Karnataka High Court Intervenes in Digital Arrest Loan Fraud Case, Stays Criminal Proceedings
The Karnataka High Court has recently issued a significant interim order, staying criminal proceedings initiated against a victim of a sophisticated digital arrest scam. The court has raised serious questions about how ICICI Bank disbursed a massive Rs 50 lakh loan to the petitioner's account within just 15 minutes without any proper documentation or verification.
Court Questions Bank's Due Diligence in Loan Disbursement
In an order passed on January 30, Justice M Nagaprasanna granted an interim stay on further proceedings against the petitioner until the next hearing date. The court explicitly directed that ICICI Bank shall not initiate or take any coercive steps against the petitioner based on this transaction.
The bench pointedly questioned the bank's actions, asking "How could the bank transfer the amount of Rs 50 lakh, without any documentation?" This query echoed the concerns raised by Additional State Public Prosecutor B N Jagadeesh, who submitted before the court that it was incomprehensible how the bank could release such a substantial amount of public money without proper documentation.
The Elaborate Digital Arrest Scam Unfolds
The fraud occurred in September 2024 when the 32-year-old victim received a call from someone claiming to be a FedEx employee. The caller informed her that her Aadhaar number had been used for purchasing drugs and subsequently transferred the call to individuals posing as:
- Mumbai police officers
- A Deputy Commissioner of Police (DCP)
- A Reserve Bank of India (RBI) official
The fraudsters created an elaborate narrative, claiming that funds from her account had been used to purchase weapons like an AK-47. They then coerced her into taking an instant pre-approved loan from ICICI Bank while she was under what has been termed digital arrest for approximately 10 hours.
Rapid Loan Disbursal and Immediate Fraudulent Transfer
Advocate Suraj Sampath, appearing for the petitioner, informed the court that the bank credited the Rs 50 lakh loan amount to her account within 15 minutes without requiring any documents or verification. Immediately after the disbursal, the fraudsters made the victim add three payees and transfer the entire amount to them, promising she would receive a No-Objection Certificate (NOC) clearing her name in all alleged cases.
Police Recovery and Bank's Response
During the investigation into the FIR registered by the victim, police managed to recover Rs 10 lakh that had been forwarded to mule bank accounts. However, as pointed out in court, the bank opted not to recover this amount through proper legal procedures before the magistrate court, instead pursuing criminal proceedings against the victim for loan recovery.
Advocate Sampath argued that despite the bank's admission that the transaction resulted from fraud, misrepresentation, and coercion, they still proceeded with criminal action against the petitioner.
Court's Directions and Future Proceedings
The Karnataka High Court has issued notices to all respondents and directed the state government to submit the investigation report or papers from the case filed by the victim in 2024. The matter has been scheduled for further hearing on February 20, where the court will continue to examine the bank's role in this troubling case of digital fraud and financial vulnerability.
This case highlights the growing challenges of cyber crime in the digital age and raises important questions about financial institutions' responsibilities in preventing fraud while protecting genuine victims of sophisticated scams.
