The Karnataka High Court on Thursday directed the Central Government to consider framing a national-level policy or framework, to ease the adjudication process involving cases where banks accounts of individuals are frozen in one state on the notice issued by the police from another state while probing alleged cyber fraud cases.
Justice Suraj Govindaraj, in his order dated June 4, has also sought the assistance of Additional Solicitor General Aravind Kamath to get instructions from the departments concerned on how these matters can be processed, citing the growing number of similar cases.
The bench in its order said, “The recurring nature of such disputes and the absence of a uniform procedural mechanism indicate the need for a comprehensive national-level policy, protocol, or regulatory framework governing the issuance, communication, implementation, review, and challenge of debit-freeze orders affecting bank accounts maintained outside the territorial jurisdiction of the authority issuing such orders.”
During the hearing, the bench noted that the present matter is another matter where the debit freeze order has been issued by a police officer outside Karnataka.
The court said, “The petitioner carries on business in Bengaluru and stays in Bengaluru, and his account is also in the Bengaluru branch of Axis Bank. While the debit freeze account is passed by the Maharashtra Police, before deciding on the petition, it would be required for the said police officer (Maharashtra Police) to be heard before granting any relief. However, in many matters when notice is issued, notice though served, there is no representation.”
The bench observed that the government advocate, who was directed to secure instruction, has categorically stated that he would not be able to appear for any other state, other than the Government of Karnataka.
It called upon ASG Kamath to take instructions from different departments and help resolve the logjam that is happening in such cases.
Stating that a comprehensive examination of the entire ecosystem governing debit-freeze orders is warranted, the bench said the objective should be to evolve a standardised, technology-enabled, citizen-centric, and legally sustainable framework capable of balancing investigative necessities with the legitimate rights and interests of account holders.
Justice Govindaraj suggested the following issues that could be considered by the Central Government:
1) Whether a police authority issuing a debit freeze order in exercise of powers under the applicable criminal law is required to simultaneously furnish a copy of such order to the account holder, indicating the nature, scope, and extent of the freezing action.
2) Whether the bank receiving such a communication is under a mandatory obligation to immediately notify the account holder of the freezing action, the identity of the issuing authority, the relevant crime number, and the remedies available to the account holder, along with a copy of the communication received by the bank.
3) Whether there ought to be a uniform, standardised format for all debit-freeze communications issued by investigating agencies throughout the country. If so, what are the mandatory details to be included in such communication?
4) Whether such communications should mandatorily disclose the particulars of the investigating agency, crime number, statutory provisions invoked, contact details of the responsible officer, duration of the freezing action, and the basis on which the account has been identified for freezing.
5) Whether service of judicial notices upon police authorities situated outside the territorial jurisdiction of the Court can be facilitated through a centralised electronic mechanism, including but not limited to the Crime and Criminal Tracking Network and Systems (CCTNS), National Crime Records Bureau (NCRB), Inter-Operable Criminal Justice System (ICJS), Indian Cyber Crime Coordination Centre, or any other established technological platform.
6) Whether a dedicated nodal officer or nodal mechanism should be designated in every State and Union Territory for receipt of judicial notices, transmission of records, coordination of responses, and facilitation of inter-state proceedings concerning debit-freeze orders.
7) Whether a centralised national portal or dashboard can be developed through which all debit-freeze orders are generated, communicated, monitored, reviewed, and tracked, thereby ensuring authenticity, accountability, and ease of verification by Banks and competent authorities.
8) The appropriate forum and territorial jurisdiction for challenging a debit-freeze order, namely whether proceedings are required to be instituted where the account is maintained, where the account holder resides or carries on business, where the Bank branch is situated, where the cause of action substantially arises, or where the order has been issued.
9) Can an institutional framework be established for the aggrieved person to approach for redressal of such grievance?
10) Whether any special procedural mechanism is required in cases where the account holder, the bank, and the investigating agency are situated in different States, to ensure expeditious adjudication and effective participation by all stakeholders.
11) Whether a debit-freeze order can validly extend to the entirety of an account irrespective of the quantum allegedly linked to the offence under investigation, or whether the freezing action ought to be restricted only to the amount reasonably suspected to constitute proceeds of crime or to have a nexus with the alleged offence.
12) Whether principles of proportionality require investigating agencies to identify and quantify the allegedly tainted amount before directing freezing of an entire account.
13) Whether the communication issued to the bank and/or the account holder should disclose, subject to legitimate investigative requirements, the money trail, transactional nexus, and basis of suspicion connecting the account with the alleged offence.
14) Whether any outer time limit should be prescribed for continuation of a debit-freeze order and whether periodic review by a supervisory officer or competent Court should be made mandatory.
15) Whether a mechanism should be devised enabling partial operation of accounts for bona fide purposes such as payment of salaries, statutory dues, taxes, loan repayments, educational expenses, medical expenses, and other essential investigation. requirements, pending
16) Whether banks should be empowered or required to seek clarification from the issuing authority where a freezing direction is ambiguous, incomplete, disproportionate, or incapable of implementation.
17) Whether a central repository or tracking mechanism can be established, enabling banks, investigating agencies, courts, and affected account holders to ascertain the status of freezing orders, subsequent modifications, withdrawals, and the authority responsible therefore.
18) Whether guidelines are required prescribing timelines within which investigating agencies must either justify continuation of the freezing action before the competent court or release the account.
19) Whether any compensation, restitution, or remedial mechanism should be available in cases where freezing orders are ultimately found to be unjustified, excessive, or issued without an adequate basis.
20) Whether standard operating procedures are required to govern inter-State requests for freezing of accountability oversight. bank accounts, including measures and supervisory
21) Whether legislative, regulatory, technological, or administrative measures are required to ensure a uniform national approach that minimises hardship to genuine account holders while preserving the efficacy of criminal investigations.
The court has also directed the Reserve Bank of India to examine the issues arising in the present matter from the perspective of banking regulation, customer protection, operational compliance, and inter-agency coordination, and to place on record, on or before the next date of hearing, an affidavit sworn by a responsible officer addressing, inter alia, the issues noticed hereinabove. Similarly, the Director General of Police – Police Computer Wing is also directed to look into the above issues and submit his recommendations.
The court has now posted the matter for further hearing on July 1.
The Karnataka HC passed the order in a petition by a Bengaluru resident who sought to quash the debit freeze notice issued to the Axis Bank in Bengaluru by the Maharashtra Police.. 
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