TDSAT Sets Aside Rs 1.51 Crore IT Act Order Against YES Bank, Finds Adjudicating Officer Denied Fair Hearing

TDSAT quashes a Mumbai Adjudicating Officer's order directing YES Bank to refund Rs 1.21 crore and pay Rs 29.83 lakh compensation, holding the final hearing was conducted without valid notice to the bank or its counsel.

The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has set aside an order passed by the Adjudicating Officer, Mumbai, under the Information Technology Act, 2000, which had directed YES Bank Limited to refund Rs 1,21,16,004 together with compound interest at 18 per cent per annum and to pay an additional Rs 29,83,996 as compensation to Wardha Nagari Sahakari Adhikosh (Bank) Maryadit, an urban cooperative bank in Wardha district, Maharashtra. The Tribunal, presided over by Justice D.N. Patel (Chairperson) and Shri Sanjeev Banzal (Member), found that the Adjudicating Officer had passed the order on 11 February 2025 without serving valid notice of the final hearing upon YES Bank at the email addresses the bank had formally communicated to the adjudicating office. The matter has been remitted for fresh adjudication, with a direction to conclude proceedings preferably within four months.

The Cyber Fraud and the Complaint Before the Adjudicating Officer

Wardha Nagari Sahakari Adhikosh had maintained a current account at YES Bank's Nagpur branch since 2013, using sub-membership arrangements for RTGS and NEFT services. On 24 May 2023, twenty-four electronic transactions aggregating Rs 1,21,16,004 were processed from that account and transferred to twenty-four separate beneficiary accounts held with various banks, who were arrayed as Respondents 2 to 24 in the appeal.

The cooperative bank alleged the transactions were unauthorised and fraudulent. YES Bank initiated recall requests with the beneficiary banks on the same day. An FIR was lodged with the Wardha Cyber Crime Cell on 25 May 2023. YES Bank also engaged M/s Ernst & Young LLP to conduct a forensic audit; an interim report followed in June 2023 and a final forensic report in September 2023.

On 1 November 2023, the cooperative bank filed Complaint Case No. 01 of 2024 before the Adjudicating Officer, Maharashtra, under Sections 43(a), 43(g), and 43A of the IT Act, seeking refund of Rs 1,21,16,004 and compensation of Rs 29,83,996 under heads including loss of reputation, public confidence, mental harassment, and litigation expenses.

The complaint remained pending for nearly a year. The cooperative bank then moved the Bombay High Court, Nagpur Bench, in Writ Petition No. 4474 of 2024. By order dated 1 August 2024, the High Court directed the Adjudicating Officer to decide the complaint expeditiously and in any event within four months.

How the Procedural Dispute Arose

Acting on the High Court's direction, the Adjudicating Officer issued a notice on 22 October 2024 fixing a hearing on 29 October 2024. The notice itself recorded that the email addresses used had been “provided by complainant” and had not been independently verified. YES Bank received the speed post notice at its Nagpur branch on 24 October 2024, giving it five days' notice.

YES Bank appeared on 29 October 2024. On the same day, at 4:26 PM, its counsel sent a formal email to the Adjudicating Officer's office furnishing four correct email addresses for all future communications: external.communication@yesbank.in, yesbank.learesponse@yesbank.in, mumbai@saikrishnaassociates.com, and navankur@saikrishnaassociates.com.

YES Bank then actively participated. It filed its reply on 14 November 2024, the cooperative bank filed a rejoinder on 18 November 2024, and YES Bank filed a sur-rejoinder on 27 November 2024. On 5 February 2025, YES Bank filed two applications under Section 46(5) of the IT Act seeking to summon the Investigating Officer of the Wardha Cyber Crime Cell and officials of Ernst & Young LLP to testify on their forensic findings.

A notice dated 6 February 2025 was then issued fixing the final hearing on 11 February 2025. YES Bank's case before the Tribunal was that this notice did not carry any of the four email addresses furnished on 29 October 2024. Neither YES Bank nor its counsel received any intimation of the final hearing date. The Adjudicating Officer proceeded on 11 February 2025 in their absence, allowed the complaint, and directed the refund and compensation. YES Bank received a copy of the order only on 20 February 2025, through the cooperative bank's counsel.

YES Bank's counsel wrote to the Adjudicating Officer on 21 February 2025 pointing out the defective service. A review application filed on 20 March 2025 remained unattended. The cooperative bank filed an execution application on 21 March 2025. YES Bank then preferred the present appeal before TDSAT on 2 April 2025. On 8 April 2025, TDSAT admitted the appeal and stayed the impugned order.

The Statutory Framework: Section 46 and the 2003 Rules

TDSAT examined Section 46 of the IT Act and the Information Technology (Qualification and Experience of Adjudicating Officers and Manner of Holding Enquiry) Rules, 2003 in detail. Section 46(2) requires the Adjudicating Officer to give the person proceeded against “a reasonable opportunity for making representation in the matter” before imposing any penalty or awarding compensation. Section 46(5) confers on the Adjudicating Officer powers analogous to those of a civil court, including the power to summon witnesses.

Rule 4(c) of the 2003 Rules requires the Adjudicating Officer to issue notice with all documents, fixing a date and time for further proceedings. Rule 4(d) requires the officer to explain the allegation on the date so fixed. Rule 4(h) permits the officer to proceed ex parte if a person “fails, neglects or refuses to appear” as required by Rule 4(d), but only after recording reasons. Rule 4(j) contemplates fixing a date for production of documents or evidence. Rule 7 governs service of notices and requires, where electronic service is used, “sufficient evidence of actual delivery of the electronic record” to the concerned person.

The Tribunal held that Rule 4(h)'s ex parte power is not free-standing. It is expressly conditional upon the person having failed, neglected, or refused to appear after a valid notice under Rule 4(c). Due notice is a condition precedent to lawful exercise of the ex parte power.

The Tribunal's Reasoning on Both Issues

On Issue I, the Tribunal found that the notice dated 6 February 2025 had not been shown to have been transmitted to the corrected email addresses furnished by YES Bank on 29 October 2024. The cooperative bank's reply affidavit produced no email dispatch log, read receipt, delivery confirmation, or any other proof of actual delivery within the meaning of Rule 7(a). The cooperative bank also did not produce a copy of the notice dated 6 February 2025 to show it bore the correct addresses. The Tribunal held that the Adjudicating Officer's finding that YES Bank had failed to appear “despite due notice” could not be accepted as established.

The Tribunal further held that the two applications filed on 5 February 2025 seeking to summon the Investigating Officer and the Ernst & Young officials were not acknowledged, listed, or disposed of by any reasoned order before the final order was passed. In a technically contested matter involving rival contentions on cyber forensics, security measures, IP address logs, and SMS delivery, such applications were not trivial procedural incidents. Their complete disregard constituted a material procedural omission.

The Tribunal rejected the argument that the exchange of written pleadings — reply, rejoinder, and sur-rejoinder — satisfied the statutory requirement of a reasonable opportunity. Filing a written statement is a component of participation; it is not the equivalent of being heard upon it, particularly when the party had specifically requested an oral hearing and had sought to summon expert witnesses.

On the High Court's direction for expeditious disposal, the Tribunal was clear: “Speed may shorten time; it cannot abrogate fairness and due process.” A direction for speedy disposal cannot be construed as dispensing with notice, hearing, or service requirements expressly embedded in the Act and Rules. The High Court's order presupposed that adjudication would proceed in conformity with natural justice, albeit within an accelerated timeline.

On Issue II, the Tribunal applied the doctrine of audi alteram partem as affirmed in Maneka Gandhi v. Union of India, Mahipal Singh Tomar v. State of U.P., Sahara India (Firm) v. Commissioner of Income Tax, and State Bank of India v. Rajesh Agarwal. It held that the right to notice and hearing under Section 46(2) and Rules 4 and 7 is a statutory entitlement anterior to the merits controversy. If the procedural foundation is infirm, the merits cannot cure the defect.

Procedural Guidelines Issued for All Adjudicating Officers

The Tribunal noted that during the hearing on 25 July 2025, Respondent No. 1 itself had submitted that the procedure followed by Adjudicating Officers under Section 46 varied from State to State and required uniformity. Both parties placed suggestion notes on record.

The Tribunal issued a set of directions applicable to all Adjudicating Officers appointed under Section 46 across States and Union Territories. The principal directions are:

• Complaints must contain the full name, postal address, email address, and mobile number of each party and their counsel.
• Upon admission, notice must be issued simultaneously by email, registered post with acknowledgment due, and SMS or WhatsApp. The complainant must file an affidavit of service.
• Where a party furnishes corrected contact details at any stage, the office must immediately update its records and use the corrected details for all future communications.
• At the conclusion of each hearing, the next date must be assigned in the presence of the parties or their counsel and recorded in the order of the day. The practice of relying exclusively on fresh notices for subsequent hearings, without assigning the next date in the course of proceedings, must be discontinued.
• A reminder notice must be sent to all parties by email and SMS or WhatsApp at least five days before each hearing date.
• A cause list must be published on the official website of the State or Union Territory's IT Department at least three days before each hearing day.
• Every application filed by a party must be placed before the Adjudicating Officer within seven days of receipt and listed at the earliest available date. The Adjudicating Officer must not proceed to final hearing while substantive applications remain pending and undisposed of, unless specific reasons are recorded in writing.
• Before proceeding ex parte, the Adjudicating Officer must satisfy himself that service has been duly and effectively completed in accordance with Rule 7 and must record reasons expressly, in conformity with Rule 4(h).
• All proceedings conducted by video-conferencing must be officially recorded and form part of the case record.
• Certified copies of final orders must be communicated to parties without avoidable delay.
• Adjudicating Officers must implement these directions with immediate effect and report compliance to TDSAT, through the IT Department of the respective State or Union Territory, within ninety days of the date of the order.

The Tribunal directed its Registrar to forward a certified copy of the judgment to the Secretary, Ministry of Electronics and Information Technology; the Chief Secretaries of all States and Lieutenant Governors or Administrators of all Union Territories; and the IT Secretaries of all States and Union Territories who serve as Adjudicating Officers under Section 46.

Outcome

The impugned order dated 11 February 2025 passed by the Adjudicating Officer, Mumbai, in Complaint Case No. 01 of 2024 is quashed and set aside. The matter is remitted to the Adjudicating Officer for de novo adjudication on merits. The Adjudicating Officer is directed to proceed strictly in accordance with Section 46 of the IT Act and Rules 4(c), 4(d), 4(h), 4(j), and 7 of the 2003 Rules, without being influenced by any observation in the present appeal. All contentions on the substantive aspects — including the applicability of Sections 43(a), 43(g), and 43A, the adequacy of security measures, the forensic reports, IP address logs, and SMS alerts — are left open. The Adjudicating Officer is directed to endeavour to conclude proceedings preferably within four months of receipt of a copy of the order. No order as to costs. All pending interlocutory applications stand disposed of.