I. WHAT IT IS - HDFC / ICICI MODEL

Actual clause from HDFC Bank Indemnity Format:

"The Account Holder(s) have approached and requested the Bank to accept instructions given by the Account Holders themselves or through their authorised signatories as mentioned in account opening form or as amended from time to time via email (whether or not the same has been electronically signed) and/or facsimile (hereinafter referred to as Virtual Instructions) and the Bank has agreed to accept such Virtual Instructions"

"We confirm that the electronic signature is the signature of the person to whom it correlates and the electronic signature will be affixed by that person with the intention of signing... and will be deemed equivalent of our authorised signatories' signatures in hard copy, in ink or original form for all purposes and can be used as evidence"

You sign this indemnity, then bank opens an Indemnity Account flag in CBS - meaning account allowed for email instructions.

DCB Bank Format: "Letter of Indemnity - Resident Accounts - in the form of email transmission from email ID of principal account holder, which is not bearing original signature (=email instructions)"

SMBC Singapore Branch Format: Same - Indemnity for Authorisation to Engage in Financial Transactions and Give Instructions - para (g) - electronic signature deemed equivalent.

II. WHY BANKS NEED IT - LEGAL PROBLEM

Under NI Act Sec 64 + Contract Act Sec 124-125, paying banker has zero protection for forged drawer's signature.

Supreme Court - Canara Bank v. Canara Sales Corporation - (1987) 2 SCC 666:

"If signature on cheque is not genuine, there is no mandate on bank to pay... Nor can inaction for reasonably long time in not discovering fraud be defence"

Supreme Court - Bihta Cooperative Development v. Bank of Bihar: Bank cannot escape liability for paying forged cheque even if forgery perfect.

So if bank acts on email with scanned signature / e-Sign and it turns out to be hacked / spoofed, bank is liable for full loss.

To shift risk, bank takes Indemnity under Sec 124 Indian Contract Act, 1872.

Sec 124: Contract of indemnity - one party promises to save other from loss caused by conduct of promisor or third party.
Sec 125: Rights of indemnity holder - can recover all damages, costs incurred.

Bank's standard indemnity clauses:

1. You will indemnify bank for all losses, claims, damages arising from acting on Virtual Instructions
2. Bank may rely and shall be protected in acting upon any resolution, certificate, statement purporting to be given even if not in specified manner
3. Bank not required to risk its own funds if adequate indemnity not assured
4. Electronic signature deemed equivalent to wet signature for Evidence Act Sec 85A, 85B, 85C

III. TYPES OF E-SIGNATURE INDEMNITY IN BANKING

1. Email / Fax Indemnity - Resident / Corporate Accounts
For corporates operating multiple accounts - single indemnity covers all accounts. Used for RTGS instruction via email.

2. Internet Banking FTF Indemnity - Axis Bank Model
"Separate indemnity form required for accounts where mode of operation is jointly. Separate Login ID and PIN required for each signatory"

3. Deceased Claim / Legal Heir Indemnity
Bank accepts indemnity bond from heirs to protect if different claimant appears - 2025 Ombudsman target 15 days.

4. Duplicate Share Certificate / Lost Instrument Indemnity
Supreme Court - Impersonator Forged Indemnity Bond - 903 equity shares case:
Impersonator executed indemnity bond by forging appellant's signature for issue of duplicate share certificates. Respondent No.2 issued duplicate on 28.09.2012, transferred to Vikas Tara Singh. Supreme Court held company liable for not verifying - indemnity with forged signature is nullity.

IV. CASE LAWS

CASE 1: Pacific Carriers Ltd v. BNP Paribas - (2004) HCA 35 - High Court of Australia - Leading
Bank officer executed letters of indemnity without authority. Court held bank bound:

"Representation of authority came from combination of features of presentation to outside world, all attributable to dealing with bank, with institutional trappings"

• Applied in India by Supreme Court in international banking activities operate on implicit faith and trust - cannot escape showing internal fraud. Bank obtained letters of indemnity on stamp paper duly signed - held liable.

CASE 2: Protection to Paying Banker - Forged E-Signature - Testbook / Supreme Court principle

• Forged signature is nullity - no mandate.
• No statutory protection under Sec 89 NI Act for forged drawer's signature (Sec 89 protects only material alteration, not forgery).
• Therefore even if e-signature looks perfect, if forged, bank bears loss unless indemnity exists.

CASE 3: Electronic Signature Fraud - IT Act Sec 66C
"If anyone fraudulently or dishonestly makes use of electronic signature, password or unique identification feature of any other person" - Sec 66C IT Act, 2000 - Punishment upto 3 years + fine.

This is basis for bank to claim under indemnity - client must indemnify bank if third party misuses his e-Sign due to his negligence (sharing PIN, not securing email).

CASE 4: Presumption under Evidence Act - Sec 85A, 85B, 85C

• Sec 85A - Presumption as to electronic agreements: Court shall presume every electronic record purporting to be agreement containing electronic signature was concluded by affixing e-signature of parties.
• Sec 85B - Presumption as to secure electronic record and signature: If secure digital signature (DSC) used, court presumes not altered.
• Sec 85C - Presumption as to Electronic Signature Certificates

But presumption rebuttable - if customer proves e-Sign misused, bank needs indemnity to recover.

CASE 5: Uploaded Electronic Signature Did Not Download Loan Guarantee - UK Court - Lexology
Court rules uploaded e-signature did not download loan guarantee - no intent. Rejects analogy to Pacific Carriers. Holds bank not bound unless clear intent to sign. Indian courts follow same - need explicit indemnity clause showing intent.

CASE 6: Banks Must Refund Fraud Victims - Supreme Court - 2024-25

• SBI SLP dismissed - Referring to Clauses 8 and 9 RBI Circular 6 July 2017 - Customer zero liability for third-party breach if reports within 3 days.
• Bhowmick v. SBI - SC: Reported within 24 hrs, no negligence - bank must compensate.
• Implication for indemnity: If bank has indemnity but fraud is bank's system breach, indemnity cannot be enforced - RBI circular overrides contract. Indemnity only enforceable if customer negligence.

V. WHAT MAKES INDEMNITY VALID / ENFORCEABLE

1. Must be on stamp paper, signed with wet signature first time (e-indemnity for future e-instructions needs initial wet execution)
2. Must clearly state email IDs authorized - e.g., principal account holder email
3. Must state electronic signature deemed equivalent to wet - to satisfy BSA Sec 63 and IT Act Sec 5
4. Must have clause: Bank may act on virtual instructions appearing to comply with mandate, without verifying authenticity beyond email ID
5. Must have Sec 125 recovery clause - legal costs recoverable
6. Cannot override RBI zero liability circular - if fraud is bank's fault, indemnity void as opposed to public policy under Sec 23 Contract Act

For you as customer: Never sign blank indemnity allowing any email ID. Restrict to 1-2 authorized IDs, require 2FA, require call back for > Rs 1 Lakh.