MHA PANEL: BANKS & TELECOM FIRMS MUST FACE LIABILITY FOR DIGITAL ARREST SCAM LOSSES CAUSED BY THEIR NEGLIGENCE:

Following the Supreme Court's suo motu initiative addressing the rising menace of "digital arrest" scams, the Ministry of Home Affairs (MHA) constituted a High-Level Inter-Departmental Committee to conduct a comprehensive examination of all aspects related to these fraudulent activities. Chaired by the Special Secretary (Internal Security) in the MHA, the Committee includes senior representatives (at the level of Joint Secretary and above) from key ministries and agencies, including 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 of I4C serves as the Member-Secretary, with the Chairperson empowered to invite additional experts as necessary. The Committee is required to convene every two weeks, and Attorney General R. Venkataramani is also scheduled to participate in its deliberations.

The Committee has been tasked with several critical responsibilities: identifying real-time operational challenges faced by enforcement agencies, carefully considering the recommendations submitted by the Amicus Curiae and the directions issued by the Supreme Court, mapping out the existing legal framework, including relevant statutes, rules, circulars, and guidelines, highlighting implementation gaps, and proposing concrete corrective measures along with inputs for any further directions the Court may deem appropriate.

According to the status report submitted by the MHA to the Supreme Court, the Committee held its inaugural meeting on December 29. During the discussions, the CBI proposed the introduction of a monetary threshold for digital arrest-related cases. Cases exceeding this threshold would be handled by the CBI, while those below it would be managed by State and Union Territory police agencies, supported by necessary assistance from the MHA. The RBI informed the Committee that it had already issued an advisory directing banks to deploy AI-based tools for fraud detection. Additionally, the RBI is in the advanced stages of finalizing a Standard Operating Procedure (SOP) for the freezing of bank accounts linked to suspicious transactions.

MeitY emphasized the urgent need to strengthen and activate the Adjudication Mechanism provided under Section 46 of the Information Technology Act, 2000. The DoT reported that draft Rules under the Telecommunications Act, 2023 have been prepared and are currently undergoing stakeholder consultations. Once notified, these Rules are expected to effectively address longstanding concerns such as negligent issuance of SIM cards and the allocation of multiple SIMs to a single individual. The I4C highlighted its ongoing efforts to reduce response timelines and improve coordination between banks and law enforcement for the prompt freezing of proceeds of crime. It further disclosed that SOPs for immediate freezing, de-freezing, recovery, and restoration of funds to victims are under active consideration by the competent authority. Parallel initiatives include the revamping of the National Cybercrime Reporting Portal (NCRP) and the 1930 helpline to enhance efficiency and accessibility.

The Committee also deliberated on the Amicus Curiae's suggestions regarding victim compensation. It reached a consensus that accountability must be enforced where losses suffered by victims are attributable to negligence, deficiency in service, or fraud committed by banks, telecom service providers, or other regulated entities. The members stressed that victims should not be left to bear the consequences of systemic failures or regulatory non-compliance, and that any compensation mechanism should operate without prejudice to other legal remedies available to the affected individuals. Accordingly, the Chairperson directed the RBI, DoT, and MeitY to review the existing mechanisms and propose necessary improvements for more effective implementation.

The MHA has requested at least one month's additional time from the Supreme Court to allow the Committee to continue its deliberations and submit comprehensive inputs. The matter is now scheduled to come up for consideration before the Court on January 20.