Karnataka High Court Refuses To Quash Case Over Dishonoured ₹52 Lakh Loan Payment Woman Links To Digital Arrest

The Karnataka High Court has refused to quash criminal proceedings initiated by ICICI Bank against a woman over the dishonour of a payment instruction for ₹52.41 lakh towards a personal loan, which she claimed was obtained during a digital arrest scam.

Justice M Nagaprasanna was hearing a petition filed by Srividya Bhaskar, who also sought to restrain the bank from taking coercive steps to recover the loan and to restore her CIBIL score.

Bhaskar claimed that she was subjected to a digital arrest scam on September 17 and 18, 2024, during which fraudsters coerced her into taking the loan and transferring the proceeds to accounts controlled by them. She lodged a police complaint, leading to the registration of a case against unknown persons.

ICICI Bank, however, contended that Bhaskar had voluntarily availed the pre-approved loan and authenticated the transactions using one time passwords. The bank initiated criminal proceedings after a payment instruction for ₹52.41 lakh was dishonoured due to insufficient funds and she failed to pay despite receiving a statutory notice. The Magistrate subsequently took cognizance of the complaint under Section 138 of the Negotiable Instruments Act, 1881, and Section 25 of the Payment and Settlement Systems Act, 2007.

While Bhaskar argued that the loan was obtained without free consent and alleged lapses in the bank's transaction monitoring, the bank contended that the allegations of coercion required factual adjudication and could not absolve her of repayment liability.

The State also contended that the circumstances surrounding the sanction and disbursal of ₹50 lakh required consideration, while confirming that the cybercrime complaint was under investigation.

The Court observed that the petition would ordinarily not have been entertained, as the allegations involved questions of evidence. However, since Bhaskar attributed the loan transaction to a digital arrest scam, the Court considered it necessary to examine the circumstances and her complaint.

For this, the Court examined the flow of the transaction made by Bhaskar, her complaint before the Station House Officer, complaint before the RBI Ombudsman and the demand notice issued by the ICICI Bank.

Rejecting Bhaskar's contention that the entire transaction happened through digital arrest, the Court remarked:

“The said submission cannot be accepted at this juncture, as every disputed transaction tomorrow can be said to be a product of digital arrest, and the borrower would get away with the loan that he or she has availed of. “

It then examined the sequence of events between September 17, 2024 and October 14, 2025 and observed that the transactions were authenticated through one time passwords sent to Bhaskar's mobile phone and that she had also approved the transfers to third party accounts.

The Court further noted that the RBI Ombudsman had closed Bhaskar's complaint on October 14, 2025, finding no deficiency in service.

Holding that the matter required evidentiary examination, the Court dismissed the petition.

For Petitioner: Advocate Suraj Sampath

For Respondents: Senior Advocate D.R Ravishankar, Advocates Francis Xavier, Pinaz Mehta, B.N Jagadeessha, SPP and Reshma K.T, CGC