TDSAT Sets Aside 2011 Order That Barred Corporate Complainant Under IT Act Section 43, Remands to Karnataka Adjudicator

TDSAT allows Gujarat Petrosynthese's cyber appeal, holding that a body corporate can invoke Section 43 of the IT Act and directing fresh adjudication within six months.

The Telecom Disputes Settlement and Appellate Tribunal (TDSAT), New Delhi, has allowed a cyber appeal filed by Gujarat Petrosynthese Limited (GPL) against Axis Bank Ltd. and others, setting aside an order passed by the Adjudicating Officer, Principal Secretary to the Government of Karnataka, on 27 December 2011. That order had dismissed GPL's compensation complaint as not maintainable on the ground that Section 43 of the Information Technology Act, 2000 does not apply where both the complainant and the respondent are body corporates. Justice Ram Krishna Gautam, Member, held the finding to be erroneous in law, imposed a special cost of Rs. 50,000 on Axis Bank, and remanded the matter to the Karnataka Adjudicating Officer for fresh adjudication within six months.

The Complaint Before the Karnataka Adjudicating Officer

GPL filed an application before the Adjudicating Officer, Department of Information Technology, Government of Karnataka, on 28 October 2011, under Section 46 of the IT Act, 2000, as amended by the Information Technology Amendment Act, 2008. The complaint alleged that on 20 June 2011, unauthorised access was made to information residing in Axis Bank's computer systems at its Marathahalli branch, Bangalore, resulting in a wrongful loss of Rs. 39,00,550 to GPL, of which Rs. 35,44,400.01 remained unrecovered.

The complaint named 12 respondents, including Axis Bank, ING Vysya Bank, HDFC Bank, IndusInd Bank, Standard Chartered Bank, and Canara Bank. It alleged contraventions of Section 43(a) and Section 43(f) and Section 43(g) of the IT Act, 2008, covering unauthorised access, damage to electronic information, and assistance to unknown persons in entering the bank's system and transferring funds.

Axis Bank filed two interlocutory applications before the Adjudicating Officer: one seeking time to file a reply, and another objecting to the sustainability of the proceedings. ING Vysya Bank also filed a reply denying liability.

The Impugned Order: Complaint Dismissed as Not Maintainable

The Adjudicating Officer overruled Axis Bank's objection on jurisdiction. On the second objection, however, the Adjudicating Officer accepted Axis Bank's argument and held that Section 43 of the IT Act relates to a “person and not a body corporate” and that the IT Amendment Act of 2008 had made a separate provision for a body corporate to seek compensation. Since both GPL and the respondent banks were body corporates, the proceedings were ended.

GPL's appeal to TDSAT was confined to this specific finding. It did not challenge any substantive point on the merits of the complaint. The prayer was to set aside the impugned order and remand the matter for adjudication on merits.

Axis Bank's Objections Before TDSAT

Before TDSAT, Axis Bank raised two categories of objections. The first was technical: the authorised representative who filed the complaint before the Adjudicating Officer and the appeal before TDSAT had acted under a power of attorney dated 1 December 2011, which, according to Axis Bank, did not confer authority to argue before the Tribunal. Axis Bank also contended that the authorised representative was not a legal practitioner under the Advocates Act, 1961, and was therefore in violation of Sections 29 and 30 of that Act.

The second objection was on merit. Axis Bank argued that Section 43 applies to a person “who is in charge of a computer, computer system or computer network,” while Section 43A, introduced by the 2008 amendment, specifically addresses a body corporate and deals with compensation for failure to protect sensitive personal data. The legislature, Axis Bank submitted, had deliberately created a distinction between a natural person and a juristic person, and since the appeal concerned a body corporate, Section 43 was not the appropriate provision.

How TDSAT Reasoned

On the technical objection, the Tribunal found that a special power of attorney had been executed in favour of Mr. Na. Vijayshankar by the authorised signatory of GPL, Mr. Urmi N Prasad, before a Government Notary. The complaint before the Adjudicating Officer had also been filed by Mr. Urmi N Prasad as the authorised representative. The Tribunal held the technical objection to be of no force, observing that procedural lapses cannot be allowed to defeat substantial justice.

On the substantive question, the Tribunal relied on its own earlier Division Bench judgment in Rajender Prasad Yadav v. ICICI Bank Ltd., Cyber Appeal No. 2 of 2012, decided on 18 July 2019. In that case, the Karnataka Adjudicating Officer had similarly rejected a complaint as not maintainable on the ground that Section 43 does not apply to a body corporate after the 2008 amendment. The Division Bench had set aside that order, holding that the jurisdiction under Section 46 of the IT Act is wide enough to make such a complaint maintainable, and that it would be an error of law to hold as a general principle that the word “person” in Section 43 cannot cover a body corporate and a bank.

The Tribunal also referred to Section 3 of the General Clauses Act, 1897, and the Karnataka General Clauses Act, 1899, both of which define “person” to include any company or association or body of individuals, whether incorporated or not. It further noted the Supreme Court's observation in Telco v. State of Bihar, AIR 1965 SC 40, that a corporation in law is equal to a natural person and has a legal entity of its own.

The Tribunal found that GPL's complaint itself specifically mentioned Section 43A of the IT Act along with other regulations, and that the complaint had been filed under Section 46 of the IT Act, 2008, with a clear invocation of jurisdiction. The Adjudicating Officer's conclusion that the complaint was filed only under Section 43 of the old Act was, the Tribunal held, against the facts on record and a cryptic finding with no reasons.

Cost Imposed on Axis Bank

The Tribunal noted that GPL had been compelled to litigate since 2011 to 2026 on account of objections raised by Axis Bank before the Adjudicating Officer that were without force in law, and on account of the Adjudicating Officer's unreasoned conclusion. Drawing a parallel with the Division Bench's imposition of Rs. 75,000 cost on the bank in the Rajender Prasad Yadav matter under similar circumstances, the Tribunal imposed a special cost of Rs. 50,000 on Axis Bank, to be paid to GPL within two months of the judgment.

Order

The appeal was allowed. The impugned order of the Karnataka Adjudicating Officer dated 27 December 2011 was set aside. The matter was remanded to the Adjudicating Officer with a direction to adjudicate on merits within six months from the date of communication or receipt of the order. Axis Bank was directed to pay a special cost of Rs. 50,000 to GPL within two months. Both sides' counsel were present and were directed to extend full cooperation to the Adjudicating Officer to enable disposal within the stipulated period.