24 January 2026 Legal Updates

Supreme Court Issues Notice in ₹22.92 Crore ‘Digital Arrest’ Scam, Examines Banks’ Duty & Need for National Preventive Framework

(a) Case Title:

• Naresh Malhotra v. Union of India & Ors.

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• 23rd January 2026 (Notice Stage)

(d) Bench:

• Chief Justice of India Surya Kant and Justice Joymalya Bagchi

Facts of the Case

The petitioner, an 82-year-old senior citizen, was allegedly defrauded of ₹22.92 crores in what is believed to be the largest individual “digital arrest” scam in India. At the time of the incident, the petitioner was living alone, while his children were abroad.

Fraudsters impersonated law-enforcement authorities and shared forged Supreme Court orders via WhatsApp messages and video conferencing calls. Under continuous threats of arrest, seizure of property and legal consequences, the petitioner was coerced into transferring his entire life savings through multiple bank transactions to accounts controlled by fraudsters (mule accounts).

Aggrieved, the petitioner approached the Supreme Court seeking preventive guidelines, accountability of banks, identification of mule accounts, restitution of funds, and coordinated national action to curb digital-arrest scams.

Issues Raised

• Whether banks and financial institutions owe a duty of care to detect and prevent large-scale fraudulent transactions, especially involving vulnerable senior citizens?
• Whether failure to prevent digital-arrest scams amounts to violation of the right to life and dignity under Article 21?
• Whether the Supreme Court can issue directions for a uniform national policy to prevent and respond to digital-arrest scams?
• Whether restitution and recovery mechanisms must be strengthened where loss is caused due to systemic negligence?

Contentions of the Petitioner

• The scam was enabled due to gross negligence of banks, which failed to flag or stop unusually large transactions.
• Banks have a duty of vigilance under RBI’s Master Directions on Fraud Risk Management, KYC norms and Customer Protection Circulars.
• The petitioner, being an elderly person, deserved enhanced safeguards.
• The use of mule accounts shows systemic regulatory failure.
• Sought issuance of writ of mandamus for:
  - A uniform national policy to tackle digital-arrest scams.
  - Identification and blocking of mule accounts.
  - Inter-bank real-time fraud detection and fund freezing.
  - Refund/restitution of defrauded amounts.
• Also sought investigation by the CBI and exemption from capital gains tax on fraudulently transferred funds.

Contentions of the Respondents

• The Court noted that certain reliefs relating to direct monetary recovery against banks could be pursued before appropriate consumer forums.
• RBI and Union authorities are already working on mechanisms to address cyber frauds, including committees formed pursuant to earlier Supreme Court directions.
• Investigation by State agencies is ongoing.

Court’s Reasoning & Key Findings

(a) Constitutional & Statutory Perspective

• The Court acknowledged the seriousness and scale of the alleged fraud.
• Noted that the issue raises systemic concerns involving banks, regulators and cybercrime agencies.

(b) Accountability of Institutions

• Senior counsel’s submissions regarding banks’ duty of alertness were taken on record.
• The Court recognised the need to examine:
  - Detection of suspicious transactions
  - Identification of mule accounts
  - Inter-agency coordination

(c) Scope of Judicial Intervention

Notice issued to:

• Union of India
• RBI
• CBI
• Seven private banks

Notice issued except prayers B, C and D, for which the petitioner was granted liberty to approach the appropriate consumer forum.

Final Verdict

• Notice issued to the Union Government, RBI, CBI and concerned banks.
• Petitioner allowed to pursue consumer remedies for certain monetary reliefs.
• Matter kept pending for further consideration on preventive measures, accountability and systemic reforms.

Legal Principles Established

1. Right to Life & Digital Safety (Article 21)

• Protection of life and dignity under Article 21 extends to financial security, especially of senior citizens.

2. Duty of Care of Banks

Banks have a positive obligation to:

• Monitor suspicious transactions
• Follow KYC and fraud-risk management norms
• Protect vulnerable customers

3. State’s Positive Obligation

• The State must evolve preventive frameworks against emerging cyber-enabled crimes.
• Failure to regulate effectively may invite constitutional scrutiny.

4. Judicial Oversight in Cyber Fraud

• Supreme Court can issue structural and policy-oriented directions under Articles 32 and 142 to address systemic failures.

5. Victim-Centric Approach in Cybercrime

• Emphasis on restitution, recovery and compensation, apart from criminal prosecution.

6. Emerging Doctrine: Digital Governance & Accountability

• Digital frauds demand inter-institutional coordination between RBI, MHA, banks and cyber agencies.

Reservation For SC/ST Advocates In Bar Councils Requires Statutory Amendment, Courts Cannot Direct It: Supreme Court

(a) Case Title:

• Universal Dr. Ambedkar Advocates Association v. Union of India

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• 22nd January 2026

(d) Bench:

• Chief Justice of India Surya Kant, Justice Joymalya Bagchi, Justice Vipul M. Pancholi

Facts of the Case

The petitioner, Universal Dr. Ambedkar Advocates Association, filed a writ petition under Article 32 seeking reservation for Scheduled Caste and Scheduled Tribe advocates in elections to the State Bar Councils and the Bar Council of India (BCI).

The petitioner contended that despite constitutional guarantees of equality and representation, SC/ST advocates remained grossly under-represented in Bar Councils. It sought a declaration that the term “proportional representation” under Section 3(2)(b) of the Advocates Act, 1961 includes proportional representation of SC/ST advocates. Alternatively, it prayed for interim directions to reserve seats until appropriate legislation is enacted.

Issues Raised

• Whether “proportional representation” under Section 3(2)(b) of the Advocates Act includes reservation for SC/ST advocates?
• Whether the Supreme Court can direct reservation for SC/ST advocates in Bar Councils in the absence of an express statutory provision?
• Whether parity can be claimed with judicial directions granting representation to women lawyers and persons with disabilities?

Contentions of the Petitioner

• SC/ST advocates are systematically excluded from governance of the legal profession.
• Section 3(2)(b) of the Advocates Act uses the term proportional representation, which should be interpreted purposively to include marginalized communities.
• The Supreme Court has earlier ensured inclusivity:
  - Women lawyers – Yogamaya M.G. v. Union of India
  - Persons with disabilities – Pankaj Sinha v. Bar Council of India
• Sought interim measures such as:
  - Co-option of SC/ST advocates
  - Reduction in registration fees
• Argued that SC/ST reservations exist in other governance bodies, including Parliament.

Contentions of the Respondent

• Reservation in Bar Councils is a matter of legislative policy, not judicial direction.
• Both the Bar Council of Telangana and the Bar Council of India have stated that the issue is under active consideration.
• Section 3 of the Advocates Act does not provide for community-based reservation.
• Courts cannot issue mandamus in the absence of an enabling statutory provision.

Court’s Reasoning & Key Findings

A. Interpretation of the Advocates Act, 1961

• Section 3(2)(b) only prescribes:
  - Number of members in State Bar Councils
  - Election through proportional representation via single transferable vote
• It does not contemplate caste-based or community-based reservation.

B. Limits of Judicial Power

• Reservation for SC/ST advocates can be introduced only by Parliament through statutory amendment.
• Issuing a mandamus without statutory backing would amount to judicial overreach.

C. Parity With Women & Disabled Advocates

• Representation of women lawyers was achieved through consensus and cooperation of the legal fraternity.
• Relief for persons with disabilities in Pankaj Sinha was context-specific and cannot be mechanically extended.
• SC/ST reservation involves broader structural changes, requiring legislative action.

D. Timing & Practical Considerations

• Bar Council elections in several States were already in the pipeline.
• Granting interim directions at this stage would disrupt the electoral process.

Final Verdict

• Petition dismissed.
• Supreme Court declined to issue directions for reservation for SC/ST advocates.
• Held that such reservation can only be introduced through statutory amendment.
• Liberty granted to the petitioner to:
  - Approach competent authorities
  - Re-approach the Court if legislation is not enacted in future

Legal Principles Established

1. Reservation Is a Matter of Legislative Policy

• Courts cannot create reservations without express statutory authorization.

2. Doctrine of Separation of Powers

• Judicial directions cannot substitute Parliamentary law-making.

3. Limits of Article 32 & Mandamus

Mandamus cannot be issued:

• Where the law does not impose a statutory duty
• To compel creation of new rights not recognized by statute

4. Proportional Representation ≠ Reservation

• Proportional representation in election law does not automatically mean social reservation.

5. Judicial Restraint in Policy Matters

• Issues involving structural reform and representation must be addressed legislatively.

6. Parity Must Be Context-Specific

• Relief granted to one class (women / disabled persons) cannot be blindly extended to another without statutory basis.