Supreme Court Flags ₹54,000 Crore Digital Fraud as ‘Robbery or Dacoity’

Introduction

The Supreme Court of India has expressed grave concern over large-scale cyber frauds, describing the siphoning of more than ₹54,000 crore through digital fraud as nothing short of “robbery or dacoity.” In a significant intervention, the Court has directed the Union Government and regulatory authorities to frame a comprehensive Standard Operating Procedure (SoP) to tackle cyber-enabled financial crimes, particularly the emerging menace of ‘digital arrest’ frauds.

Bench Composition and Judicial Observations

The matter was heard by a bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi, and Justice N. V. Anjaria. The bench noted that the magnitude of money siphoned through digital frauds exceeds the annual budgets of several small Indian states, underscoring the systemic and national security implications of cybercrime.

The Court observed that such offences could be facilitated by either collusion or negligence of banking officials and stressed the urgent need for proactive regulatory and institutional responses by the Reserve Bank of India (RBI), banks, and telecom authorities.

Directions to the Union Government and Regulatory Authorities

The Supreme Court directed the Ministry of Home Affairs (MHA) to consider existing SoPs and decisions of the RBI and the Department of Telecommunications (DoT) and draft a Memorandum of Understanding (MoU) within four weeks. The objective is to create an integrated framework for preventing, detecting, and responding to cyber frauds.

The Court also noted that the RBI has already framed an SoP allowing banks to temporarily block debit cards to prevent ongoing cyber-enabled frauds and urged its effective implementation.

Directions to CBI and State Governments

The bench directed the Central Bureau of Investigation (CBI) to identify cases involving ‘digital arrest’ scams and asked the governments of Gujarat and Delhi to accord sanction to the federal agency to proceed with investigations. The Court reiterated its earlier direction for a unified pan-India probe into such cases.

Authorities were directed to file fresh status reports before the next date of hearing, scheduled after four weeks.

Compensation Framework for Digital Arrest Victims

The Supreme Court directed the RBI, DoT, and other stakeholders to convene a joint meeting to formulate a framework for awarding compensation to victims of digital arrest frauds. The bench emphasised that a pragmatic and liberal approach must be adopted in awarding compensation, given the psychological coercion and financial losses suffered by victims.

What Is ‘Digital Arrest’ Cybercrime?

‘Digital arrest’ is a form of cyber fraud where criminals impersonate law enforcement officers, court officials, or government personnel through audio or video calls. Victims are intimidated with fabricated allegations, threatened with arrest or legal action, and coerced into transferring money. The Court noted that such crimes exploit fear of the legal system and technological vulnerabilities.

Relevant Statutory Framework Governing Digital Fraud

Information Technology Act, 2000

  • Section 66C: Punishment for identity theft.

  • Section 66D: Cheating by personation using computer resources.

  • Section 66E and 66F: Privacy violations and cyber terrorism provisions (in aggravated cases).

Indian Penal Code, 1860 / Bharatiya Nyaya Sanhita, 2023

  • Section 415–420 IPC / Sections 318–319 BNS: Cheating and dishonestly inducing delivery of property.

  • Section 379 IPC / Section 303 BNS: Theft.

  • Section 383–389 IPC / Sections 308–315 BNS: Extortion and putting person in fear of injury.

  • Sections 120B and 34 IPC / Sections 61 and 3 BNS: Criminal conspiracy and common intention.

Banking and Regulatory Laws

  • Reserve Bank of India Act, 1934: Regulatory powers over banks and financial institutions.

  • Banking Regulation Act, 1949: Obligations of banks regarding customer protection and risk management.

  • Payment and Settlement Systems Act, 2007: Regulation of electronic payment systems.

Constitutional Provisions Implicated

Article 21: Right to Life and Personal Liberty

The Supreme Court has interpreted Article 21 to include the right to security of person and property, as well as protection from arbitrary deprivation of property and dignity. Large-scale cyber fraud directly affects personal liberty, financial security, and dignity of individuals.

Article 14: Equality Before Law

Victims of digital fraud are entitled to equal protection of laws. Regulatory and enforcement failures that disproportionately affect vulnerable populations raise concerns of systemic inequality.

Article 300A: Right to Property

Although no longer a fundamental right, Article 300A guarantees that no person shall be deprived of property save by authority of law. Cyber fraud represents unlawful deprivation of property, necessitating robust State protection.

Judicial Precedents on Cybercrime and Financial Fraud

Shreya Singhal v. Union of India (2015)

The Court recognised the significance of regulating cyberspace while protecting constitutional rights, highlighting the State’s obligation to address online threats.

State of Maharashtra v. Mohd. Yakub (1980)

The Court observed that economic offences pose serious threats to the nation’s financial health and must be dealt with sternly.

N. Radhakrishnan v. Maestro Engineers (2010)

The Court noted that serious allegations of fraud require thorough criminal investigation, not merely civil adjudication.

Internet and Mobile Association of India v. RBI (2020)

The Court underscored the regulatory role of the RBI in safeguarding financial systems and protecting consumers in the digital economy.

Regulatory and Policy Implications

The Supreme Court’s directions reflect judicial recognition that cyber fraud has reached a scale comparable to organised crime. The emphasis on inter-agency coordination among RBI, DoT, banks, and law enforcement agencies indicates a shift toward a whole-of-government approach to cybercrime governance.

The Court’s suggestion to use artificial intelligence to trace and freeze fraudulent accounts indicates a future-oriented regulatory approach to financial cybersecurity.

Conclusion: Toward a National Cyber Fraud Response Framework

The Supreme Court’s characterisation of ₹54,000 crore digital fraud as “robbery or dacoity” marks a critical moment in India’s cybercrime jurisprudence. The Court’s directions to frame a national SoP, coordinate among regulators, and establish compensation mechanisms reflect an evolving judicial strategy to address systemic digital fraud. The outcome of the ongoing proceedings could significantly reshape India’s cybercrime enforcement architecture, regulatory oversight, and victim compensation regime.

Location: Varanasi, Uttar Pradesh, India

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