As bank freeze petitions flood courts, Delhi High Court urges Centre to frame uniform policy

Justice Manoj Jain recorded in the order, “There is nothing to suggest that petitioner is suspect or accused of any cyber-crime. The petitioner, quite possibly, may not even be connected with the offence under investigation and might be an unintended beneficiary. In such types of cyber-crimes, if any fraudster cheats a complainant and with the help of cheated money, when such fraudster buys something using such money, the police, chasing such money trail, directs freezing the bank accounts of all concerned and in the process, many innocent recipients have to bear the brunt, for no fault of theirs.”

The court noted that instead of directing for the preservation of the Rs 200, the bank was directed to freeze the entire account, which “left the petitioner high and dry”, leading to “significant adverse financial consequences, including dishonouring of several cheques issued by the petitioner and the complete disruption of its business operations.”

The bank account was frozen following instructions from Vartaknagar police station in Thane, Maharashtra, on November 29, 2024. After the firm filed a petition, and subsequent to another communication from the investigating agency on January 29, the bank account freeze was removed and a lien of Rs 200 was marked.

Justice Jain held that while the investigating agency “is fully empowered to conduct an investigation, and can also, under appropriate circumstances, send a request to the concerned bank, directing freezing of the entire account,” in case of such freezing, “it must assign reasons.”

“Such blanket measure, if taken recourse to, without offering any reason, can certainly play havoc with the financial concerns of such account holders. In relation to small-time vendors, it can disrupt the prospects of their mere existence, even. It is not difficult to imagine that any such action can put their lives in complete disarray…Therefore, the possibility of marking a lien on a disputed amount, whenever it is identifiable, should be explored as a more appropriate interim measure. Ideally, it should be the first and foremost option. This would, naturally, mitigate the undue hardship being caused on account of blanket freezing of account and would also ensure that the alleged cheated money remains secured and intact,” the court reasoned.

While disposing of the plea, Justice Jain said, “The issue raised in the present petition has been a matter of recurring concern as many such like petitions are flooding the Courts. It is, therefore, high time that the investigating/law enforcement agencies, in the context of freezing bank accounts, act with requisite care, caution and yes, compassion as well.”

The Reserve Bank of India (RBI) informed the court that similar issues have cropped up before various other High Courts and suggested that a uniform advisory can be prepared to deal with such cases, and highlighted that such advisory can come from MHA.

“In light of the frequent filing of such matters concerning blanket freezing of the accounts, this Court feels that the Ministry of Home Affairs, Government of India, should take proactive steps to address the same. It may consider consulting all concerned stakeholders, including respective States/UTs and then, with the consensus of everyone, chalk out a uniform policy, standard operating procedures and guidelines to ensure that such matters are handled with requisite consideration and compassion. The aim should be to balance the rights of a complainant in any such criminal investigation vis-a-vis the right of innocent and unwary accountholder, made to face unwarranted hardship on account of blanket freezing of account, despite being completely innocent and unaware of the commission of any crime,” the court recommended.

Recently, the court ordered to de-freeze the account of a small vendor selling chhole bhature in Delhi’s Ashok Vihar for alleged cyber fraud of Rs 105, and marked a lien of the disputed amount. The vendor’s bank account was frozen after the UPI transaction was traced to a cyber fraud worth Rs 71,000 registered in Andhra Pradesh.

In another case, the Enforcement Directorate had frozen a bank account of a garment retailer in Delhi over a mistaken identity.

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