The Supreme Court of India on Monday took a decisive stand against the "digital arrest" scam epidemic signalling a shift from individual blame to institutional responsibility.
Reacting to the development Dr Deepika Dhingra, Associate Professor at BML Munjal University, said that "Digital fraud is no longer a matter of an individual failing, a mere glitch, or an event. The Supreme Court’s characterisation of digital fraud as being a ‘robbery’ or ‘dacoity’ is a welcome move. The judgment is relevant as it now focusses on institution and not the victim."
This judicial stance follows a landmark July 2025 ruling by a Kalyani court in West Bengal that sentenced nine cybercriminals to life imprisonment for a Rs100 crore digital arrest scam with prosecutors terming the act "economic terrorism."
Onus on financial institutions
In a significant move to combat "digital arrest" scams, the Supreme Court placed the burden of prevention squarely on financial institutions asserting that banks must develop robust mechanisms to intercept massive, suspicious transactions.
The apex court pointed out a clear failure in current oversight when a customer, such as a retiree who typically handles small amounts like Rs10,000, suddenly attempts to transfer sums as high as Rs50 lakh, the bank should be obligated to trigger an immediate alert.
Supreme Court of India |
Addressing the root causes of these breaches, Ajay Trehan, Founder and CEO of AuthBridge, said, "We welcome the Supreme Court’s push for a clear SOP to curb digital fraud. This is a strong signal that fraud prevention and data privacy must be treated as a shared national priority across banks, telecom and digital platforms. A key root cause is insider collusion where sensitive customer data is leaked through misuse of access. This can be prevented to a large extent through continuous monitoring, tighter access controls and ongoing due diligence for high-privilege roles, not just at onboarding."
Judicial critique of banking profit motives
Justice Joymalya Bagchi observed that banks have become focussed primarily on business growth, which has unfortunately turned them into efficient conduits for the rapid movement of stolen money, whether through negligence or complicity.
This institutional scrutiny is vital, as Dr Dhingra said, "The judgment is relevant as the focus changes from the victim to the institution. When the court remarks on the possible negligence or even collusion on the part of the bank officers, there is a focus on the regulations and the overall supervision of the financial institution, a trend associated with the overall issue of moral or regulatory hazard."
Justice Bagchi noted that the Ministry of Home Affairs report itself flagged that over Rs 52,000 crore have been misappropriated from April 2021 to November 2025 through cyber fraud, an amount the CJI remarked is more than the budget of many states.
A national SOP
Attorney General R Venkataramani informed the apex court that the Reserve Bank of India has drafted a Standard Operating Procedure (SOP) for banks to deal with such cases, which includes temporary debit holds. The Supreme Court directed the Ministry of Home Affairs to formally adopt the SOP and issue directions for its implementation across the country.
Trehan emphasised that "a coordinated SOP that enables faster detection, quicker response and privacy-by-design will go a long way in restoring trust in India’s digital ecosystem."
Dr Dhingra further highlighted the significance of this inter-agency approach.
"The direction on how a SOP is to be formulated by inter-agency discussion will clearly demonstrate that cyber fraud is, by its very nature, inter-sectoral. The need for framing a liberal and pragmatic framework for compensating the victims of digital arrest scams also signals a rights-based approach, acknowledging the elements of psychological manipulation involved in these crimes. The verdict thus embodies the potential for being a watershed moment for digital governance in India. However, this would rest on the enactment of the judgment with the objective proposed by the judgment itself," she said.
