Karnataka HC Stays Proceedings Against Bengaluru Man In ‘Digital Arrest’ Loan Fraud Case

The Karnataka High Court has stayed criminal proceedings against a 32-year-old Bengaluru resident who claimed he was trapped in a case of "digital arrest" by cyber fraudsters and coerced into taking an instant ₹50 lakh loan from ICICI Bank.

Justice M Nagaprasanna, in an interim order passed on January 30, also restrained the bank from initiating any coercive recovery steps linked to the disputed loan transaction until the next date of hearing.

"There shall be an interim order of stay of further proceedings qua the petitioner, till the next date of hearing. It is made clear that on strength of the subject transaction, respondent No.1 (ICICI Bank) shall not initiate or take any coercive steps against the petitioner," the court said.

According to the petition, the alleged fraud dates back to September 17, 2024, when the petitioner received a call from a person claiming to be a FedEx employee, who alleged that the petitioner's Aadhaar number had been misused to send drugs.

The call was then transferred to another individual posing as a Mumbai Police official, who claimed that the Aadhaar card was linked to multiple criminal cases and that the petitioner's bank accounts were involved in suspicious transactions.

The petitioner was subsequently connected to a third caller claiming to be a Deputy Commissioner of Police, who alleged that funds from the petitioner's account had been used to purchase an AK-47 rifle and other items, the court was told.

The petition stated that the impersonators later connected the petitioner to another person claiming to represent the Reserve Bank of India, who allegedly said the petitioner would be "cleared" only if funds were transferred as part of a verification process.

During this period, the fraudsters allegedly gained access to the petitioner's Skype account, restricted his communication and guided him to take an instant pre-approved loan.

According to submissions before the court, ICICI Bank credited ₹50 lakh into the petitioner's account within about 15 minutes, without seeking documents or conducting independent verification. The fraudsters then allegedly instructed the petitioner to add three new beneficiaries and transfer the entire amount, claiming this was required to obtain a No-Objection Certificate.

Justice Nagaprasanna raised serious concerns over the manner in which the loan was sanctioned, questioning how such a large sum could be released without documentation.

"How could the bank transfer the amount of ₹50 lakh without any documentation?" the judge observed.

Additional State Public Prosecutor B N Jagadeesh also told the court that it was unclear how the bank released the amount without apparent checks or paperwork.

Advocate Suraj Sampath, appearing for the petitioner, submitted that the victim was under "digital arrest" for nearly 10 hours on the day of the incident. He said the fraudsters exercised complete control over communication and decision-making, leaving the petitioner under constant psychological pressure.

Sampath argued that despite the bank acknowledging that the transaction involved fraud, misrepresentation and coercion, it proceeded to initiate criminal action against the petitioner for loan default.

He further submitted that during investigation of the FIR lodged by the petitioner in 2024, police were able to trace and recover ₹10 lakh, which had been routed through mule bank accounts.

However, instead of approaching the magistrate court to claim the recovered amount through legal procedure, the bank chose to pursue recovery of the entire loan from the petitioner, he argued.

The High Court has issued notice to ICICI Bank and other respondents and directed the Karnataka government to place on record the investigation report and relevant documents connected to the criminal complaint filed by the petitioner.

The matter has been posted for further hearing on February 20, when the court is expected to examine the bank's role, the investigation status and the legality of recovery proceedings in greater detail.