Digital Arrests | Banks, Telecom Cos Be Held Liable If Victim's Loss Attributable To Their Negligence : MHA Committee

Pursuant to the Supreme Court's order in the suo motu case taken up over "digital arrest" scams, the Ministry of Home Affairs has constituted a High-level Inter-Departmental Committee to comprehensively examine all facets related to "digital arrests”.

The Committee will work under the Chairmanship of Special Secretary (Internal Security), MHA. It further comprises members at the Joint Secretary level (and above) from the Ministry of Electronics and Information Technology (MeitY), Department of Telecommunications (DoT), Ministry of External Affairs (MEA), Department of Financial Services, Ministry of Law & Justice, Ministry of Consumer Affairs, Reserve Bank of India (RBI), Central Bureau of Investigation (CBI), National Investigation Agency, Delhi Police, and the Indian Cyber Crime Coordination Centre (I4C).

The CEO, I4C, shall act as Member-Secretary and any other expert, as required, may also be invited by the Chairperson. The Committee is scheduled to meet every 2 weeks and Attorney General R Venkataramani will also be in attendance.

The Committee has been mandated to: (i) examine real-time issues faced by enforcement agencies, (ii) consider the Amicus' recommendations and the Court directions, (iii) identify relevant legislations, rules, circulars and implementation gaps, and (iv) suggest corrective measures and provide inputs for further directions.

As per a status report filed by the MHA in the Supreme Court, the first meeting of the Committee took place on December 29, when the CBI suggested having a monetary threshold for cases. Cases falling above this threshold can be dealt with by CBI, while those falling below can be dealt with by State/UT agencies with requisite assistance from the MHA.

The RBI, on its part, informed that an advisory for using AI-based tools to detect fraud has been issued to banks. Further, it is in the advance stage of finalizing a Standard Operating Procedure regarding freezing of bank accounts involved in suspicious transactions.

The MeitY underlined a need for strengthening and activation of the Adjudication Mechanism under Section 46 of the Information Technology Act 2000. The DoT informed that draft Rules under the Telecommunications Act, 2023 have been framed and are at the stage of stakeholder consultations. Once notified, they would address concerns about negligence issuance of SIM Cards, multiple SIMs issuance to one individual, etc.

Further, the I4C focused on efforts to improve response timelines and strengthen coordination with banks and law enforcement agencies for the timely freezing of proceeds of crime. It informed that SOPs for immediate freezing, de-freezing, recovery and restoration of monies to victims are under final consideration of the competent authority. Revamping of the National Cybercrime Reporting Portal (NCRP) and the 1930 helpline are also under active consideration.

Besides the above, the Committee considered the Amicus' suggestions regarding victim compensation. It agreed that “where loss to victims is attributable to negligence, deficiency of service or fraud on the part of banks, Telecom Service Providers or other regulated entities, accountability of such entities must be ensured”.

It was observed that victims should not suffer due to systemic failures or regulatory non-compliance and victim compensation mechanisms should function without prejudice to other remedies available under laws. Accordingly, the Committee Chair directed RBI, DoT and MeitY to look into the existing mechanism and suggest improvements and changes for effective implementation.

The MHA has sought atleast a month's time from the Court to enable the Committee to deliberate further and provide inputs. The matter is next listed for consideration on January 20.

Case Title: In Re: Victims of Digital Arrest Related to Forged Documents, SMW (Crl.) 3/2025