session in February 2020. By all indications, it is likely to be passed before the end of the budget session.

At the next stage the Data Protection Authority has to be constituted and necessary rules need to be notified.

When the Act is fully operational, all Data Fiduciaries namely those who collect, process personal data will come under the provisions of the Act. Amongst them those who deal with “Sensitive Personal Information” will need to designate a “Data Protection Officer” (DPO).

The DPO will be an executive at the higher levels of management on par or even above the CISO and needs to have the skills to advise the company on technical aspects of data security, legal aspects of Privacy protection and HR skills of negotiation to deal with the DPA, the Adjudicator, the Cyber Appellate Tribunal (Coordination with a lawyer), mediation with the data principal etc. He needs to also have audit skills and skills to manage internal relationships in the organizations where he is likely to have clashes with the Business heads and CTOs and CISOs.

Further most Indian companies will be exposed to Data Protection regulations of not only India but also other countries.

Recognizing all these requirements, Cyber Law College, which recently started a course on PDPA in association with FDPPI, has decided to take up a long term plan of developing well rounded DPOs through a multi level Course structure.

The present program will be considered as Level I of becoming a “Certified DPO”. Next year after the Act is passed, DPA Constituted, Codes and Practices for data processing established, there will be a next level of training which will be called Level-2.

Subsequently a “SoftSkills Development” training will be conducted to cover the requirements of the DPO and it will be considered as Level 3.

Presently the technical skills are kept out of these training since  there are other avenues for this purpose.  However certain technical aspects that are relevant for Data Protection may be covered under Level 3 or separately as Level 4.

During these programs the discussions will also cover major international data protection laws such as GDPR, CCPA, Federal Data Protection Laws of USA (When established) etc.

Education is endless and need to acquire additional knowledge and skills is ever green. Hence Cyber Law College will continue to add value to each levels of these trainings as may be relevant at the appropriate time.

This entire program developed by Cyber Law College is being recommended to be introduced through the FDPPI, the Foundation of Data Protection Professionals in India which is a Not for Profit Section 8 company.

I look forward to the support of all well wishers in making this program a success. One way to take this forward with your participation is to join the movement of FDPPI as a member and make it the movement of all Data Protection Professionals in India.

Naavi

The Supreme court of India made a fine distinction between Section 79 of ITA 2000 as it existed  before the amendment on 27th October 2009 and earlier. In an appeal from Google contending that it cannot be made liable for defamation under IPC 499/500 for not removing the content even after a notice from a Court, the Supreme Court ruled that prior to the amendments, protection was available only for offences under ITA 2000 and not under other acts.

Prior to the amendments the section stood as follows:

Network Service Providers not to be liable in certain cases

For the removal of doubts, it is hereby declared that no person providing any service as a Network Service Provider shall be liable under this Act, rules or regulations made thereunder for any third party information or data made available by him if he proves that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence or contravention.

.. Explanation.  – For the purposes of this section –

(a) “Network Service Provider” means an intermediary;

(b) “Third Party Information” means any information dealt with by a network   service provider in his capacity as an intermediary.

After the amendments the section was reworded as follows

(1) Notwithstanding anything contained in any  law for the time being in force but subject to the provisions of sub-sections (2) and (3), an intermediary shall not be liable for any third party information, data, or communication link  hosted by him. 

 (2)The provisions of sub-section (1) shall apply if-

(a) the function of the intermediary is limited to providing access to a communication system over which information made available by third parties  is transmitted or temporarily stored; or

(b) the intermediary does not-

(i) initiate the transmission,

(ii) select the receiver of the transmission, and

(iii) select or modify the information contained in the transmission

(c) the intermediary observes due diligence while discharging his duties under this Act and also observes such other guidelines as the Central Government may prescribe in this behalf 

According to the reports  the protection did not extend to offences outside ITA 2000 and hence rejected the appeal.

Naavi

The PDPA contained 112 sections divided into 15 chapters. The new version PDPA 2019 contains 98 sections and is structured as follows:

It is important to note that the chapter on “Transition” that set a time line for implementation is no longer there. This could mean that the Act may be effective as soon as it is passed into law though DPA may not be in place.

The Grounds of processing which were contained in three chapters earlier has now been condensed into one chapter.

Naavi

The first thing we notice is that the PDPA 2019 (draft) contains 98 sections instead of 112 sections in the earlier Bill and also omits one schedule regarding the amendment to RTI.

The change regarding the data localization could be first looked at since this has been a point of concern of the industry.

Chapter VII of PDPA 2019 has two sections 33 and 34 which refer to Restriction on transfer of personal data outside India.

According to section 33:

33. (1) Subject to the conditions in sub-section (1) of section 34, the sensitive personal   20 data may be transferred outside India, but such sensitive personal data shall continue to be stored in India.

(2) The critical personal data shall only be processed in India.

Explanation.—For the purposes of sub-section (2), the expression “critical personal data” means such personal data as may be notified by the Central Government to be the    critical personal data.

This means that the provision of one copy being stored in India continues for sensitive personal data and has been removed for Non Sensitive personal data. Strict restriction for non transfer applies to critical personal data as and when notified.

Under Section 34 the transfer of sensitive personal data is subject to the following provisions such as explicit consent and intra group schemes approved by the DPA and on adequacy principle,medical emergencies etc.

34. (1) The sensitive personal data may only be transferred outside India for the purpose of processing, when explicit consent is given by the data principal for such transfer, and where—

(a) the transfer is made pursuant to a contract or intra-group scheme approved 30 by the Authority:

Provided that such contract or intra-group scheme shall not be approved, unless it makes the provisions for—

(i) effective protection of the rights of the data principal under this Act, including in relation to further transfer to any other person; and 

(ii) liability of the data fiduciary for harm caused due to non-compliance of the provisions of such contract or intra-group scheme by such transfer; or

(b) the Central Government, after consultation with the Authority, has allowed the transfer to a country or, such entity or class of entity in a country or, an international organisation on the basis of its finding that

(i) such sensitive personal data shall be subject to an adequate level of protection, having regard to the applicable laws and international agreements; and

(ii) such transfer shall not prejudicially affect the enforcement of relevant laws by authorities with appropriate jurisdiction:

Provided that any finding under this clause shall be reviewed periodically in such manner as may be prescribed;

(c) the Authority has allowed transfer of any sensitive personal data or class of sensitive personal data necessary for any specific purpose.

(2) Notwithstanding anything contained in sub-section (2) of section 33, any critical personal data may be transferred outside India, only where such transfer is—

(a) to a person or entity engaged in the provision of health services or emergency services where such transfer is necessary for prompt action under section 12; or

(b) to a country or, any entity or class of entity in a country or, to an international organisation, where the Central Government has deemed such transfer to be permissible under clause (b) of sub-section (1) and where such transfer in the opinion of the Central Government does not prejudicially affect the security and strategic interest of the State.

(3) Any transfer under clause (a) of sub-section (2) shall be notified to the Authority within such period as may be specified by regulations

The definition of sensitive personal data has also been slightly revised and the current list is as follows:

“sensitive personal data” means such personal data, which may, reveal, be related to, or constitute—

(i) financial data;

(ii)  health data;

(iii) official identifier;

(iv) sex life;

(v) sexual orientation;

(vi) biometric data;

(vii)  genetic data;

(viii)  transgender status;

(ix)  intersex status;

(x) caste or tribe;

(xi) religious or political belief or affiliation; or

(xii) any other data categorised as sensitive personal data under section 15.

Explanation.— For the purposes of this clause, the expressions,—

(a) “intersex status” means the condition of a data principal who is—

(i) a combination of female or male;

(ii) neither wholly female nor wholly male; or

(iii) neither female nor male;

(b) “transgender status” means the condition of a data principal whose sense of gender does not match with the gender assigned to that data principal at birth, whether or not they have undergone sex reassignment surgery, hormone therapy, laser therapy, or any other similar medical procedure;

It may be noted that “passwords” is no longer considered “Sensitive”. Implication of this needs to be debated since any misuse of “passwords” is an offence under Section 66C/66D of ITA 2000.

The amended provisions therefore has given up the data localization for non sensitive personal data and must be a big relief to most companies.  Social media which carry political discussions as well as names which are associated with “caste” or “Tribe” may be considered as “Sensitive” and hence fall under the restrictive category.

Naavi