The Madras High Court has ruled that bank accounts cannot be freezed beyond the alleged amount involved in the financial frauds.
Dr. Justice G Jayachandran observed that “Under the guise of investigation, order freezing the entire account without quantifying the amount and period cannot be passed. Such order will be construed as violation of the fundamental rights of trade and business as well as violation of livelihood.”
In the present case, the petitioner, suspected of engaging in cryptocurrency transactions, is under investigation by the Cyber Crime Bureau of Cyberabad, Telangana, with a case registered on May 16, 2023.
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The fifth respondent bank was instructed to freeze the petitioner’s account, involving approximately ₹2,48,835/- linked to the alleged crime. However, the petitioner’s account holds a balance of ₹9,69,580/-, and neither the investigating agency nor the bank has provided information about the reasons for the freeze or its duration. The petitioner has thus approached the court seeking a mandamus to release the funds and unfreeze the account.
In a similar case, Crl. OP No. 10569 of 2021, the court directed the Commissioner of Police, Greater Chennai, to ensure proper conduct in investigations involving account freezes. This led to a circular from the Commissioner ensuring adherence to guidelines, though many cases still see non-compliance. In WP No. 13509 of 2024, considering precedents set by the Supreme Court in cases like M.T. Enrica Lexie vs. Doramma, Teesta Atul Setalvad vs. State of Gujarat, and Shento Varghese vs. Julfikar Husen, the court directed account holders to execute bonds if there was a possibility of the money being tainted.
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For the current case, despite the Cyber Crime Bureau indicating that only ₹2,48,835/- is under suspicion, the bank has frozen the entire account. This blanket freezing order, without specifying amounts and duration, constitutes a violation of the fundamental rights to trade and livelihood, stated the court.
The High Court observed that while statutes grant investigation agencies the authority to request banks to freeze accounts pending investigation and to promptly notify the jurisdictional court, the proper exercise of this power remains an important issue. Courts across India have consistently ruled that accounts cannot be frozen indefinitely without informing the account holders of the reasons and extent of the freeze.
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Despite this, the court frequently receives petitions to unfreeze accounts, mentioning the failure of investigation agencies to notify both account holders and the jurisdictional court as mandated by Section 102 of the Cr.P.C. and Section 106 of the BNSS Act.
Therefore, the bench directed the fifth respondent bank to unfreeze the account but maintain a lien over ₹2,50,000/-. The petitioner was allowed to operate the account with the condition that it always retains a minimum balance of ₹2,50,000/-.
Know When to Say No to Cash Transactions, Click here.
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