Introduction
In a landmark development highlighting the alarming rise of cyber-enabled financial frauds in India, the Supreme Court of India has issued notice in a writ petition filed by an 82-year-old senior citizen who was allegedly defrauded of a staggering ₹22.92 crores through a so-called “digital arrest scam”. The case, described as possibly the largest individual digital scam in the country, brings into sharp focus the vulnerability of elderly citizens, the accountability of banks, and the urgent need for coordinated national preventive mechanisms against sophisticated cyber frauds.
A Bench comprising Chief Justice of India Surya Kant and Justice Joymalya Bagchi issued notice to the Union Government, Reserve Bank of India (RBI), Central Bureau of Investigation (CBI), and seven private sector banks, signalling the Court’s serious consideration of systemic lapses and regulatory responsibilities in preventing such crimes.
Background Of The Case
The writ petition, titled Naresh Malhotra v. Union of India & Ors. (W.P. (Crl.) No. 15/2026), was filed by an octogenarian who lives alone and was targeted while his children were abroad. According to the plea, fraudsters impersonated law enforcement authorities and subjected the petitioner to continuous threats of arrest, property seizure, and criminal proceedings.
The scammers allegedly shared forged Supreme Court orders via WhatsApp messages and video conferencing calls, creating an illusion of authenticity. Under psychological pressure and fear of imminent arrest, the petitioner was coerced into transferring his entire life savings through multiple banking transactions, amounting to ₹22.92 crores.
The petitioner claims that he acted in good faith, relying on the apparent legitimacy of judicial documents and authority figures, which ultimately led to catastrophic financial loss.
Supreme Court Proceedings
Senior Advocate K. Parameshwar, appearing for the petitioner, submitted before the Court that the incident was a direct consequence of “gross negligence” on the part of the banks involved. Emphasising the petitioner’s age and physical condition, he informed the Bench that the senior citizen appears in a wheelchair and requires special protection under law.
“There is some duty that these banks also owe. He is almost 82 years old. The banks should show alertness when such large transactions are detected,” the Senior Advocate submitted.
The Bench issued notice in the matter to all respondents, except prayers B, C, and D, for which the petitioner was permitted to approach the appropriate consumer forum, including the National Consumer Disputes Redressal Commission (NCDRC).
Banks Named As Respondents
The petitioner has arrayed the following private banks as respondents in the case:
- Kotak Mahindra Bank
- HDFC Bank
- Axis Bank
- ICICI Bank
- IndusInd Bank
- City Union Bank
- Yes Bank
The plea alleges that these banks failed to exercise due diligence and failed to flag or halt unusually large and suspicious transactions, despite existing regulatory safeguards and RBI guidelines on fraud risk management.
Key Prayers Before The Supreme Court
The writ petition seeks a wide range of directions aimed not only at individual restitution but also systemic reform to tackle the growing menace of digital arrest scams.
Identification Of Mule Accounts
One of the central prayers (Prayer F) urges the Court to direct the RBI to mandate collecting banks to identify the mule accounts used by fraudsters and ensure refund of fraudulently transferred amounts.
“Issue a writ of mandamus to the RBI to direct the collecting banks to identify the account holders/operators of mule accounts used in conducting the fraudulent transactions and ensure refund of the amounts fraudulently transferred,” the plea states.
National Policy Against Digital Arrest Scams
The petitioner has sought directions to the Union of India to formulate and implement a uniform national policy to prevent and respond to digital arrest scams, ensuring coordinated action among the Ministry of Home Affairs (MHA), RBI, and cybercrime agencies.
Strengthening Banking Safeguards
The plea also seeks directions to the RBI to:
- Enforce strict compliance with Master Directions on Fraud Risk Management, KYC norms, and Customer Protection Circulars
- Establish a real-time national fraud detection system
- Enable inter-bank coordination for immediate freezing of suspicious transactions
- Identify and block mule accounts used in digital frauds
Additionally, the Ministry of Finance has been urged to oversee and enforce robust financial regulatory safeguards across all banking institutions.
Telecom And Investigation Measures
The petitioner has further sought directions to the Ministry of Telecommunications to implement mandatory telecom-based fraud warnings, regulate scam-linked numbers, and establish real-time communication blocking mechanisms.
A separate prayer requests the CBI to take over the investigation from the Delhi Police, conduct a time-bound probe, trace mule networks, freeze diverted funds, and dismantle the fraud syndicate.
Tax Relief
An unusual but significant relief sought is exemption from capital gains tax liability arising from the sale of securities, the proceeds of which were allegedly transferred due to fraud.
Court’s Limited Intervention At Present
While issuing notice, the Supreme Court refrained from granting immediate relief directing banks to deposit the defrauded amount into an escrow account. Such reliefs were kept open for consideration before appropriate consumer fora.
However, by entertaining the writ and issuing notice to multiple regulators and banks, the Court has indicated that larger questions concerning institutional responsibility, regulatory failure, and victim protection merit judicial scrutiny.
Broader Context: Supreme Court’s Past Intervention
It is noteworthy that the Supreme Court had previously taken suo motu cognisance of recurring digital arrest scams and directed the CBI to investigate such cases. A committee was also constituted under the Union Government to explore preventive measures and victim compensation mechanisms.
This case builds upon that judicial concern, presenting a real-life instance demonstrating how such scams continue to operate despite regulatory frameworks.
Conclusion
The ₹22.92 crore digital arrest scam case represents a critical moment in India’s legal and regulatory response to cyber-enabled financial crimes. As digital frauds grow more sophisticated, the case underscores the urgent need for inter-agency coordination, proactive banking safeguards, and enhanced protection for vulnerable citizens, particularly senior citizens.
The Supreme Court’s decision to issue notice may pave the way for comprehensive national guidelines, stronger accountability for banks, and improved mechanisms for restitution to victims. The outcome of this case could have far-reaching implications for cybercrime jurisprudence, banking compliance, and consumer protection law in India.
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