The has dismissed a petition filed by an individual seeking to quash criminal proceedings initiated by following the dishonour of payment instructions for a loan of ₹52.41 lakh. The petitioner, Srividya Bhaskar, had sought to restrain the bank from recovering the funds, claiming that the personal loan agreement was entered into under duress during a "" incident in . Justice M. Nagaprasanna, presiding over the matter, ruled that the allegations of coercion constituted a complex, disputed question of fact that could not be resolved through .
The court’s decision arrives as part of a larger legal challenge involving criminal complaints under , and . The petitioner contended that she was coerced by fraudsters masquerading as law enforcement officials into authorizing a loan through the bank’s digital interface. She argued that the transaction lacked as defined under the , and alleged that the bank failed to exercise sufficient despite her established transaction history and the suspicious nature of the rapid loan disbursement.
In his order, Justice Nagaprasanna highlighted the systemic dangers of allowing petitioners to escape based solely on allegations of digital fraud without a full . “The said submission cannot be accepted at this juncture, as every disputed transaction tomorrow can be said to be a product of , and the borrower would get away with the loan that he or she has availed of,” the court observed. The judge underscored that the procedural framework of the criminal courts is the appropriate forum to determine whether the transaction was truly involuntary or if the petitioner had retained control over her digital credentials.
The bank’s counsel maintained that the loan was disbursed as a pre-approved facility based on algorithmic assessments and that the petitioner had completed the entire digital authentication process voluntarily. Evidence presented to the court indicated that each fund transfer was validated via one-time passwords (OTPs) sent directly to the petitioner’s mobile device. The bank asserted that it had complied with all security protocols and that the subsequent transfer of funds to various third-party accounts was confirmed by the petitioner’s own actions, leaving no room for the bank to intercept or block the flow of money in real-time.
Procedural history in this case shows that the petitioner had previously pursued relief through multiple channels, including reporting the incident to the in Bengaluru and filing a complaint with the Ombudsman. The had reviewed the grievance regarding the alleged and subsequently closed the complaint, finding that the bank had acted within the established parameters for digital lending. This finding significantly weakened the petitioner's claim that the bank’s internal systems were inherently compromised or negligent in protecting her account.
The court examined the flow of transactions between , noting the sequence of events that led to the disbursement and rapid dissipation of the ₹50 lakh credit. The court’s review of the bank’s records suggested that the petitioner had authorized the transfer of the funds, which contradicted her claim that she had no intent or requirement for the financial assistance at that time. Justice Nagaprasanna’s refusal to interfere in the ongoing criminal case in the effectively leaves the on the petitioner to demonstrate, during the trial, that her consent was vitiated by fraud or external pressure.
The legal arguments focused heavily on the definition of "" under the Indian Contract Act, with the petitioner’s counsel attempting to frame the digital interaction as an instance of "digital gunpoint." However, the court remained unconvinced that the current writ petition under provided a sufficient mechanism to adjudicate these claims. As Justice Nagaprasanna noted, “The afore-narrated facts are a matter of record. They would not require detailed iteration. Since the petitioner is now before this Court calling in question the complaint instituted by the Bank before the learned Magistrate... it becomes germane to notice the complaint.”
This ruling serves as a notable precedent regarding the intersection of digital banking and criminal liability. It signals that courts are increasingly reluctant to intervene in recovery proceedings when bank records suggest that the borrower followed standard authentication procedures, even when the borrower claims to be a victim of sophisticated cybercrimes. By dismissing the petition, the court ensures that banks maintain the right to pursue recovery for defaults, provided that the financial institution follows its regulatory obligations, while forcing the accused to prove their lack of agency within the formal trial process.
The practical consequence of this judgment is that the criminal case in C.C. No. 11728 of 2025 will proceed before the jurisdictional Magistrate. The petitioner will now have to present her defense, including the police report from the cybercrime investigation, to the trial court to argue that she is not liable for the repayment of the loan. With the high court dissolving all that had previously prevented the bank from taking coercive action, the lender is now legally empowered to continue its efforts to recover the outstanding loan amount through established judicial and civil processes.
The court’s final order is a definitive dismissal, clearing the way for the lower court to address the merits of the cheque-bounce case. While the cybercrime investigation against the unknown fraudsters continues separately, the petitioner remains bound by the loan agreement unless she can successfully establish the claims of coercion in a court of law. This decision reinforces the principle that procedural digital authentication in banking, such as OTP verification, carries significant weight in legal determinations of contractual validity, making it difficult for individuals to challenge these transactions without substantial, trial-tested evidence of genuine duress.
loan recovery proceedings - electronic fund transfer
