The Karnataka High Court ruling on June 5, 2026, held Bharat Sanchar Nigam Limited (BSNL) liable for a cooperative bank’s Rs 50.5 lakh loss in a SIM swap fraud. The court found that BSNL’s negligent issuance of a duplicate Subscriber Identity Module (SIM) card directly enabled the theft.
The ruling names a deeper problem than the liability question it settles. A duplicate SIM can give a fraudster control of a victim’s entire financial identity because India’s digital payments architecture treats the mobile number registered for One Time Password (OTP) authentication as the master channel on which the security of the whole system depends.
What the Karnataka High Court held: Justice Suraj Govindaraj decided two connected petitions, one by the cooperative bank seeking higher compensation and one by BSNL challenging its liability, against a Permanent Lok Adalat award that had granted the bank only Rs 5 lakh. The key findings:
- TSP as custodian: The court treated a telecom service provider (TSP) as a custodian of mobile connectivity, comparing it to a vault keeper, and held that a provider who carelessly or dishonestly issues a duplicate SIM bears responsibility for the fraud that the SIM enables.
- Proximate cause: The court held the duplicate SIM was the proximate cause of the loss, reasoning that no one could have diverted the OTPs and no fraud could have occurred without the SIM’s issuance.
- Verification was worthless: Applying the principle that a thing speaks for itself, the court held that the very fact a duplicate SIM reached a non-subscriber proved BSNL either skipped verification or performed it so perfunctorily as to render it worthless.
- Vicarious liability: The court held BSNL vicariously liable for its employee, rejecting the argument that the absence of a criminal chargesheet absolved it and holding that evidence too thin for a criminal conviction can still establish civil negligence on the balance of probabilities.
- Insurance does not offset the loss: The court held that the money the bank recovered must be adjusted against the loss, but insurance proceeds under an independent policy cannot reduce the wrongdoer’s liability.
- The award: The court directed BSNL to pay Rs 50,50,762 as net loss plus Rs 5 lakh as consequential damages, with 9% annual interest from February 7, 2019, and a default interest of 12% if BSNL misses the three-month window.
Why the mobile number is the weakest link: The Unified Payments Interface (UPI) ties three things to one anchor, the mobile number registered with the bank:
- The bank account: When a user sets up a UPI app, the National Payments Corporation of India (NPCI) maps the number to every linked bank account.
- The UPI ID: The app verifies the number through an SMS from the active SIM, then the user sets a UPI PIN using debit card details.
- The authentication: The same number carries the OTPs that authenticate internet banking, card transactions, and Real…
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