1. The Three Tracks

You must file Chargeback within network timeline, otherwise even if you win Ombudsman, network won't recover from merchant.

2. RBI Zero Liability Framework - The Heart of Indian Law

Circular dated 6 July 2017 - Limiting Liability of Customers in Unauthorised Electronic Banking Transactions:

Scenario A - Third Party Breach (Bank/System fault):

• If fraud due to bank negligence or third-party breach where deficiency lies neither with bank nor customer but elsewhere in system, and customer reports within 3 working days of receiving communication from bank - Customer liability = ZERO. Bank must reverse entire amount within 10 days, credit must be value-dated to fraud date.

Scenario B - Customer Negligence:

• If loss due to customer sharing PIN/OTP - customer bears full loss till he reports.

Scenario C - Neither party at fault, delay in reporting:

• Report within 3 working days = Zero liability
• Report within 4-7 working days = Liability capped at Rs 25,000 for credit card with limit > Rs 5 lakh (Rs 10k for limit 1-5L, Rs 5k for <1L)
• Report after 7 working days = Bank's board-approved policy decides.

Mandatory Bank Obligations:

• Must send SMS alert for every card transaction
• Must acknowledge dispute within 7 days, resolve within 90 days - else pay penalty Rs 100 per day under RuPay Offus guidelines
• Must provide provisional credit during investigation
• Must establish customer negligence with evidence, cannot simply hold customer liable

3. Chargeback Process - Network Rules

Reason Codes you must use in complaint:

Fraud:

• Visa 10.4 - Other Fraud - Card-Absent Environment
• Mastercard 4837 - No Cardholder Authorization
• RuPay - Fraudulent Transaction

Consumer Disputes:

• Visa 13.1 - Merchandise/Services Not Received
• Visa 13.3 - Not As Described / Defective
• Mastercard 4853 - Cardholder Dispute - Goods/Services Not as Described
• Mastercard 4855 - Goods/Services Not Provided
• Mastercard 4834 - Duplicate Processing
• Mastercard 4840 - Fraudulent Processing of Transaction

Process:

1. Customer reports to issuer within 120 days (Visa) / 120 days (Mastercard)
2. Issuer raises chargeback with reason code + evidence
3. Acquirer debits merchant, merchant can represent with proof of delivery
4. If issuer wins, second presentment possible, then pre-arbitration, then arbitration - Visa charges $250-$500 fee to loser
5. Timeline: Typical resolution 45-90 days

4. Case Laws - How Courts Decide

CASE 1: SBI Cards & Payment Services Ltd. v. Customer - Chandigarh Consumer Commission 2024 - Leading Zero Liability Case

Facts: Customer reported two unauthorised transactions promptly. SBI Cards failed to reverse despite intimation.

Held:

• Complainant entitled to zero liability under RBI Circular dated July 6, 2017
• SBI Cards liable for deficiency in service for failing to redress unauthorised transactions despite prompt intimation
• Directed refund + interest + remove name from CIBIL + compensation

Principle: Bank must prove customer negligence with logs, not just claim. Failure to give provisional credit within 10 days = deficiency.

CASE 2: Rajasthan High Court 2022 - Customer Has Zero Liability Even with Compromised SIM

Facts: Fraud occurred Friday evening/Saturday morning, complaint lodged Sunday 13 Feb 2022 - within 3 working days. Customer did not receive SMS as SIM non-functional/compromised.

Held:

• 3 working days counted from when customer actually receives communication, not from fraud date if SIM compromised
• Customer has zero liability if reported within 3 working days under RBI circular even with compromised SIM
• Bank liable for service deficiency

Principle: Working days exclude bank holidays, and bank cannot claim customer delayed if bank's own SMS system failed.

CASE 3: Sandeep Sharda vs ICICI Bank Ltd. - NCDRC Revision - Handing Over Card

Facts: On 13.12.2011 complainant delivered card to executive of ICICI, Rs 29,000 debited.

Held by District Forum and NCDRC:

• Complainant by himself handing over credit card to third person - gross negligence
• Similar principle laid down in State Bank of India Vs K.K. Bhalla Revision Petition No.3182/2008 decided 7.4.2011 by NCDRC
• Customer bears full liability when negligence proved - handing over card + PIN = negligence

Principle: Zero liability does NOT apply if customer negligence established.

CASE 4: Vipin Vaish vs HDFC Card Division - Delhi State Commission 18 Nov 2008

Facts: Unauthorized debits, bank claimed customer shared OTP.

Held: Bank must produce system logs showing customer authentication (Verified by Visa 3D Secure logs, IP address, device fingerprint). Mere allegation not enough. Bank failed to establish customer negligence, liable.

CASE 5: Mrs. Kapoor - Ombudsman Jurisdiction - Integrated Ombudsman Scheme Clause 16(2)

Facts: Long standing dispute with credit card, filed both court case and Ombudsman complaint.

Held: Under Clause 16(2) of Integrated Ombudsman Scheme, complaint not maintainable if same subject matter pending before Court, Tribunal, or Arbitrator. Even if court is Small Causes Court, it is still judicial body - Ombudsman shall reject.

Principle: Choose one forum. If you file consumer case, you cannot simultaneously pursue Ombudsman for same transaction. But you CAN file chargeback + Ombudsman together - chargeback is not judicial body.

CASE 6: SBI Credit Card and Anr. vs R Chandrasekaran - Kerala HC on RBI Guidelines

Facts: Disputed transaction, customer claimed no receipt of goods.

Held: RBI guidelines is clear mandate to exonerate customer in such disputed transaction. RBI circular presumes innocence of customer in given circumstances. Bank must reverse.

CASE 7: US/UK Chargeback Precedent - Friendly Fraud

Indian courts import Visa/ Mastercard rules. In friendly fraud (customer receives goods then claims fraud), merchant can win representment if shows:

• Proof of delivery with signature
• Customer contacted merchant before chargeback (attempting refund)
• Chargeback reason code does not fulfill requirements

If issuer submits second presentment without evidence, Visa will decide in merchant's favour in arbitration.

5. Step-by-Step Recovery Process - India

Day 0 - Fraud Happens:

• Block card immediately via app / customer care - record reference number
• File written complaint to bank via email (not just phone) - mention "Unauthorised transaction, claim zero liability under RBI circular DBR.No.Leg.BC.78 dated 6 July 2017"
• File complaint on Cyber Crime portal 1930 + FIR if > Rs 50k

Day 1-3 - Within Zero Liability Window:

• File chargeback on issuer's portal - select reason code 10.4 / 4837 for fraud, 13.1 for non-receipt
• Attach: Email complaint, blocking reference, FIR copy

Day 7 - Bank Must Acknowledge
Day 10 - Bank Must Give Provisional Credit

Day 30 - If No Resolution:

• Escalate to Principal Nodal Officer of bank

Day 31-60 - If Still No:

• File complaint at RBI CMS portal cms.rbi.org.in - under Integrated Ombudsman Scheme 2021 - Ground: Deficiency in service - non-adherence to RBI customer protection circular

RBI Ombudsman Powers: Can award compensation up to Rs 20 lakh + Rs 1 lakh for mental agony.

After Ombudsman Rejection or Court Pending?

• File consumer case at District Commission - claim deficiency + CIBIL damage + compensation. Timeline 90 days for banks to resolve chargeback, else penalty Rs 100 per day until credit processed as per RuPay guidelines.

Important: For credit card, interest cannot be charged on disputed amount during investigation period. If bank charges interest, it's unfair trade practice - Supreme Court in Dec 2024 overturned NCDRC cap of 30% interest, but upheld RBI's authority to regulate - so bank can charge high interest only if disclosed, but not on fraud amount.