On a recent Friday, the Supreme Court of India issued notices to several key governmental and financial institutions regarding a grave case of alleged fraud amounting to ₹22.93 crores. This particularly heinous case unfolded as part of a “digital arrest” scam that targeted an 82-year-old senior citizen, raising alarms about cybercrime, banking oversight, and regulatory vigilance. The court’s intervention reflects a significant concern surrounding the protection of vulnerable populations in the digital age.
Supreme Court Takes Note
The bench, comprising Chief Justice Surya Kant and Justice Joymalya Bagchi, addressed a petition that suggested lax banking safeguards may have allowed this extensive fraud to transpire. While choosing not to entertain some of the petitioner’s requests at this phase, the court recognized the critical nature of the remaining issues, marking this case as one of the largest instances of digital fraud targeting an individual in India.
The Plight of Naresh Malhotra
Represented by senior advocate K. Parameshwar, the petitioner, Naresh Malhotra, appeared in a wheelchair, symbolizing the vulnerability he faced during this daunting experience. Malhotra’s children were overseas, leaving him isolated and exposed when the fraudsters struck. His counsel emphasized that the significant monetary transactions should have automatically triggered alerts within the banking system, arguing that banks must prioritize monitoring and preventive measures, especially when it concerns the life savings of senior citizens.
The Methodology of Fraud
The petition reveals a chilling tactic employed by the fraudsters. They masqueraded as law enforcement officials, contacting Malhotra via WhatsApp messages and video calls. Deceptive claims of serious criminal charges and imminent arrest were fabricated to induce fear, coercing him into transferring his life savings to various accounts. What Malhotra believed were Supreme Court orders turned out to be elaborate forgeries, a detail that underscores the lengths to which scammers will go to exploit their victims.
The Role of Mule Accounts
An essential focus of the legal argument revolves around “mule accounts,” which are used to receive and launder the proceeds of fraud. The petitioner’s counsel contended that such a large-scale fraud could not have occurred without the involvement of these accounts. Consequently, the court was urged to instruct the Reserve Bank of India (RBI) to mandate that banks identify those account holders and operators involved in directing the fraudulent money transfers.
Path to Restoration
The plea forwarded in this case seeks, among other things, directions from the court to ensure the recovery of the defrauded amount. The inadequacies in timely checks within the banking system, which allowed the crime to escalate, have caught the court’s attention, highlighting systemic failures in preventing such frauds.
Consumer Forum as an Alternative
In a significant move, the court granted Malhotra the liberty to approach the National Consumer Disputes Redressal Commission (NCDRC) concerning the banks implicated in this case. This decision posits that, in addition to pursuing criminal investigations, there may also be grounds for claiming deficiency of service against the banks, arguing for accountability in financial institutions’ responsibilities.
The Glaring Issue of Digital Fraud
Legal experts underscore that the Supreme Court’s involvement signals a rising judicial concern over the escalation of cyber-enabled financial crimes. These crimes often exploit personal fear and the trust individuals place in financial institutions. By issuing notices to the Central government, investigative agencies, and the banking regulator, the court highlights that it views this incident not as an isolated case but as an inherent systemic challenge.
Questions for the Future
Going forward, the Centre, the CBI, the RBI, and the implicated banks must respond to several pressing inquiries posed by the court, including:
- How was such a large fraud orchestrated without detection?
- Why were mule accounts not identified in a timely manner?
- What failures allowed the existing banking alert mechanisms to overlook such significant transactions?
As discussions unfold in upcoming hearings, the Supreme Court is anticipated to deliberate over the potential imposition of responsibilities on banks and regulatory bodies while exploring if additional safeguards are necessary to prevent similar occurrences of digital fraud, particularly aimed at protecting senior citizens.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
