Can police freeze your bank account in fraud case? Rajasthan High Court answers

The Rajasthan High Court said that freezing a bank account without any connection with cognisable offence will be construed as violation of livelihood. (Image enhanced using AI)

Findings

• Such action, taken in a mechanical and arbitrary manner, not only cripples the financial autonomy of an individual but also directly impinges upon the right to life and personal liberty enshrined under Article 21 of the Constitution.
• It also impinges upon the freedom to carry on trade, occupation and business under Article 19(1)(g).
• The power to interdict the operation of a bank account is an exceptional one, to be exercised sparingly.
• It should be exercised strictly in accordance with law, and only on reasons demonstrating a live and proximate link between the account and the alleged criminal activity.
• Any freezing order passed is against such safeguards, betrays a colourable exercise of power, is manifestly arbitrary, and cannot be sustained in the eyes of law.
• Though only a certain amount is disputed and the same has been kept on hold, but due to the blanket order to freeze the account, the respondent bank has frozen the accounts in their entirety.
• The petitioner is unable to operate the account and deal with the money lying in there.
• Under the guise of investigation, an 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.
• Keeping only the disputed amount on hold would serve the interest of the parties.
• The amount in dispute shall remain under freeze.
• However, the petitioner shall be permitted to operate the said bank account for all other lawful transactions.
• The respondent-bank shall ensure that only the debit operations to the extent of the disputed amount in the account remain interdicted, while the account shall otherwise remain fully operational for all remaining purposes.

Decision

• The high court directed that only the amount allegedly in dispute shall remain under freeze.
• The petitioner was permitted to operate his bank account freely for all other lawful transactions.
• The respondent bank was ordered to ensure that debit operations are interdicted only to the extent of the disputed amount, while the account otherwise remains fully operational.
• The superintendent of police concerned was further directed to immediately communicate the order to the bank and ensure prompt defreezing without delay or impediment.

Background

• Lal, 26, who hails from Mandore, Jodhpur district, moved the high court seeking directions to defreeze his bank account maintained with the State Bank of India, Nagore Road Branch, Jodhpur.
• The account had been frozen at the instance of the Cyber Police Station, Mumbai, allegedly in connection with certain suspicious or fraudulent transactions.

Petitioner’s submissions

• Advocate Ashok Khillery, appearing for the petitioner, argued that the blanket freezing of the entire account had paralysed the petitioner’s daily financial life.
• The counsel submitted that Babu Lal was unable to access his own lawful funds for basic needs, payments, or business-related transactions.
• Even if the investigation agency suspected a particular transaction or amount, there was no justification in law to freeze the entire account indefinitely, submitted advocate Khillery.
• Such action, it was argued, severed the “very lifeline” of livelihood and amounted to a disproportionate restriction on constitutional rights, imposed without notice, reasons, or judicial oversight, he argued.
• The counsel further argued that neither the precise allegations nor the quantum of the disputed amount was communicated to Lal.

State’s stand

• Public prosecutor N S Chandawat defended the freezing action by submitting that statutory provisions empower investigating agencies to request banks to freeze accounts during the pendency of investigation to prevent siphoning or dissipation of suspected proceeds of crime.