New Delhi | The Supreme Court has expressed serious concern over the rising incidence of digital arrest scams, cyber fraud and online financial crimes, sharply questioning the role of banks and regulators in preventing such offences. The court has made it clear that any laxity on the part of banks that enables cybercriminals to siphon money from customer accounts would amount to a ‘deficiency of service’, making banks liable for the consequences.
A Bench comprising Chief Justice Surya Kant and Justice Joymalya Bagchi described the scale of cyber fraud as “alarming” and underlined the urgent need for a banking-wide early-warning mechanism that alerts customers the moment suspicious activity is detected.
Court flags ₹3,000-crore losses as “shocking”
Referring to disclosures made earlier by investigating agencies, the Bench noted that nearly ₹3,000 crore has already been siphoned off through digital arrest scams and other cyber frauds across the country. The court observed that the magnitude of losses suffered by ordinary citizens was deeply disturbing.
“The staggering amount taken from people through digital arrest and cyber fraud is shocking,” the Bench said, adding that the banking system cannot remain so vulnerable that fraudsters are able to exploit it with ease.
The judges stressed that banks must have robust internal systems to detect unusual transactions, abnormal fund movements or suspicious account behaviour, and that such red flags should immediately trigger alerts across the system to prevent further losses.
Government admits systemic gaps, promises corrective action
Attorney General R. Venkataramani, appearing for the Centre, acknowledged before the court that certain structural and procedural gaps in the existing framework were being exploited by cybercriminals. He informed the Bench that the government was actively working with regulators and enforcement agencies to plug these loopholes.
According to the Attorney General, an inter-ministerial committee is currently examining multiple proposals aimed at creating a strong, coordinated mechanism to prevent cybercrimes such as digital arrests, which often involve impersonation of law enforcement agencies and psychological coercion of victims.
Focus must shift to recovery of stolen money, says amicus
Amicus curiae and senior advocate N. S. Nappinai urged the court to ensure that the response to cyber fraud goes beyond arrests and prosecutions. Drawing a comparison with the United Kingdom, she pointed out that while similar cybercrimes occur there, more than 90% of the defrauded amount is recovered and returned to victims.
She argued that Indian authorities must place greater emphasis on tracing, freezing and restoring stolen funds, rather than leaving victims to bear the financial burden of sophisticated cyber scams.
SIM boxes and telecom lapses under scanner
The issue of misuse of telecom infrastructure also came under scrutiny. Vipin Nair, President of the Supreme Court Advocates-on-Record Association, told the court that SIM boxes capable of housing up to 400 SIM cards continue to be sold openly in the market. These devices, he said, enable fraudsters to operate multiple phone numbers from a single location, making scams harder to trace.
Nair flagged the negligent approach of telecom service providers in issuing multiple SIM cards, arguing that lax verification norms were directly aiding cybercrime networks. The court recalled that on December 1, it had already expressed concern over rampant violations in SIM issuance and had directed the Department of Telecommunications (DoT) to submit corrective proposals.
The Bench noted that despite earlier observations, no meaningful regulatory action appeared to have been taken and asked authorities to urgently address the issue.
CBI probe monitored, status report sought in sealed cover
The Attorney General informed the court that the Central Bureau of Investigation (CBI), which has been entrusted with a nationwide probe into digital arrest cases, has made significant progress. The Supreme Court directed that a status report be submitted in a sealed cover, adding that the agency could seek further directions if required for a seamless investigation.
