Srividya Bhaskar Vs ICICI Bank Ltd. (Karnataka High Court)
Digital Arrest Plea Requires Evidence: Karnataka HC Refuses to Quash Bank’s Dishonour Case
Background of the alleged digital-arrest fraud and disputed personal loan: The Karnataka High Court, in Mrs. Srividya Bhaskar Vs ICICI Bank Ltd. & Ors., considered a petition challenging criminal proceedings initiated by ICICI Bank following dishonour of an electronic repayment instruction connected with a personal loan of ₹50 lakh. The petitioner claimed that she had become the victim of a sophisticated online financial fraud on 17 and 18 September 2024. According to her, individuals impersonating courier-service representatives, police officials and financial authorities falsely alleged that her identity had been used for drug trafficking, money laundering and other serious offences. She asserted that the impersonators threatened her with arrest, compelled her to remain on prolonged video calls, restricted her communication with family members and controlled her banking activities. During the alleged coercion, a pre-approved personal loan of ₹50 lakh was disbursed into her ICICI Bank account, and substantial amounts were transferred to other accounts. She maintained that the transaction was neither genuinely authorised nor supported by her free consent. The petitioner reported the incident through the National Cyber Crime Reporting Portal on 19 September 2024 and approached the police on 21 September 2024. Crime No. 759 of 2024 was registered against unknown persons under Sections 66C and 66D of the Information Technology Act, 2000 and Section 318(4) of the Bharatiya Nyaya Sanhita, 2023. The criminal investigation into the alleged fraud remained pending.
Dishonour of electronic repayment instruction and criminal complaint by the Bank: ICICI Bank maintained that the petitioner had voluntarily availed the personal loan under a loan agreement and authorised repayment through electronic standing instructions. According to the Bank’s complaint, an electronic debit instruction for ₹52,41,514 was presented on 18 March 2025 but returned unpaid because of insufficient funds. The Bank issued a statutory demand notice dated 11 April 2025, which it stated was served on 17 April 2025. Alleging failure to discharge the liability within the prescribed period, the Bank approached the jurisdictional Magistrate under Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023, invoking Section 25 of the Payment and Settlement Systems Act, 2007. The proceedings also referred to Section 138 of the Negotiable Instruments Act, 1881. The Magistrate took cognizance and registered C.C. No. 11728 of 2025. The petitioner consequently invoked Articles 226 and 227 of the Constitution of India read with Section 528 of the BNSS, seeking quashing of the complaint and consequential proceedings. She additionally requested protection against coercive loan recovery, restoration of her credit score and restraint against further adverse reporting to the credit information company.
Petitioner’s arguments concerning coercion, free consent and banking negligence: The petitioner contended that the alleged loan transaction was fundamentally invalid because her actions were controlled by third-party fraudsters. Relying upon Sections 14, 15, 19 and 20 of the Indian Contract Act, 1872, she argued that a digital transaction authenticated while the customer was acting under threats could not automatically establish voluntary consent. She described the circumstances as coercion at a digital gunpoint and asserted that she had neither intended nor required a personal loan of such magnitude. She also questioned the Bank’s compliance with customer due diligence, transaction monitoring and internal security safeguards. According to her, her previous six years of banking activity did not disclose transactions comparable to the sudden ₹50 lakh loan and the subsequent high-value transfers. She alleged that the Bank permitted transactions inconsistent with its own restrictions concerning newly added beneficiaries and transfer limits. The petitioner further contended that the unusual velocity and pattern of the transfers should have triggered enhanced scrutiny. She maintained that the Bank was informed of the alleged fraud and that it was unjustified in pursuing criminal proceedings and loan recovery while the police investigation was pending. The petitioner therefore sought to have the proceedings terminated without undergoing a criminal trial.
The Karnataka High Court has dismissed a petition seeking to quash criminal proceedings arising from dishonour of an electronic repayment instruction, holding that allegations of “digital arrest”, coercion and banking negligence involved seriously disputed questions of fact requiring evidence.
The petitioner claimed that fraudsters compelled her to obtain a ₹50 lakh personal loan and transfer funds. The Bank maintained that the loan and subsequent transfers were authenticated through her credentials and confirmations.
The judgment in Mrs. Srividya Bhaskar v. ICICI Bank Ltd. & Ors., Writ Petition No. 2819 of 2026, was delivered by Justice M. Nagaprasanna on 16 October 2026.
Background of the alleged digital fraud
The petitioner alleged that she was subjected to a digital-arrest scam on 17 and 18 September 2024.
According to her complaint, persons impersonating courier-service staff, police officers and financial authorities claimed that her identity had been used for drug trafficking, money laundering and other illegal activities.
She alleged that the fraudsters threatened arrest, prevented her from contacting family members and controlled her actions during prolonged video calls.
During this period, a personal loan of ₹50 lakh was disbursed into her ICICI Bank account. She claimed that the loan was processed without her genuine approval and that funds were subsequently transferred to accounts controlled by the fraudsters.
She reported the matter on the National Cyber Crime Reporting Portal and lodged a police complaint. An FIR was registered for offences under Sections 66C and 66D of the Information Technology Act, 2000, and Section 318(4) of the Bharatiya Nyaya Sanhita.
Bank initiated dishonour proceedings
The Bank alleged that the petitioner had availed the loan under a loan agreement and authorised repayment through standing instructions.
An electronic debit instruction for ₹52,41,514, presented in March 2025, was returned for insufficient balance.
Following a statutory demand notice and alleged non-payment, the Bank instituted a complaint under Section 25 of the Payment and Settlement Systems Act, 2007, invoking the complaint procedure under Section 223 of the BNSS.
The judgment also records proceedings concerning Section 138 of the Negotiable Instruments Act, 1881. The Magistrate took cognizance and issued summons, prompting the petitioner to approach the High Court.
Petitioner challenged the existence of free consent
The petitioner argued that the loan transaction was vitiated by third-party coercion, fraud and mistake.
Relying on Sections 14, 15, 19 and 20 of the Indian Contract Act, 1872, she submitted that completing a digital transaction while acting under threats did not establish free consent.
She also alleged inadequate due diligence and transaction monitoring. According to her, the sudden loan and high-value transfers were inconsistent with her previous banking history.
The petitioner questioned whether beneficiary restrictions and transfer limits had been properly enforced. She sought quashing of the criminal proceedings, protection against coercive recovery and restoration of her CIBIL score, together with restraint against further adverse reporting concerning the disputed loan.
Bank relied on authentication and customer confirmation
ICICI Bank disputed those allegations.
It submitted that the petitioner selected the pre-approved loan offer, accepted its terms and authenticated the transaction using her credentials and debit-card grid.
The subsequent transfers, according to the Bank, were authenticated through one-time passwords. Transactions flagged by its monitoring system were allegedly cleared only after her request and confirmation.
The Bank maintained that it had complied with security protocols and had no knowledge of coercion arising from communications between the petitioner and third parties.
It argued that the coercion claim required factual adjudication and could not, by itself, defeat recovery under the loan agreement.
High Court found disputed factual issues
The Court held that the petitioner’s submissions could not be conclusively accepted in proceedings under Article 226 of the Constitution, read with Section 528 of the BNSS.
Whether the loan was genuinely authorised, whether the petitioner acted under coercion and whether the Bank failed in its duties required examination of evidence.
The Court observed that the transaction sequence showed OTPs being sent to the petitioner and approvals being given for the transactions and subsequent transfers.
It therefore found no warrant for interference at that stage. Treating the digital-arrest allegation as sufficient by itself to quash proceedings would bypass the necessary factual inquiry.
Ombudsman proceedings also noted
The judgment records that the RBI Ombudsman closed the petitioner’s complaint on 14 October 2025, finding no deficiency in service.
The High Court considered that development as part of the chronology. Its refusal to interfere nevertheless rested on the conclusion that the competing versions raised seriously disputed questions requiring evidence.
Decision and significance
The High Court dismissed the petition and dissolved any subsisting interim protection. Pending applications were also disposed of.
The ruling does not establish that digital authentication invariably proves free consent or that digital-arrest allegations are necessarily false. It holds that, on this record, those allegations could not justify quashing the Bank’s proceedings without an evidentiary examination.
