Supreme Court Issues Notice In ₹22.92 Crore ‘Digital Arrest’ Scam, Flags Banks’ Duty Of Care

The Supreme Court has issued notice to the Union Government, the Reserve Bank of India (RBI), the Central Bureau of Investigation (CBI) and seven private banks on a writ petition filed by an 82-year-old man who claims he was defrauded of ₹22.92 crore in a “digital arrest” scam. The case is possibly the largest individual digital fraud reported in the country so far.

A bench of Chief Justice of India Surya Kant and Justice Joymalya Bagchi heard the matter and sought responses from the authorities. Senior advocate K Parameshwar, appearing for the petitioner, told the court that the fraud took place when the man’s children were abroad and that the petitioner, a senior citizen who lives alone, was subjected to sustained intimidation by fraudsters impersonating law enforcement agencies, Live Law reports.

A chilling case of fear and coercion

According to the writ petition, the fraudsters shared forged documents purportedly issued by the Supreme Court through WhatsApp messages and video conferencing calls. Under continuous threats of arrest and seizure of property, and believing the judicial documents to be genuine, the petitioner was coerced into transferring his entire life savings through multiple bank transactions.

Parameshwar described the episode as one involving “gross negligence” on the part of the banks. Stressing the vulnerability of the petitioner, he told the bench, “There is some duty that these banks also owe. He comes on a wheelchair, he is almost 82 years old.” He argued that banks ought to have shown greater alertness when such large transactions were detected.

The petitioner has arrayed Kotak Mahindra Bank, HDFC Bank, Axis Bank, ICICI Bank, IndusInd Bank, City Union Bank and Yes Bank as respondents.

Should banks have raised red flags?

A key focus of the hearing was the role of banks in preventing large-scale fraud. The senior counsel urged the court to consider prayer “F” of the plea, which seeks directions to identify and trace mule accounts used by the fraudsters. The prayer asks the RBI to direct collecting banks to identify the account holders or operators of mule accounts and ensure refund of the amounts fraudulently transferred from the petitioner’s accounts.

The bench issued notice in the matter on all prayers except prayers B, C and D. For those prayers, the petitioner was granted liberty to approach the appropriate consumer forum. Notably, these excluded prayers seek directions to the banks to deposit the defrauded amount of Rs 22.92 crore in an escrow account to be released in favour of the petitioner.

Parameshwar informed the court that the petitioner was also contemplating approaching the National Consumer Disputes Redressal Commission against the banks, reinforcing the argument that financial institutions cannot remain passive when suspicious high-value transactions take place.

A call for systemic reform against digital arrest scams

Beyond individual relief, the petition raises wider concerns about the growing menace of digital arrest scams. The petitioner has sought a writ of mandamus directing the Union of India to frame and implement a uniform national policy to prevent and respond to such scams, with coordinated action among the Ministry of Home Affairs (MHA), RBI and cybercrime agencies.

The plea also seeks directions to the RBI to ensure strict compliance by all banks with its Master Directions on Fraud Risk Management, KYC norms and customer protection circulars. Among the measures sought are the establishment of a real-time national system for fraud detection and inter-bank fund freezing, and mandatory identification and blocking of mule accounts used for digital arrest frauds.

Further prayers seek directions to the Ministry of Finance to enforce stricter financial safeguards across banks, mandate immediate reporting and blocking of suspicious transfers, and coordinate with the RBI to curb money laundering through mule accounts. The petitioner has also sought directions to the Ministry of Telecommunications to implement compulsory telecom-based fraud warnings, regulate scam-linked numbers and establish real-time communication-blocking mechanisms.

In addition, the plea asks the court to direct the CBI to take over the investigation into FIR No. 85/2025 registered in Delhi, conduct a swift and time-bound probe, freeze and recover diverted funds, and dismantle the fraud syndicate. The petitioner has also sought exemption from capital gains tax liability arising from the sale of securities whose proceeds were later fraudulently transferred.

Court scrutiny intensifies on a growing digital menace

The case comes against the backdrop of the Supreme Court’s own concern over the rise of digital arrest scams. Last year, the court had taken suo motu cognisance of recurring instances of such frauds and directed the CBI to investigate them. A committee was also constituted under the Union Government to explore preventive measures and victim compensation.

Filed with the assistance of advocate-on-record Abhinav Agrawal, the present petition adds urgency to the debate on whether India’s banking and regulatory systems are adequately equipped to protect vulnerable citizens from sophisticated digital fraud. As the court examines the matter, the case is likely to test not just criminal accountability, but also the responsibility of banks in an era of fast-moving, high-value digital transactions.