Two verdicts, one week, one lesson
Within 24 hours, the Supreme Court sent out two messages that I have been waiting to hear since 2019.
Verdict 1 — Banks must pay for their lapses (29 October 2026)
A bench led by Chief Justice Surya Kant, with Justices Joymalya Bagchi and V Mohana, hearing its own suo motu case on "digital arrest" scams, said :
- When a cyber fraud happens because a bank failed in its due diligence, the bank must compensate the victim — not less than the amount lost
- The RBI's proposed anti-fraud rules must make this mandatory, and the Court will vet them before they are notified
- Banks must suspend unusual transactions, report them automatically and alert the local police
- Most frauds run through mule accounts opened without proper KYC; bank staff who collude must face liability
- The Attorney General said the RBI is examining both the bank's liability and the accountability of individual officials
- The role of WhatsApp is also under scrutiny; next hearing on 30 November 2026
Verdict 2 — A public servant must explain his wealth (30 October 2026)
In V Gopalkrishnan vs State of Kerala, Justices Sanjay Kumar and Sanjeev Sachdeva upheld the conviction of a former Sub-Registrar for holding assets disproportionate to his income :
- Between 1993 and 2001, he and his family built up assets about Rs 5.25 lakh (52%) more than their lawful income could explain
- The Court held that once the prosecution shows the gap against known sources of income, the burden shifts to the public servant to prove that the extra wealth came from lawful sources — because those facts lie within his own special knowledge
- The prosecution need not chase every imaginary source the accused may invent later; unexplained wealth allows the court to draw an adverse inference
But look at the timeline of Verdict 2 :
Year | Step |
|---|---|
1993–2001 | Assets acquired (the "check period") |
2001 | FIR registered |
2009 | Convicted by Special Judge : 2 years RI, Rs 5.5 lakh fine |
2025 | High Court upholds conviction, but halves the sentence to 1 year and Rs 2 lakh — citing the delay, his age and the trauma |
2026 | Supreme Court dismisses his appeal |
Twenty-five years from FIR to final verdict — for Rs 5 lakh. And the delay itself earned him a lighter sentence !
Sources : Economic Times, Bar & Bench, The Sentinel, The Hans India, Indian Masterminds, LiveLaw (29–30 Oct 2026)
What I wrote 7 years ago
In June 2019, I pointed out that many countries have a Product Liability Act, which holds a manufacturer — and even the supplier of a defective component — responsible for harm to users, even years later.
But what India needed "rather badly" was a Service Liability Act, because :
- Every day, public servants deliver hundreds of services to citizens
- When they fail, citizens suffer — through potholes, fires, floods, pollution, fake medicines
- These are CRIMES OF OMISSION (as against crimes of commission), and nobody is ever held responsible
- Action happens only when the Supreme Court steps in
I proposed that every failure be graded by extent of hurt, coverage, time frame, economic impact and cause — negligence / poor but honest decision / mala-fide decision — and designed SLAM (Service Liability Assessment Matrix), an app on which citizens rate each mishap to produce an "Anger Quotient".
Then vs Now
My 2019 proposal | What the Supreme Court said this week |
|---|---|
Service providers must be liable for harm caused by their omissions | Banks liable when fraud results from failure of due diligence — a pure crime of omission |
Compensation linked to the sufferer's economic loss | Compensation not less than the amount lost |
Liability must reach the individual responsible | RBI examining accountability of individual officials; colluding staff to face liability |
Like product liability, it must reach the supplier of the defective component | Court scrutinising WhatsApp, the channel scamsters use |
Grade the cause : negligence vs honest error vs mala fide | Bank liable only where due diligence failed — a first step towards grading cause |
"But for the Supreme Court, nothing would happen" | Both verdicts came from the Court, not from a law passed by Parliament |
What the Sub-Registrar's case adds
The second verdict gives my 2019 idea two things it was missing.
1. The legal principle already exists
Indian law already accepts that when the facts lie within the special knowledge of a public servant, the burden of explaining them is on him, not on the citizen or the State.
That is exactly the principle a Service Liability Act needs. Who knows why a KYC was skipped, why a footpath stayed encroached, why a fire NOC was granted, why a drain was not cleaned ? Only the officer and his file. So let the officer — or the bank — explain, and let silence count against him.
2. Punishment after 25 years is not accountability
A verdict that arrives a quarter-century later deters nobody. Worse, the delay itself reduced the sentence. The Sub-Registrar retired, aged, and still kept arguing over the cost of his house.
Compare that with a bank that must refund a fraud victim within days. Which system will make the next officer more careful ?
Accountability must be automatic and time-bound — not a 25-year lottery in court.
My suggestions
- Reverse the burden of proof — for banks too — An old man who lost his savings to a "digital arrest" cannot prove a bank's internal lapse. Apply the same logic the Court applied to the Sub-Registrar : the facts are within the bank's special knowledge, so the bank must prove it did its due diligence. If it cannot, it pays
- Refund first, investigate later — Credit the lost amount within a fixed period (say 10 working days), as RBI already does for some unauthorised electronic transactions. Let the bank then chase the fraudster and its own staff
- Share the liability across the chain — as product liability reaches the component supplier :
- the bank that opened the mule account
- the telecom company that issued the SIM on fake documents
- the messaging platform that carried the fake "CBI officer" video call
- Grade the cause, as in SLAM — The bank always compensates the customer. For the employee :
- honest error in good faith → retraining, no punishment
- negligence → penalty and an adverse entry in appraisal
- collusion (mala fide) → dismissal and prosecution
- A time limit on accountability itself — Every departmental inquiry into a public servant's lapse to close within one year, and every corruption trial within three, with fast-track courts as needed. A delay caused by the system must never become a discount for the guilty
- Prevent, don't just prosecute — Every public servant already files an annual property return. Let software match it automatically with land records, vehicle registrations, bank and tax data, and flag any gap as it happens — not 8 years later in an FIR
- Publish a Liability Dashboard — bank-wise : frauds, amounts refunded, days to refund, mule accounts traced. Department-wise : complaints of service failure, compensation paid, officers held responsible. Let citizens rate both, as SLAM proposed
- Then pass the Service Liability Act — Banks are the right place to start : losses are in rupees, every action is logged, and a regulator exists. Once the RBI rules work, extend them by law to civic bodies, hospitals, transport and utilities
Closing thought
In 2019, I wrote that my proposal might sound too radical even for a bold Government.
In one week of October 2026, the Supreme Court has said :
- a bank must pay for its omissions, and
- a public servant must explain what lies within his own knowledge.
Put the two together, add a time limit, and you have the Service Liability Act.
Dear Shri Sanjay Malhotraji (RBI Governor) : when you draft the new rules for the Court's review, please make liability automatic, time-bound and traceable to the individual.
And dear Members of Parliament : please don't wait 25 years — or for another suo motu case — to do the same for every other public service.
With regards,
Hemen Parekh
www.HemenParekh.ai / www.IndiaAGI.ai
30 October 2026
Related reading : Needed : a Service Liability Act (12 June 2019)
News : LiveLaw : SC upholds Sub-Registrar's DA conviction · Bar & Bench : SC on bank compensation
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